Finally, there was an incredible story by the Wall Street Journal’s Sarah E. Needleman regarding GameStop and the fascinating rise of Ryan Cohen, the brash billionaire who wrested control of the board (GameStop’s Power Player: How Outsider Ryan Cohen Wrested Control – WSJ – paywall).
We were conflicted on the implications of Mr. Cohen’s move to power and board control at GameStop. The fascinating story is one that screams of concern regarding the role and function of a board or board member. It is perhaps the most extreme example of a board’s failure of imagination, being resistant to change, and the risks of following a century’s old playbook for governance.
We don’t condone Cohen’s actions, in fact we find them reprehensible in many ways (self-enrichment, focus on personal gain over corporate strategy and governance, playing chicken with shareholder value creation while ignoring the obligation to move to stakeholder worldview). Yet, his moves were cunning and successful, at least measured by his celebrity, personal wealth creation, and wresting control of a publicly traded company.
Our point is the whole scenario could have been positively avoided had the board operated a more modern playbook and one that favored pace and progress over years of corporate governance experience that filled its ranks of executives and board members.
In our view, this story is a story of non-diversity – of opinion and experience (saying nothing of race or ethnicity) that allowed for a rogue investor activist to leverage social media to torpedo management and governance of a company away from common shareholders (and stakeholders!). Perhaps the only silver lining is that this story serves as a warning to boards and governance professionals: Fall asleep at the wheel or get too comfortable in your chaise lounge chairs at the club, and Reddit will come for you.