Mark Zuckerberg is the founder, CEO, and chairman of the board at Facebook. He also controls a majority of the company’s voting stock. His power at the company is complete. He cannot be fired or disciplined.
If the directors on his board attempted to remove him, he could simply vote with his stock to replace them with friendlier ones. It is unlikely the current directors would do that because they are each paid at least $350,000 a year, except for the ones who are also Zuckerberg’s company employees — they are paid many millions more.
Zuckerberg has much more power than ordinary CEOs at publicly traded companies, many of whom are held accountable by independent board chairmen and directors appointed at the behest of investors. On paper, everything ought to be going his way.
And yet Zuckerberg is at war with his own shareholders. As Business Insider’s Jake Kanter reported last week , 51% of independent Facebook investors — those stockholders who are not Zuckerberg himself or his managing executives — believe Mark Zuckerberg should be fired as chairman of the board, and 83% of them believe the share structure that gives Zuckerberg control of the company should be abolished.
That’s an astonishing majority against him, given the stock’s performance. By any measure, Zuckerberg has delivered as CEO. His product is used by 2 billion people. The stock has risen from an IPO price of $38 in 2012 to $195 today — a staggering return.
Yet his own investors think he needs to be reined in.
Zuck’s critics should be taken seriously
It is extremely rare for a majority of common stockholders to vote against their own CEO with such a massive majority. Even in the fiercest of proxy fights, activist investors find it difficult to muster more than 20% or 30% of a company’s stock. (Shareholders suffer from extreme inertia — it’s easier to sell the stock than it is to wage war against a board.) If, at an annual general meeting, the company wins a vote by a margin of less than 90%, it is generally regarded as a sign of significant unrest.
So Zuck’s critics should be taken seriously.
The shareholders’ problem is that Zuckerberg has a history of making mistakes , which he himself admits.
He initially did not think that Russian interference in Western elections via Facebook was a big deal. He also took responsibility for not following up quickly enough on the Cambridge Analytica crisis. “We didn’t take a broad enough view of what our responsibility is, and that was a huge mistake. It was my mistake ,” he said.
Way back in the beginning, Zuckerberg made the mistake of being cavalier about his users’ privacy. As a 19-year-old Harvard freshman who founded Facebook in his dorm room — an origin story Zuckerberg still references when he speaks in public today — he sent a string of texts to a friend describing how much data he had access to. “People just submitted it,” Zuckerberg told his friend . “I don’t know why. They ‘trust me’. Dumb fucks.”
Facebook, with Google, has a duopoly over the internet
Who among us has not said something stupid as a teenage student? We can forgive him for that.
Zuckerberg is a different person today. He is a corporate titan whose firm vacuums up half of all new advertising dollars being spent on the web. Facebook, with Google, is a de facto duopoly over the internet. The pair capture 71% of all digital ad spending in Europe, according to analyst Brian Weiser at Pivotal Research.
And that is precisely why Zuckerberg’s unchecked power is so dangerous. In March, Facebook stock slipped 6%, wiping $30 billion off the value of the company , on the Cambridge Analytica news. That was just one morning’s trading.
The cost of Zuckerberg’s errors in judgment thus run into the billions.
Yet Facebook, which is systemically important to the internet, remains tightly attached to a single point of failure: Mark Zuckerberg. (Continue reading here)
James E Windsor, Overpasses News Desk
July 26th, 2018