Could Tech Giants Really Take On Their Duties?
I wrote this article following a dinner we organized with Aurélia Setton (Montblanc Ventures) in San Francisco with French entrepreneurs, investors, and thinkers. At daphni, we believe that our position as investors also gives us a duty to think about societal issues, such as governance.
Tech Giants are now central players in society, well beyond the many innovations we owe them, they have clearly started to stir politics in recent years. Tech giants have catalyzed the latest popular demands, from the Arab Spring to the election of Donald Trump to the Yellow Vests movement. When Mark Zuckerberg comes to Paris, he is meeting with Emmanuel Macron at the Elysee, to discuss the company’s tax and data protection.
Tech giants don’t have much to gain from helping out governments. This far, there are no signs of powerful governments coalitions to impose a rule of law on tech giants. So, why would they cooperate or even more, help out? The below will explore ways to build bridges between companies and governments to create more sustainable models of governance. If you care about these topics, please send us comments or subscribe to our newsletter.
GAFA Have Yet To Show Their Ability To Team up With Governments
Despite their obvious impact on society, Tech Giants seem to manage their way independently from geopolitical constraints of the countries in which they operate. In the 1950s, Charles Wilson, then President of General Motors, stated that “What is good for [the United States] is good for General Motors and vice versa”. A distant dream for today’s politicians who are struggling to prevent the growth of these “meta-national” companies, that choose new markets based on the optimal cost/benefit combination. They often have a legal entity based in one country, the management of some entities in other, financial assets in a third, and administrative staff spread all over the world. These new multinational strategies make tax redistribution policies complicated, and where digital companies have a major advantage, is that they can relocate easily, in addition to the unprecedented flexibility that their dematerialized infrastructures give them.
Some of the largest US companies, the so-called “GAFAs (Google Amazon Facebook and Apple)” but also other unicorns, collectively hold trillions of dollars tax-free by paying their foreign market receipts to the holding companies incorporated in tax-efficient countries such as Switzerland, Luxembourg, Singapore, etc. And Apple’s cash liquidity competes with the budgets of the world’s largest economies: they own $200 to $250 billion whereas France public expenses exceed $400 billion every year).
This power struggle is the source of more and more confrontation with the public authorities regarding their responsibilities. Their strategy is not only defensive, as they were used to, but also to anticipate their ability to influence the society on their own. They are taking roles that go broader than their company’s mission. Facebook no longer hides its strategy and recruits directly from politics: in September 2018, Nick Clegg, former leader of the Liberal Democrats and Deputy Prime Minister of the United Kingdom joins the company in the midst of financial crisis and the heart of Cambridge Analytica scandals.
Tech Giants have yet to undertake a real work on their impact on democracy and political elections. This responsibility towards users and citizen is still only an act of good faith as the fines in case of violation of the regulations seem to be drops of water in the ocean of the financial market.
On their way to recover some sovereignty and power, governments create diplomatic ties with the digital actors. France recently appointed David Martinon as “ambassador for digital affairs”, with jurisdiction over the digital issues that the foreign affairs ministry deals with, which shows his involvement in geopolitical issues. These recent ambassadorial appointments to countries (Denmark and Estonia have been precursors) show not only the important socio-economic and political roles of technology but also the evolution of diplomacy and its adaptation to our societies.
Governments are trying to defend themselves but their fines are too small, their vision too scarce and their resonance too little in the hands of Tech Giants who control the dialog with populations. The only forward is to get them to act with the same level of accountability as governments when they own the same type of power as them on populations choices. That’s the reason why we started writing this article. They could even be the ones having the blueprint to regulation. Even if it might be a problem to let them have full influence on larger societal problems — after all, they exist to make money. To gain the trust of governments, and work for hand in hand with them, these tech giants should keep doing what they do best: business and innovation, adding a level of self-accountability for their impact.
A few good examples of self-initiative exist out there: Airbnb is an interesting example, who approached the regulation challenge with diplomacy, trying to convince the cities that it contributes in a benevolent way to local economies, maintaining close relations with town halls. The company even initiated programs to federate its host community in order to share petitions collectively, both the company and the customers. In 2018, the company will pay 24 million euros in tourist tax to 23,000 French cities.
Another example of good practice lies — surprisingly — on the market for electric scooters. The battle for short-distance transport is at the local level, and Los Angeles has been one of the fastest municipalities to legislate quickly and allowing the emergence of new independent players from the Lime and Bird behemoths.
What Responsibilities Could Tech Giants Take On?
For any company, legal responsibility is concentrated around executives or managers, who are held accountable to the law. However, leaders are, in fact, not only responsible for making the business grow or manage misdemeanors but also building the best possible governance to deal with all eventualities (people management, resources, global economy…)
CEOs and their closest associates (shareholders, executives…) seem still unaware of the impact they have on society. They are all influenced by different systems with very strict rules, whether they are side companies or unlisted companies. The GAFA’s interests are often misaligned with society, even with the common good or democracy: Facebook, for example, has every interest in retaining users, even if they have a negative influence on the results of an election or exposing malicious content.
We need to get out of the model where responsibilities only lie in front of their shareholders in terms of financial impact and assert that companies do have a social responsibility. More precisely to contribute to the common good by creating jobs, preserving the environment or public health. Since they leverage on common good assets (recruitment, schools, health system…), they must give back to society when they create value. When shareholders push leaders to reap profit, they are doing their job, which is creating a return on investment (they are often themselves simple managers of assets). Although they are not managers of the company, they have a big influence on strategic decisions, especially when they sit at the board of directors.
Post-clearance regulation has shown its limits, leading to a strong lack of trust between governments and companies. The primary responsibility of the GAFAs is, therefore, as we have seen in the introduction to this article, to create and respect for themselves governance solutions adapted to the world of tomorrow. It is also about understanding the economic models of these companies, which do not necessarily run after profit, but after valuation, under the pressure of their investors. The managers of these companies are therefore also subject to the durability of their business, and must, beyond their commitments to third parties, ensure the sustainability of jobs and their product range especially if they create new dependencies.
Finally, if Tech Giants are empowered, they will be responsible for their actions, as can already do companies in the health sector, ultra-regulated and controlled. This is perhaps the most delicate point: how to continue the race for growth while having a social, legal and moral responsibility, a company must also care about others and its impact on the world?
So, What Are Viable Alternatives?
Yet, we are super optimistic about the future. Solutions exist to create a regulation without economic trouble and to preserve democracy as we know it.
Deontology for all — According to Jérôme Lecat (founder and CEO at Scality), we will relive a debate forever, the one taking place at the arrival of each new technology, namely the code of ethics that we put in place in society. You have to know how to ask the right questions and not confuse the consequences and the pathology.
A Tech Giants Oath — The oath of Hippocrates, considered as the founding text of medical ethics, is not subject to legal value but symbolic value. Its origins are fuzzy, although it was written around 440–360 BC. J.-C, to separate doctors with a so-called “scientific” approach and the simple caregivers. Grégory Renard (Chief AI Officer at xBrain) suggested during our dinner to initiate, as did the doctors, but also the postmen (to fight against the temptation to open the postcards) an oath Giants would take to show their commitment to their users and society. Above tech giants, all companies should be under such an oath such as the Holberton-Turing Oath (on the implementation of AI Tech)
A universal precautionary principle — The precautionary principle is in the French constitution, namely that “in the face of uncertainty, research programs must be developed to remove doubt. Science, therefore, remains an answer and cannot be hindered in the name of the status quo”. In legal terms, the precautionary principle is a matter of health law, having been developed as a result of the “mad cow” affair. Alain Rossmann (Founder and Chairman of the board at Machinify), also attending the dinner, suggested introducing the precautionary principle for giants to think about new organizations. Competition between governments does not make the task easy, but it is necessary.
Enforce taxes and increase business contribution to society — It’s accurate that growing companies are investing massively and benefiting less than established corporations. On the other hand, private companies are not out of society, they draw on the common goods for their talents, science, roads, or the health of their employees… so they should contribute as well to society. Amazon has supplanted all its rivals on tax reduction and pays a billion tax where the number one worldwide of distribution, Walmart, pays more than sixty-four billion to the US state every year.
Last But Not Least
We are entering an era where the most powerful law is not made of sovereignty but from supply and demand. This new paradigm forces us to take our responsibilities as citizens first, but then as investors, entrepreneurs, managers, and employees by creating a desirable future. Many questions remain and we are just beginning to sketch them. The question of governance must be decided at an international scale.
The sovereign role of the government around security, defense, diplomacy, education, health… is extending to cybersecurity. The digital players, including the GAFA, at one point in time, might not be able from an independent perspective to ensure the security of their service without the collaboration of a government or a more collaborative initiative. In that sense, there might be a rebalancing of power relations between government and GAFA.
To follow our debates, reflections, and next initiatives, do not hesitate to subscribe to our mailing list, we publish every week the best articles we read about the challenges societies are facing with technology. Thanks a lot to Aurelia Setton and Willy Braun for their great feedback on this article.
