Business Models, Commerce, Controversial Topics, Ethics, Research

PLoS, Stakeholders, and Shareholders

Scales of Justice - Frankfurt Version

Scales of Justice – Frankfurt Version (Photo credit: mikecogh)

There has been an extraordinary announcement from the Public Library of Science (PLoS). Both the CEO and the CFO are leaving the organization and a new CEO has been appointed.

I encourage everyone to read the announcement in its entirety. Of particular interest is the following:

The Board has appointed an interim leadership team effective immediately to ensure that PLOS is able to continue to move projects and strategic initiatives forward. Together with the existing PLOS Executive team, they will govern the organization until Marincola’s arrival.

Okay, will somebody please tell me what is going on? This sounds like a sudden decision was made. How often do you see the CEO and the CFO leaving on the same day?

Were PLoS a for-profit company, especially one that is publicly traded, this would be very big news. It would be on page one (for print readers!) of the Wall Street Journal. The blogosphere would be burning up. None of this has happened, and I cannot imagine why.

The question is, what responsibility does an organization have to explain its internal operations to outsiders? For publicly traded companies, the rules are pretty stiff. For privately held for-profit companies, the requirements are not very great. This is because for-profit companies exist for the benefit of their shareholders. In a public company, the shareholders could potentially be anyone, so the requirements for disclosure are considerable. The privately held company can do pretty much what it pleases, because that is what its shareholders require.

But when you have a not-for-profit organization, the discussion moves from shareholders to stakeholders. No one “owns” a NFP. But the stakeholders are many. For PLoS those stakeholders include scientists, authors, readers, funding agencies, and employees; and it also includes everyone else, at least all Americans, as PLoS has tax-advantaged status. The taxes that PLoS does not pay have to be paid by someone else. As stakeholders, don’t we have a right to know more?

The reason these events, and the lack of disclosure, trouble me so much is because I am a huge admirer of PLoS, especially PLoS ONE. I have long felt that Green OA is a bad idea and that Gold OA is a good one, and PLoS certainly proved the second part of that statement. We have heard that PLoS burst into profitability (or into “surplus,” as it is called in the NFP environment) and is growing rapidly. What’s not to like and admire?  I don’t accept the critique of traditional publishing that is associated with PLoS (why can’t we have both?), but that doesn’t take anything away from what PLoS ONE has accomplished. The supporters of PLoS ONE could be total knuckleheads when they talk about Elsevier and John Wiley, but they certainly know what they are talking about when it comes to PLoS ONE.

Or do they? That’s what the disappearance of the CEO and CFO calls into question. If the business is growing and is profitable, why are these two individuals leaving? If the business is not growing and is not profitable, why have we been told otherwise?

It would be a good idea for PLoS to publish a transcript of their Board discussions concerning this management transition. Let’s be open about open access.

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About Joseph Esposito

I am a management consultant working primarily in the world of digital media, software, and publishing. My clients include both for-profits and not-for-profits. A good deal of my activity concerns research publishing, especially when the matter at issue has to do with the migration to digital services from a print background. Prior to setting up my consulting business, I served as CEO of three companies (Encyclopaedia Britannica, Tribal Voice, and SRI Consulting), all of which I led to successful exits. Typically I work on strategy issues, advising CEOs and Boards of Directors on direction; I also have managed a number of sticky turnarounds. Among other things, I have been the recipient of grants from the Mellon, MacArthur, and Hewlett Foundations, all concerning research into new aspects of publishing.

Discussion

22 thoughts on “PLoS, Stakeholders, and Shareholders

  1. As we discussed at length on Twitter last night, I’m still not convinced PLOS needs to provide any more information than they have. Surely they, like every other organization, have the right to message any departure or hire of staff in any way they choose. But speaking of transparency — or at least collegiality — it would’ve been nice to have been properly credited in your post for that “stakeholder” vs. “shareholder” distinction, which was originally mine. Just because the comment was made on Twitter doesn’t make it public domain, just public.

    Posted by Rebecca Kennison | May 13, 2013, 2:00 pm
    • Rebecca, I wrote the blog post BEFORE our exchange on Twitter. The distinction between shareholders and stakeholders was mine. Not that it is such an original thought.

      Posted by Joseph Esposito | May 13, 2013, 2:06 pm
    • Rebecca, your comment may not technically be in the public domain, but the distinction between stakeholders and shareholders certainly is. You can’t copyright an idea.

      Posted by Rick Anderson | May 13, 2013, 4:53 pm
      • Rick, my point was merely that there was an entire discussion that happened the day before this blog post that wasn’t acknowledged — and has now been roundly dismissed. The title of this piece was taken from that discussion. I’m not claiming the *idea* to be unique. I’m only saying the Twitter conversation should’ve been acknowledged as helping to frame the discussion presented here, just like any other source should be. Dismissing that exchange as if it never happened is not good scholarship and certainly not in the spirit of transparency and honest exchange that this post is demanding of PLOS.

        Posted by Rebecca Kennison | May 13, 2013, 9:24 pm
        • For the second time, I wrote the blog post BEFORE we had the Twitter exchange. Your accusations are entirely wrong.

          Posted by Joseph Esposito | May 13, 2013, 9:42 pm
        • I don’t know what axe you’re grinding here, but if you’re this proud of a distinction like “stakeholders vs. shareholders,” I really don’t know what to say. It’s a pretty common distinction. Also, Joe is a man of integrity, and if he says he wrote the post before the Twitter exchange, he did. The coincidence of your verbiage with his only underscores how commonplace this rhetorical device (contrast via parallelism) is.

          Posted by Kent Anderson | May 13, 2013, 9:53 pm
          • FWIW, here is once piece of the Twitter exchange that supports Rebecca’s claim above: https://twitter.com/JosephJEsposito/statuses/333733749273538560

            The rest of the conversation is available here: http://hawksey.info/tagsexplorer/?key=tcz4gGU8DTahdPMC65uZX_A&sheet=oaw

            Personally, I find the Twitter exchange to be interesting reading, but so far as axe-grinding goes, I’m not sure why this shake-up at PLoS seems so “scandalous”–the leadership changed, an announcement was made. I don’t know if it’s truly unique for a CEO and CFO to depart at the same time, but for several members of a leadership team to move on at the same time? That certainly isn’t.

            Posted by Rob Hilliker | May 16, 2013, 4:36 pm
            • For the third time, I drafted the blog post before the Twitter exchange with Kennison. To say otherwise is a slander. The “good idea” of the tweet was a reference to writing to the people at PLoS. Here are the time stamps for the revisions made while drafting in Google Docs:
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              Posted by Joseph Esposito | May 16, 2013, 5:03 pm
            • You guys are wrong in asserting that Rebecca has any “claim” whatsoever. First, the distinction between “shareholder” and “stakeholder” is pretty pedestrian. It’s easy rhetoric. Google the two words together, and you’ll find hundreds of documents, sites, and related turns of phrase. Really, if this is your claim to fame, don’t expect much.

              But the accusation is what’s wrong here — it’s both inappropriate and just factually wrong as timestamps prove. Joe notified me that the post was done in an email at 12:16 p.m. on Sunday, May 12th. Rebecca did not make her statement until 10:11 p.m. on Sunday, May 12th. By then, the post had been edited and scheduled for Monday. I edited it at around 7 p.m., and nobody touched it after that.

              Rebecca, I think you owe Joe a big public apology.

              Posted by Kent Anderson | May 16, 2013, 5:12 pm
              • Gentlemen, please. This isn’t about claims, although it may have seemed on the surface to be that way. This has always been about conversations and about properly acknowledging those conversations. It’s about being collegial and being balanced in analysis. It’s about transparency. It’s not about being defensive or hostile. It’s about exactly the opposite: it’s about acknowledging differences of opinion and about including those differences of opinion in a piece of public writing, even if that means amending (or commenting on) your own blog post to do so.

                I will apologize, though, as clearly Joe thinks harm has been done to his reputation and others seem to think so as well. I sincerely doubt any harm at all has been done, except perhaps to my reputation, such as it is, but I am truly and sincerely sorry that he feels that way. I certainly never meant to hurt Joe (or anyone else) or to call his (or anyone else’s) credibility into question. I merely wanted to set straight what I thought was the record. All Joe ever needed to have said was “Yes, we had a great Twitter conversation. My blog, though, was all queued up to be published before that exchange, as that’s the way the Scholarly Kitchen blogs work, but what they say is true: great minds think alike.” In other words, an explanation of the publishing process at the Scholarly Kitchen would have sufficed, if it had been offered alongside some acknowledgment of the considerable time that had been spent in conversation on this topic the night before the blog post appeared.

                As for me, I’ll admit I rarely read the Scholarly Kitchen and that I only read this particular posting because I had already been engaged with Joe on Twitter in what I thought was a collegial, if spirited, conversation on the topic of PLOS’ C-level departures. I note that Kent has also weighed in with a posting of his own on the subject, but I assure you have no intention of reading it. My own thoughts on that topic are in that Twitter archive to which you all now have the link, so there’s no need to reiterate those. I think in retrospect I perhaps should’ve just stuck to my usual practice of not reading the Scholarly Kitchen. I can assure you all that I am returning to that practice post-haste.

                Posted by Rebecca Kennison | May 16, 2013, 9:40 pm
  2. One of the interesting themes over the past few years has been around what constitutes a responsible organization — is it more responsible to be OA, or not-for-profit, or charitable? By all lights, for-profit public companies are potentially more scrutinized and more subject to disclosure than charities or not-for-profits. We all recall the scandals of United Way and BCBS, with lavish perks and excessive comp packages. The IRS has ratcheted up disclosure requirements for 501(c)n organizations, but they are nowhere near as stringent as those for public companies. Yet. Things like this catch the attention of the IRS, which is becoming less conciliatory toward NFPs. Actions like this — the two primary executives let go without even a fig leaf of an explanation — are exactly what are fueling the trend to more public accountability. The TYPE of organization doesn’t determine responsible behavior — only responsible behavior counts.

    Now that venture capitalists (Mendeley, PeerJ), private for-profits (Hindawi), and new NFPs (PLoS is relatively young) are proliferating, it will be interesting to see which breed is more transparent and above-board. This is not a reassuring incident in that regard, given the rare and inexplicable nature of the simultaneous departure of CEO and CFO.

    Posted by Kent Anderson | May 13, 2013, 3:42 pm
  3. Here is the announcement that Reed Elsevier made after Chief Executive Ian Smith resigned after about 8 months in the post back in 2009:

    http://www.reedelsevier.com/mediacentre/pressreleases/2009/Pages/ErikEngstromappointedCEOReedElsevier.aspx

    In the annual report, this major upheaval was described (http://www.reedelsevier.com/investorcentre/reports%202007/Documents/ReedElsevier_AR09.pdf):

    “Ian Smith who had been appointed to the Board as CEO designate in January resigned in November by mutual agreement. I would like to thank Ian for his contribution over a period of unprecedented economic turbulence.”

    It certainly was front page financial news, but then Reed Elsevier is a FT100 company and listed on both the London and New York markets. But it is not clear to me that Reed Elsevier’s reporting of what occurred was in any more depth than PLoS One’s reporting or how the ‘pretty stiff’ rules for publicly traded companies gave us any more information about what was clearly a traumatic occurrence at the top of Reed Elsevier.

    Posted by David Prosser | May 13, 2013, 5:46 pm
    • David, the CEO and the CFO left ON THE SAME DAY.

      Posted by Joseph Esposito | May 13, 2013, 6:23 pm
      • Joe’s claim is that there are ‘pretty stiff’ rules requiring public disclosure. The public disclosure for Reed Elsevier consisted of a series of bland press releases. Some journalists managed to get unnamed ‘sources’ to go a bit further, to which they added their own bits of speculation. There were certainly no transcripts of board discussions made available.

        Of course, like anybody I’d love to get the gossip and know more about what’s happening at PLoS. But this is being presented as an open access organisation being more secretive than non-oa organisations. All I did was give a concrete example of a $9billion business waving goodbye to it’s Chief Executive of ten months with little more than a ‘cheers;.

        Posted by David Prosser | May 13, 2013, 7:12 pm
        • I think it’s more a question of contrasting for-profit with not-for-profit, and publicly held versus privately held rather than open access versus other access models.

          Posted by David Crotty | May 13, 2013, 8:38 pm
        • But when the CEO and CFO leave at the same time? That’s remarkable in any organization.

          Posted by Kent Anderson | May 13, 2013, 9:50 pm
        • David, your argument appears to be, “PLOS, we behave exactly like Elsevier”. Elsevier has, like any other publicly listed company, to make regular statements about all sorts of things. Announcements of many kinds have to be timed carefully so the markets have access to the information in a timely manner, etc etc. Hypothetically, had the CEO and CFO of a major organisation gone on the same day, a bland press release most certainly would not have been acceptable to the markets. I suggest you search for CEO CFO departure, and note carefully what the results show. Companies and organisations in serious trouble. Very serious trouble. Usually departures are set against a background of worsening numbers. Or other very serious issues are behind the events…

          This is massively important. It’s not about gossip.

          Posted by David Smith | May 14, 2013, 2:23 am
          • No, my argument is that Joe was suggesting that other organisations have to release much more information around changes of this nature. I quickly found an example of a much larger organisation (annual turnover about 400 times larger that of PLoS) that gave a bland explanation of what was clearly a turbulent change. I’m questioning the central assumption that PLoS is being much more secretive than other players in this field.

            Again, I would love to know what was happening behind the scenes, but I don’t accept that there is fundamentally different behaviour on the part of PLoS.

            Posted by David Prosser | May 14, 2013, 7:33 am
    • Whilst the press release may have been bland, it is but the work of a moment using your favourite search engine to find a plethora of interviews and information in the financial sections of all the major media outlets, where it’s made perfectly clear that the Chairman decided he didn’t have the requisite media experience. There’s details of the compensation and all sorts. Clearly there was some pretty detailed disclosure. Briefings… Put politely, everybody decided it was a mistake. Given the surprise when he was appointed, it also was a logical explanation. Believable.

      Here we have nothing. And speaking personally… The CEO AND the CFO at the same time… All sorts of alarm bells are ringing. This is serious.

      Posted by David Smith | May 13, 2013, 6:45 pm
  4. Two thoughts:

    Last week WebMD fired the CEO with no explanation at all. But the CFO is still there so it’s not the same.

    More importantly, the “institutional imperative” holds true for any organization, profit and nonprofit alike. Shareholders and stakeholders and everyone else are secondary to the interests of the institution itself.

    Posted by Larry Husten | May 15, 2013, 12:58 pm
  5. To: Rebecca Kennison: Thank you. No problem. Mistakes happen.–Joe

    Posted by Joseph Esposito | May 16, 2013, 9:50 pm

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