While the behavior of these startup CEOs is awful, it's just because they see the awful behavior of established CEOs. In the 70s CEOs tended to make about 40 times average worker salaries. Now it's between 400 and 500 times depending on how well their stock grants do.
CEOs backdate their options for better strike prices, they negotiate employment contracts that give them interest-free (or -paid) mortgages, company reimbursement of taxable travel on corporate aircraft, and forget about "golden parachutes" nowadays they're platinum, a fired CEO today can make more money than one who stayed (c.f. Mark Hurd). Meanwhile worker salaries are stagnant, reductions in benefits regularly occur, and that's assuming the jobs stay in the U.S. It's like the progressive era never happened, and the American people have forgotten what life was life for average citizens when the Robber Barons ruled the country like a kleptocracy.
The film “The Social Network” has helped to make startups popular among young people the world over. It’s just one factor inspiring new generations of entrepreneurs hoping to succeed through innovation and hard work.
But are they learning ethical ways of doing business?
The more we find out about Mark Zuckerberg and his behavior during the early days of Facebook, the more he reveals his cavalier use of ethics.
And other founders of successful startups also have shown questionable ethics. Take Mark Pincus, the CEO of Zynga, the social gaming company behind Farmville. His behavior was documented by Mike Arrington in Techcrunch:
Scamville: The Social Gaming Ecosystem Of Hell
…The real story isn’t the business success of these startups. It’s the completely unethical way that they are going about achieving that success.
…Wonder how Facebook got to profitability way ahead of schedule? It was a surge in this kind of advertising. The money looks clean – it’s from Zynga, Playfish, Playdom and others. But a large portion of it is coming from users who’ve been tricked into one scam or another.
Mr Pincus isn’t even trying to hide his unethical business practices. He openly boasted on camera: “I did every horrible thing in the book to, just to get revenues… We did anything possible just to get revenues so that we could grow and be a real business.”
I’ve never seen an apology from Mr Pincus to all the people that were knowingly scammed by his business.
Bill Gates, the billionaire philanthropist, and co-founder of Microsoft, it was recently revealed in a book by his co-founder Paul Allen, plotted with Steve Ballmer to dilute Mr Allen’s equity.
The Wall Street Journal reported that it happened in 1982, after Mr Allen was diagnosed with Hodgkin’s disease:
Mr. Allen says he eavesdropped on a discussion in the Microsoft offices in Bellevue, Wash., between Mr. Gates and Steve Ballmer, now the company’s CEO, in which he heard the two men talking about Mr. Allen’s recent lack of productivity and how they might dilute his equity in the company by issuing options to themselves and other shareholders.
…
“I had helped start the company and was still an active member of management, though limited by my illness, and now my partner and my colleague were scheming to rip me off,” he says in the book. “It was mercenary opportunism, plain and simple.”
These are some nasty examples of unethical behavior by people that are successful entrepreneurs. Are they the type of role models that the next generation of young entrepreneurs should look up to?
Peter Yared, in a guest post on VentureBeat also names Ev Williams, the co-founder of Twitter, in the same company as Messrs Zuckerberg and Pincus because of the way he treated a co-founder.
Mr Yared is an apologist of the worst kind. He dismisses Mr Pincus’s behavior as “immature” rather than what it is: blatantly unethical.
In his post titled: Zynga’s Mark Pincus: The ethical founder? | VentureBeat he asks “Was Scamville really a scam?” and says that Mr Pincus was a victim of Techrunch’s tabloid style headlines.
He even claims that, “The type of hustling Pincus did is now considered de riguer for startups.” He says that Dave McClure, a leading angel investor blessed this type of behavior when he once said: “The perfect startup has a hustler, a hacker and a designer.”
Give me a break. As Jon Kelly commented:
Seriously? I don’t know Dave McClure, but I really doubt this is what he means by “hustling.” Pincus and Zynga have been accused of helping companies like Offerpal defraud consumers into signing up for re-bill schemes and defrauding advertisers by generating incentivized leads. … These weren’t victimless crimes.
I know Dave McClure, and Mr Kelly is right about that…
Peter Yared’s post has certainly exposed the fact that he has trouble distinguishing ethical behavior - a trait that you would think he would prefer to keep quiet about, lest his colleagues at Webtrends, and future business partners, consider it a negative one.
My hope is that the next generation of young entrepreneurs can tell the difference and will choose to build ethical businesses.
From what I’ve seen, social corporate responsibility is a big motivator for young people and an important factor in where they choose to work. And studies such as those by IBM, have shown this to be true.
As Silicon Valley companies compete for the best talent, I have no doubt that business ethics will grow in importance and become a deciding factor in a startup’s success. And that the Zuckerbergs and Pincuses of this world become seen as outliers, rather than standard bearers for the way business is done.
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Please see:
Irving Wladawsky-Berger: Growing Up in a Complex World
IBM Study: Millennials And The New Corporate Leaders - Social Responsibility Is Essential - SVW
Yahoo’s China “police informant” role sparked a $47.5 billion slide in market value | ZDNet
Would You Work For Moral “Pygmies?” - The Costs Of Yahoo’s Actions In China - SVW
