“The whole world revolves around me!” This statement could be a perfect slogan for many users on Facebook but also for the top Executive at the company. The results over the past couple of years could not have been more evident. One scandal after another plagued Facebook. And now the shareholders are up in arms wanting to restrict Mark Zuckerberg’s power. How did this nightmare come to be?
Uneven Power
When Facebook went public, the power structure was distinctly uneven. Class A shares, which are those hold by founding members and directors, have one vote per share. Publicly traded stocks have one vote per ten shares. Combined with the fact that Zuckerberg is the largest holder of class A stocks, it gives him an outsized vote in the company. Shareholders cannot institute changes without him agreeing to it.
On the one hand, it seems apparent that he wants to keep control of the company he created. However, when a lot of people and institutions invested in the company, they want to have a say about what happens to their money. Additionally, his resistance to even listening to the opinion of other shareholders did not helped contain the situation.
Spotty Results
The problematic power structure would not have been a problem if the results had been stellar. However, after one too many scandals and antitrust investigations on the horizon, the stock price is more of a laggard in the market. Thus early investors have lost their money and no power to change the direction of the company.
Worse, there seems to be no clear plan on how to solve the underlying cultural and organizational issues. All that comes are empty promises and marketing catchphrases. Looking through Facebook’s plans for the future, the potential for further scandals seem to be more like a feature of the platform. Tighter integration of the data from the different services, more automated processing, and defined interfaces for advertisers were all part of the past problems.
Missed Penance
Now, it is not only the problems but also the response delivered by Facebooks executives, that create the problem. Every time one of them apologizes for a mistake, it more sounds like dismissing the complaint than genuinely taking it seriously. Thus what shareholders hear is a long stream of “Ahh, Whatever!” If you ever tried that as a reaction to a problem you caused, you will note that most people do not react favorably to it. Somehow Facebook has yet to notice.
Increased Oversight
Thus the solution of the shareholders is to increase the oversight of the management. Taking away the chairman position from the CEO and thus removing his control of the board is an essential first step. While the reduction of power would not be all that great, it installs someone in the hierarchy, who gets a better picture of the complete operation and further can help with advice and direction.
If Facebook can hire someone who has turned navigated post IPO and post-scandal communications might even be an excellent opportunity for Mark Zuckerberg to hone his skills. At least it would introduce someone, who can make the voice of the powerless shareholders heard within the management and elevate them from their cash source position.
Act Now
A shareholder revolt always forecasts trouble for the company. Right now, would probably be one of the last opportunities for Facebook to act before the share takes another hit due to this unhappiness. Unfortunately, it seems no one at Facebook is ready to genuinely listen.