“Facebook’s ordeal is an object lesson for unicorn firms”

Mark Zuckerberg, CEO of ex-unicorn Facebook

Mark Zuckerberg’s grilling by the US Congress shows that leaders of high-growth firms must be ready to accept their governance duties, writes the IoD’s director general

The business world does love a good buzzword. One of the most popular in recent times has been “unicorn”, which is code for “super-high-growth private firm valued at more than $1 billion”.

Most of these are to be found in the US and China. But, as Director’s cover story shows, the UK boasts numerous unicorns of its own. This country’s strength in digital tech in particular has helped to make ventures such as Deliveroo a reality.

As with all buzzwords, it’s not always easy to separate the hype from the reality. Ilya Strebulaev, Stanford professor of finance, estimates that one out of every 10 unicorns is overvalued by at least 100 per cent. This theory can only really be tested when many of them turn into ex-unicorns by listing on the stock market, of course.

Becoming a plc doesn’t mean that they can’t continue doing well, but the rapid rise from bedroom to boardroom can require a big adjustment. Probably the most famous former unicorn, Facebook, recently encountered the hard reality that it’s no longer a tech disruptor. It’s a global media giant, with all the public scrutiny this entails. If a small firm were to start experimenting with crunching data on what people’s tastes and interests say about their politics, it would probably be of academic interest only. When Facebook allows this to happen on its platform, the chairman and CEO gets hauled in front of the US Congress to explain himself.

This reveals the tension between the freedom that unicorns feel to concentrate single-mindedly on success and the burden of legal and societal expectations felt by large corporations. Start-ups often come with grand mission statements about changing the world, but you don’t get to be a unicorn without a relentless focus on growing the business.

The wider responsibilities of plcs are increasing all the time. For example, the UK corporate governance code is being changed to make listed firms give employees a louder voice in the boardroom. Unicorns ask themselves one question: how can we take more market share? Public companies also have to ask: how will our shareholders react? How will this affect our employees and suppliers? What will the government say?

This need to heed so many competing voices lies at the heart of corporate governance. Several unicorns have shown that even a mythical creature can suffer growing pains. As Mark Zuckerberg found, it’s worth thinking about this before you find yourself swapping your T-shirt and jeans for a suit to face your own parliamentary representative blaming you for “enabling the cynical manipulation” of millions.


Talking of corporate governance reform, for years there has been confusion about the meaning of section 172 of the Companies Act 2006. This instructs directors to pay regard to the interests of employees, suppliers and the environment as well as those of shareholders, and to maintain “a reputation for high standards of business conduct”.

This is something that IoD members will naturally try to do, but it’s not clear what the act means in specific practical terms when business leaders need to make decisions that affect more than one of these groups.

The government is proposing to oblige firms to report on how they are complying with section 172. More reporting is very much the current trend in governance. Whether this will be beneficial is another matter.

For information about the IoD competency framework, which is designed to support the highest standards of leadership in business, visit iod.com/training

Stephen Martin is the IoD’s director general. To join Policy Voice and have your say, visit iod.com/policyvoice. Follow the institute on Twitter at @The_IoD

About author

Stephen Martin

Stephen Martin

Stephen Martin is director general of the IoD. Prior to joining the IoD in February 2017, Martin was chief executive of Clugston Group, a role he held from 2006. While running the construction company, Martin appeared in Channel Four's Undercover Boss, assuming a new identity to go incognito in the business. Martin's career has also included roles at Westinghouse Security Systems, Amey Rail and twchief executive of Barhale Construction. He was made a fellow of the IoD in 2011. To read Director's exclusive first interview with Stephen Martin click the globe icon below.

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