Platform governance

Definition

In the digital world, «many of the largest and most successful business operate and organize as open and inclusive platforms», which use technologies in order to

• facilitate economic exchange;
• transfer information;
• connect people.

The term “platform” tends to be associated with different types of tech-companies:

• exchange platform, such as Amazon or Alibaba;
• service platform, such as Airbnb or Uber;
• content platform, such as YouTube or Netflix;
• software platform, such as Google Android;
• social platform, such as Facebook or Instagram;
• smart contract platform, such as Ethereum.

However, these platform companies not only use technologies to facilitate interaction and obtain value from this intermediary activity, but also, they use them to organize their own structure. Thus, they maximize collaboration among multiple stakeholders and «deliver constant innovation in platform services and functionality».

In this sense, the main characteristics of platform governance are the following ones:

1. they try to make stakeholders feeling part of the organization, thus using their inputs and feedbacks to improve users’ experience and engagement. In this sense, stewardship codes became very important, so that many platform governance entities have one;
2. the platform is open and accessible, which means, for instance that the code is "open source";
3. communication is seen as a fundamental value, not only as «one-way process of information disclosure (from platform operators to platform users)», but also as a means for a more engaged, responsive and open process that could encourages «a mutually productive dialogue».

Traditional firms are very different: they are organized in a hierarchically structured corporate form, oriented toward achieving the corporate purpose stated by the shareholders and maximizing their profit, mainly through the distribution of profits and the increase in the value of the shares. In order to reach these goals, corporate governance traditionally provides for

1. a highly centralized source of authority;
2. a clear boundary between the firm and the “outside world”;
3. a settled and formal hierarchy with functionally differentiated “departments” and “roles”;
4. standardized operating systems and procedures dictated by the centralized authority.

However, if such firms want to remain competitive, they should adapt to the different world where they operate, which is hyper-competitive and have been transformed by new technologies (artificial intelligence and distributed ledgers), that have been largely used even in some of the typical functions of corporations. The phenomenon, known as CorpTech (from a crasis, precisely, of the terms "corporate" and "technology"), is allegedly bringing about a deconstruction of the typical architectures of corporate governance, and clearly describes the changing movement.

For those who would like to learn more about the topic, see

• C. Ciligot, What Is Platform Governance and Why Is It a Big Deal?, Feb 24, 2020, available at https://learn.g2.com/platform-governance
• S. Etlinger, The Next Wave of Platform Governance, May 14, 2021, available at https://www.cigionline.org/articles/next-wave-platform-governance/

References

• L. Enriques, D. Zetzsche, Corporate Technologies and the Tech Nirvana Fallacy, in Hastings Law Journal, 2020, p. 72.
• M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, The End of "Corporate" Governance: Hello "Platform" Governance, in European Business Organization Law Review, 2019, pp. 171-199.
• T. Teh, Platform Governance, in American Economic Journal: Microeconomics, 2022, pp. 213-254.