This week in the NewCo Daily, we’ve started something different. We’re committed to publishing detailed stories of business and positive change at stories.newco.co, and we’ll let you know about them as we do. In the Daily, we’re aiming to do what many of our favorite newsletters do best: share a curated view of the last 24 hours with our own unique, NewCo point of view. We’re eager to find out what you think, especially in the coming days as we figure out how to make the new format work best for you.
Pull Up These Boards
You won’t be shocked to learn that independent boards pay their CEOs less (Wall Street Journal) than companies whose boards are packed with their chief executive’s golf buddies. According to a new study by proxy advisory firm Institutional Shareholder Services, CEOs reporting to an independent chairman make $2.9 million less a year. Makes sense. But you might be surprised to learn that relative coziness is pretty much the only variable that makes any difference in determining CEO pay, including a company’s stock price. Remember when owning stock was supposed to align CEOs with “shareholder interest”? Jensen and Meckling’s influential “Theory of the Firm” from 1976 (Journal of Financial Economics, PDF) played an enormous role in tying executive pay to stock options, a trend that in the long term has wreaked enormous damage to corporate giants like Kodak, HP, GM, Xerox, and many more. Boards that don’t hold CEOs accountable to more than stock price broaden the principal agent problem. By aligning stock price to compensation — and because an overly chummy board also holds lots of stock — both CEO and Boards are often incented to act against a firm’s long term best interests.
The Downside of Slack
No one would argue that communication inside companies is a bad thing. Oh wait, someone would, and that someone is in the business of helping companies communicate. Jason Fried runs Basecamp (nee 37 Signals), one of the early collaboration software platforms. In a Medium post, Fried lays out the pros and cons (mostly cons) about what happens to organizations that think primarily in chat. While Fried acknowledges that “group chat used sparingly in a few very specific situations … makes a lot of sense,” he continues “what makes a lot less sense is chat as the primary, default method of communication inside an organization.” His insights have broader ramifications than just using Slack smarter. He reminds us how software should enable employees, not exhaust them: “Whatever tools you use, keep in mind how they affect other people, not just what they appear to help you get done. Done doesn’t matter if people are wrecked along the way.”
Twitter: Still Not Dead
The Twitter death watch marches on. Indeed, the narrative is that the company, which serves more than 320 million regular customers, is well on its way to a Yahoo!-like fate. The latest foray into Twitter navel-gazing is Can Twitter Make It? (Fortune). The story fails to answer its own heavily baited headline, but then again, consensual tongue-clicking around Twitter’s fate has become a Valley pastime. There are certainly troubles at the company and it will likely never reach Facebook-like scale (comparisons to Facebook drive execs at Twitter nuts), but for all its product faults and internal dysfunctions, Twitter provides a highly valuable service that no competitor replicates (not yet, anyway). Plus, it took in more than $2 billion in revenue last year. Maybe it’s OK to be a $10 billion market cap “failure.” Plenty of companies would kill for such problems.
Boston Globe Turns Spotlight on Itself
Oftentimes, organizations in the transparency business aren’t very transparent about themselves. But The Boston Globe just had a chance to solve a problem in the open — and it did. Back in December, the 144-year-old newspaper switched delivery services, a cost-cutting move that quickly led to thousands of missed deliveries and, reportedly, many cancellations. The company acknowledged the problem almost immediately, everyone from reporters to accountants pitched in to deliver, and the Globe is now returning to its previous, more expensive but more reliable, provider. One could note that it’s 2016 and who gets a newspaper delivered anymore, but what’s important here is that almost every step of the debacle and its solution played out on the front page of the Globe and gave customers confidence that the company was taking its problems seriously and fixing its mistake.
Austin, Here We Come
Turns out we’re not the only people avoiding unwanted responsibilities to attend SXSW in Austin.
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