The promise of stakeholder governance: a feasible limit to Big Tech?

A special thanks to Omar Alfaro, Julio Avellaneda, and Klever Espinoza for their comments on the drafts of this article.

The shadow of the Big Tech

Technological innovation in the last thirty years has generated a series of companies that have revolutionized how the world moves: the way we communicate, our relationships, how we consume and a long etcetera, and represent a series of challenges to life in society and the institutions that govern them. While there are many technology enthusiasts who blindly believe in its benefits and preach it, there are social scientists, such as Francis Fukuyama, who have not hesitated to qualify the large technology companies - the big tech- as a threat to democracy. In a recent article in Foreign Affairs magazine, he considered that[1]:

Among the many transformations taking place in the US economy, none is more salient than the growth of gigantic Internet platforms. Amazon, Apple, Facebook, Google, and Twitter, already powerful before the COVID-19 pandemic, have become even more so during it, as so much of everyday life moves online. As convenient as their technology is, the emergence of such dominant corporations should ring alarm bells — not just because they hold so much economic power but also because they wield so much control over political communication. These behemoths now dominate the dissemination of information and the coordination of political mobilization. That poses unique threats to a well-functioning democracy.

On the other hand, we see that the growth of certain companies in the technology sector are increasingly under the scrutiny of political, regulatory and judicial forces. Facebook, for example, is part of a massive anti-competitive conduct investigation carried out by the Federal Trade Commission of the United States of America, along with 46 states.[2], and Google is part of three cases for anticompetitive conduct carried out by the Department of Justice of the United States also[3].

The specialized press and consumers are also increasingly aware of certain aspects of our relationship with technology. Very recently changes in the terms and conditions of use of WhatsApp have been the subject of scrutiny[4] and it has been questioned how much of our personal data is being transferred from WhatsApp to Facebook and how Facebook continues its commercial exploitation[5].

While no one doubts the benefits these great companies bring us, they also cast a larger and larger shadow on our lives that leads us to question how these companies should be run and how they should be regulated.

The Role of Corporate Governance in American Law

Not only big tech they are increasingly under scrutiny; the predominant model of corporate governance in the United States - the model of shareholder value- has also been the subject of serious questioning in recent years. The shareholder value principle proposed by Milton Friedman advocates a maximization of profits by the directors of a company in favor of its shareholders[6]:

There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

Friedman's proposed doctrine enjoyed wide acceptance since its birth in 1970 and is considered by many to be one of the engines of growth for the American economy in subsequent decades. Although the explanation developed by Friedman makes a lot of sense in the context in which it was formulated (a clear rejection of any collectivist argument in the context of the Cold War), authoritative voices are questioning its premises and offering alternative models. Blackrock has generated much discussion based on the stewardship principles that they implement in their investment portfolios, just as there is much talk today about the Environmental Social Governance. However, one of the most relevant criticisms is that simply the assumptions under which the shareholder value principle emerged have changed. Martin Wolf, in a notable opinion column in the Financial Times, emphasizes that[7]:

There are many arguments to be hard over how corporations should change. But the biggest issue by far is how to create good rules of the game on competition, labor, the environment, taxation and so forth. Friedman assumed either that none of this mattered or that a working democracy would survive prolonged attack by people who thought as he did. Neither assumption proved correct. The challenge is to create good rules of the game, via politics. Today, we cannot.

On the other hand, Martin Lipton, one of the survivors of the corporate raiders of the eighties, has been advocating for several years a "new paradigm" in corporate governance of companies, the model of stockholder value[8]. It proposes a new approach to corporate governance that consists of the following[9]:

The purpose of a corporation is to conduct a lawful, ethical, profitable and sustainable business in order to ensure its success and grow its value over the long term. This requires consideration of all the stakeholders that are critical to its success (shareholders, employees, customers, suppliers and communities), as determined by the corporation and its board of directors using their business judgment and with regular engagement with shareholders, who are essential partners in supporting the corporation's pursuit of its purpose. Fulfilling purpose in such manner is fully consistent with the fiduciary duties of the board of directors and the stewardship obligations of shareholders.

Both models are not at odds with each other -finally both point to the profit as a mechanism for the growth of society - but we can consider that the stakeholder governance it is an evolution of shareholder value principle. The changes in the last fifty years show us that the corporation is not an isolated actor in society and that the rules of the game of society - to use Friedman's terminology - have changed. Also, the stakeholder governance, by emphasizing that corporate decisions weigh ethical considerations, sets an additional and higher standard that goes beyond avoiding deception or fraud. It is no longer enough to avoid committing fraud, but instead encourages us to go into the gray areas of corporate decisions and see what a board's decisions look like in light of certain values. It is putting a fence higher than just profit, and recognizing that the business environment and the sensitivities of society have changed.

In a context of reputational and functional crisis of the big techIt is worth wondering if this new model of corporate governance can alleviate social and state questions regarding the operation of technology companies. In particular, in this article we want to focus on the corporate governance of companies big tech and the treatment of our personal data.

Big Tech and Stakeholder Governance

Perhaps the links between the stakeholder governance y big tech are not immediately apparent, but there is a connection point that should not go unnoticed: all users of the big tech we are stakeholders in them. Why? For the delivery of our personal data in exchange for the use of their services[10].

So, should technology companies take into account the impact of their decisions on the users of their services? A first answer is that not necessarily. Under the shareholder value principle prevailing, it may be that the directories of the big tech if they do so eventually if it has an impact on generating greater value in the business and, therefore, the shareholder. For example, Lucian Bebchuk, a staunch defender of the shareholder value principle states that, even in states where there are stakeholder constituencies (laws that allow weighing different interests of the shareholder in corporate decisions), the directors and administrators of companies in mergers and acquisitions operations have not considered interests other than value maximization[11].

It is worth making two objections here: (i) on the one hand, that there are stakeholder constituencies does not imply that the stakeholders, if the prevailing doctrine is one of maximization of value and without a doctrinal justification, as today is the stakeholder governance; and (ii) the focus of the analysis is in the framework of mergers and acquisitions operations, where the risk of questioning and litigation about how an operation was carried out is extremely high. I would add that the stakeholder governance is intended as a doctrine of social management and not for the sale of companies. That is, think about the impact of decisions to invest in different jurisdictions, close operations or not, contract with more ethical suppliers, etc. An M&A operation already has clearly defined standards (the so-called Revlon duties o Unocal duties) that should guide the management of a directory.

But it is clear that the interest of the end user will diverge, in many points and moments, with the desire to maximize the value of the administrators (which in itself is a legitimate interest). This is where the model stakeholder governance it can serve as a valid complement in decision-making. A corporate governance movement that institutionally legitimates considering the interests of the stakeholders in decision-making - from both a legal and commercial point of view (the coveted coverage of the business judgment rule), as ethical and moral-, and that can have support before a court, can serve as a limit or a self-regulation to the big tech.

Thus, the administrators of the big tech can weigh factors beyond value maximization, it can help to ensure longer-term interests in the survival of a company (to avoid, for example, litigation of antitrust that can lead to divestments significant, as was the case with AT&T[12]), to take care of reputational aspects (such as those that we detail in section I of this note) and to self-regulate the preponderant and variant role assumed by the big tech as actors in the society we inhabit (note that what was previously just a social network now has a similar role to the press, verifies content, regulates the free speech, Etc.).

Personal data and you owe fiduciaries

As we have already noted, the big tech they collect a large amount of our personal data that subsidize or make their services largely free. However, users do not have greater control over what these companies do with our information, which generates a series of inconveniences due to information asymmetry.[13]. Also, many times we do not have the technical capacity to understand the terms and conditions that are imposed on us, and little capacity to make a opt-out of those terms that we do not like or generate suspicion. There is a valid concern of users of technology companies: how do we protect our personal data and sensitive information from technology providers?

Jack M. Balkin, professor at Yale University School of Law, proposes that technology companies have fiduciary duties regarding the management of our information as their services are increasingly “essential” (we use the term in a sense fairly broad and not legal), offer the consumer respect for their privacy and create a reasonable expectation that personal information will not be abused. In summary[14]:

Perhaps the best way of summarizing the idea of ​​information fiduciaries in the digital age is that online service providers may not act like con men. The term "con man" is short for "confidence man," and the point of a "con game" (or "confidence game") is to gain the trust and confidence of a mark in order to act against their interests later on. The idea of ​​a con game is just the mirror image of the idea of ​​a fiduciary duty: if you induce another to treat you with confidence, you cannot turn around and betray that confidence (The highlight is mine).

Although this theory has not been without criticism (see Kazen and Khan[15]), we believe that it can be perfectly assumed from the perspective of shareholder value and at stakeholder governance. Shouldn't companies behave without deception or fraud (according to Friedman) and within ethical and sustainable frameworks (according to Lipton)? It seems logical that technology companies behave as fiduciaries of their customer data.

On the other hand, the implementation of this theory in practice does not seem like a burden that would be excessive or that would completely reformulate how a big tech. Andrew F. Tuch, commenting on Balkin's theory and responding to his detractors, identifies an extremely relevant aspect: companies in the financial sector already live with the supposed “fiduciary dilemma” of companies. big tech without this representing a practical impossibility (Kazen and Khan consider a scenario of divided loyalties of a board of directors towards users, on the one hand, and towards shareholders, on the other[16]). These companies handle a large amount of information in a highly regulated sector and have the same value-maximizing duties towards their shareholders.[17]:

"If requiring Facebook to treat users as fiduciaries would generate the problem of conflicting fiduciary obligations, would the same problem not also apply to Goldman Sachs today? Goldman's directors — like Facebook's — owe fiduciary duties under Delaware law. Both companies have powerful self-serving incentives. The interests of Goldman's customers, like those of Facebook's users, may conflict with those of the corporation's shareholders. Indeed, Goldman's interests, like those of financial institutions generally, often conflict with those of their customers.

Many even regard the financial conglomerate business model that Goldman and its competitors adopt as inherently conflicted, inevitably putting them at odds with their clients' interests. The potential conflict here encompasses even the particular asset at the heart of Balkin's proposal: information.


Yet, as far as I can tell, the problem of conflicting fiduciary obligations as described by Khan and Pozen has not been addressed or even identified by courts, policymakers, or commentators in the financial services setting."

Is the promise feasible?

As we already anticipated, the big tech could consider the interests of consumers in their decision-making process, whether they adhere to the theory of shareholder value (to behave without deception or fraud) or to stakeholder governance (ethics in decision making). We believe that the existence of stakeholder governance as an evolution of corporate governance in the United States (which, in turn, is often imitated in various jurisdictions) can “embolden” - in the absence of a better term - the boards of directors of companies in the technology sector to consider their stakeholders in their decisions, which can generate, immediately, a reputational improvement of the big tech. Such an improvement would lead the consumer public to perceive a coherence between the commercial discourse and the company's legal practice.[18], which can have an impact on a higher value of the shares of the technology sector and, in turn, on a higher “social welfare”.

Now, on Jack M. Balkin's theory of information fiduciaries, we consider that big tech they can do this without waiting for it to become a normatively imposed reality in the United States, in other large jurisdictions, or wherever they operate (and through a process over which they may not have control). TUCH showed that this already occurs in one sector of the economy, the financial sector. Additionally, big tech They are already dealing with a regulatory imposition on the processing of personal information: remember that the General Data Protection Regulation of the European Union (Regulation 2016/679) already imposes regulatory obligations on technology companies, prioritizing the interests of data holders personal[19]. Building, based on this experience, fiduciary duties on personal data is not unreasonable. So, nothing prevents this from happening voluntarily in the technology sector. Furthermore, we consider that this may affect the social perception of companies with a favorable reputational effect, as well as their appreciation in the market.

The doctrinal development, both of the stakeholder governance as from technology companies such as information fiduciariesIn our opinion, they provide a solid doctrinal foundation for technology companies -whether public or private- to give a change of direction in their corporate governance that, potentially, could have an impact on greater value, not only social but also economic. Now, the challenge of assuming the stakeholder governance and defending it will not be easy. On the one hand, it is necessary that it does not remain in words (as the statements of defense of the environment can remain in a speech without content, greenwashing) and, on the other hand, we do not know if it will pass a judicial control in, say, courts like those of the state of Delaware or New York. So far, to our knowledge, the stakeholder governance has not been subjected to a judicial test to validate this doctrine, but, for now, we consider that there are sufficient elements to believe in this promise[20].  

*The opinions expressed in this article are those of the author and do not necessarily reflect the views of the administrators of The Crypto Legal blog or the Lawgic Tec association.

[1] FUKUYAMA, Francis, Barak RICHMAN and Ashish GOEL. "How to Save Democracy from Technology - Ending Big Tech's Information Monopoly". Available in: Last consulted - January 10, 2021.  

[2] See Last consulted - January 10, 2021.

[3] See Last consulted - February 17, 2021.     

[4] The following quote is illustrative: "In practice, this means that WhatsApp shares a lot of intel with Facebook, including account information like your phone number, logs of how long and how often you use WhatsApp, information about how you interact with other users, device identifiers, and other device details like IP address, operating system, browser details, battery health information, app version, mobile network, language and time zone. Transaction and payment data, cookies, and location information are also all fair game to share with Facebook depending on the permissions you grant WhatsApp in the first place.

"WhatsApp is great for protecting the privacy of your message content," says Johns Hopkins University cryptographer Matthew Green. "But it feels like the privacy of everything else you do is up for grabs."

See Last consulted - January 10, 2021.

[5] WAGNER, Kurt. "Facebook Sees WhatsApp As Its Future, Antitrust Suit or Not" Available in: Last consulted - January 10, 2021.    

[6] FRIEDMAN, Milton. "A Friedman doctrine-- The Social Responsibility Of Business Is to Increase Its Profits" Available in: Last consulted - January 10, 2021.

[7] WOLFE, Martin. "Milton Friedman was wrong on the Corporation" Available in: Last consulted - January 10, 2021.

[8] This proposal was reflected in “The New Paradigm - A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth” for the World Economic Forum ”.

[9] LIPTON, Martin. "The New Paradigm - A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth ”for the World Economic Forum”. Available in: Last consulted - January 10, 2021.

[10] Jack M. Balkin sums it up by stating that “When we are dealing with online service providers like Facebook or Google, the most important source of compensation is personal information. For many online companies, the product or service is either free or heavily subsidized because it generates data, which is valuable to the company or to third parties to which the company sells the data.

All other things being equal, companies like Facebook or Google would like to maximize the value of the personal data they collect. And certainly if such a company goes bankrupt or is later sold, its collection of end-user data is one of its most valuable assets. The value of end-user data, and its centrality in the business models of many online service providers, creates an inherent potential for conflicts of interest between the digital company and the end-user."

BALKIN, Jack M. "Information Fiduciaries and the First Amendment”. In: UC Davis Law Review. Volume 49, No. 4. April 2016. p. 1226.       

[11] "We then examine whether, in fact, the leaders of companies incorporated in states with constituency statutes have used the discretion provided by those statutes to protect the interests of stakeholders when considering a sale of their company. We find that, in negotiating with acquirers, corporate leaders have bargained for benefits to shareholders as well as for themselves but have made little use of their bargaining power to secure protections for stakeholders. This evidence is consistent with and reinforces our conclusion that corporate leaders who have discretion to do so should still not be expected to benefit stakeholders beyond what would be necessary for shareholder value maximization. " (Emphasis is ours).

BEBCHUK, Lucian. "The Illusory Promise of Stakeholder Governance" Available in: Last consulted - January 31, 2021.

[12] Exemplary is the case of the dismemberment of AT&T by the US Department of Justice due to a number of factors, including a lack of clear regulatory policy and a perception that AT&T was "too big." We recommend Steven Coll's book "The Deal of the Century - The Breakup of AT&T".

[13] "Thus, online service providers present the familiar problems that generally give rise to fiduciary obligations. First, there are significant asymmetries of knowledge and information between online service providers and end-users. Second, it is very difficult for end-users to verify online companies' representations about data collection, security, use, and dissemination. Third, it is very difficult for end users to understand what online companies do with their data and how data analysis and use affects their interests. Fourth, even if end users understood these information practices, it would be almost impossible for end-users to monitor them."

BALKIN, Jack M. Op. Cit. p. 1227.

[14] BALKIN, Jack M. Op. Cit. p. 1224.

[15] KATZ, David E., and Lina M. Khan. "A Skeptical View of Information Fiduciaries" Available in:,their%20personal%20data%20for%20profit. Last consulted - January 31, 2021.

[16] KATZ, David E., and Lina M. Khan. Op. Cit. pp. 508-510.

[17] TUCH, Andrew F. "A General Defense of Information Fiduciaries”. pp. 29-30. Available in:

[18] Facebook's slogan "The Future is Private" today does not seem as consistent with its business practice.

[19] Number 39 of the initial considerations of the General Regulation for the Protection of Personal Data, for example, indicates that “All processing of personal data must be lawful and fair. For natural persons, it must be completely clear that personal data concerning them is being collected, used, consulted or otherwise processed, as well as the extent to which said data is or will be processed. The principle of transparency requires that all information and communication related to the processing of said data be easily accessible and easy to understand, and that simple and clear language be used. "

[20] It is still pending task to deepen the ideas of Shoshana Zuboff about the Surveillance Capitalism (for example,, which could somewhat modify the conclusions of this short article.

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Raul Vizcarra
Lawyer from the Pontificia Universidad Católica del Perú and LLM from the University of California - Berkeley, with more than 12 years of experience in matters of mergers and acquisitions and commercial and financial law. Interested in corporate governance issues and the intersections of law and technology. Principal Associate of the Corporate and M&A area of ​​Philippi, Prietocarrizosa, Ferrero DU & Uría (Lima).


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