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Mark Zuckerberg seems more and more lonely at the top of Facebook Inc., with rushing leaders, promising a new direction that seems to go against everything he has said about the company's projects for years.
Of course, he can do what he wants, because the company is really a production of Mark Zuckerberg and he always had what the founders of Silicon Valley are thirsty: the control of the founder of his company. As more and more executives leave, Facebook seems to be moving more towards the absolute rule of Zuckerberg.
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has endured seemingly endless controversies, including the most recent, by organizing a series of mass shootings in two mosques in New Zealand. The Christchurch police asked Facebook to remove the video, which was not found by any of the AI engines nor by humans in search of violent content, contrary to the explanation of Zuckerberg in Congress on how his systems manage to better find harmful content. Facebook said in a blog post this week that in the first 24 hours of the shooting, about 1.5 million videos of the attack had been suppressed worldwide, including more than 1.2 million blocked during the download.
The massacres took place two days after a massive breakdown and a day after the departure of a senior officer who said he was unhappy with the new direction taken by Zuckerberg, described in a manifesto that contains many words and details. It seems that Zuckerberg has plunged into a pit, where he follows his instincts and intuition for the company he created with his roommates at Harvard 15 years ago. Needham & Co. analyst Laura Martin, citing recent events and an imminent threat of regulation, said the combined risks created a negative network effect for Facebook.
Investors who may be dissatisfied with persistent chaos know that their hands are tied, even if they do not agree with how Zuckerberg rules his kingdom. Zuckerberg still controls about 60% of Facebook votes. The departure of a key lieutenant – Chris Cox, a longtime product manager – adding to the loss of the founders of Instagram and WhatsApp, announces a growing internal turmoil, with a more isolated CEO at the top.
Learn more about the poor corporate governance of Silicon Valley related to founders control
"There have been a lot of worries about a number of important senior executives," said Jonas Kron, head of shareholder advocacy at Trillium Asset Management, an employee-owned investment management firm based in Boston. "Then you add New Zealand and a 12-hour power outage is a little hard to follow."
Last October, Trillium submitted a shareholder proposal with the support of several state treasurers representing approximately 5 million shares, asking Facebook 's board of directors to appoint an independent chairman. .
"There are a lot of things going on and the company would be very interested in Mark Zuckerberg's focus on management and execution, and his independent chairman focusing on advice, investor relations and oversight. advice, "he said.
In the course of the many crises that the company suffered after the 2016 US elections, Zuckerberg seemed to listen only to the operations manager, Sheryl Sandberg. The New York Times reported late last year that Zuckerberg and Sandberg had ignored repeated warning signs of some of the many problems that Facebook is hurting.
Anecdotal reports have been reported of Facebook employees looking for a new job or feeling uncomfortable giving differing opinions under Zuckerberg's close control. In January, CNBC reported on the cult culture of society and the extent to which the fear of giving honest feedback among some employees could have contributed to the scandals that surrounded society.
Cox was not the only key leader from the past few months. Last fall, the co-founders of WhatsApp and Instagram disagreed on the directions that Zuckerberg wanted to take on their platforms, a few years after their acquisitions by Facebook. He had initially promised to leave the companies alone, managing them as subsidiaries. In Martin's note, in which the Needham analyst had also downgraded the stock, she pointed out 11 executive departures in recent months.
"A negative network effect suggests that departures will continue and, since we believe that people are a key competitive advantage for FAANG companies, it involves accelerating value destruction until the end of the rollover." leaders, "wrote Martin. "We prefer to stay on the sidelines until the turnover rate of senior staff stabilizes."
The pressure to produce continued revenue growth and generate revenue for its other properties, Instagram and WhatsApp, even as Facebook's growth in user numbers dwindled, led Zuckerberg to make tough decisions. These decisions, however, could lead to more controversy.
After his privacy manifesto, which dealt with the encryption of all messages, many feared that Facebook would be used more and more for perverse means and that the company would not be able to control the violations on its network or to prevent it. help the forces of order. Roger McNamee, an early Facebook investor and co-founder of Elevation Partners, believes that even with message encryption, the company's business model remains intact. Messaging is "a tiny fraction of the data and metadata that matters" to Facebook's business model, he said, because it can continue to collect information about its users for targeted advertising through news and reports.
"The manifesto leaves the economic model of FB unchanged. This is not acceptable, "said McNamee in an email." The business model amplifies hate speech, misinformation and conspiracy theories, with increasingly serious consequences, such as terrorism in New Caledonia. Zealand. "
Read McNamee's new book, which discusses problems with Facebook and its solutions.
Whether Zuckerberg's decisions and instinct are correct or not, Facebook's investors have to trust him. Since he still has control of the votes, the board of directors of the company and its investors simply have to accept or vote as they wish, since they have no technical say. One day, Zuckerberg may well become the standard bearer of the concept of phasing out founder control and dual class actions, a proposal supported by some Securities and Exchange Commission officials that would impose a certain time limit to the founder. control of a company.
Jonas of Trillium believes this is an imperfect solution.
"The best approach is simply not to have a double class at all," he said. "An action, a vote."
But as more and more investors oppose the control of two-class corporations and the control of founders in public companies, the concept is becoming more and more popular as a new wave of IPOs large-scale starts to hit the US markets. The Lyft application developer's leaflet from the developer of Ride-hailing revealed that it would go public with two-class actions. Its two founders, Logan Green and John Zimmer, should take control. This comes after the well-documented problems of his rival Uber Technology Inc. with its dominant co-founder, Travis Kalanick. A DA Davidson analyst wrote in a note this week that Lyft had won runners after Uber's series of scandals, ranging from a culture of widespread sexual harassment to software used to trick regulators, which eventually drove the dismissal of Kalanick.
At Facebook's next annual meeting, which will likely be held in May, shareholders will have the opportunity to express their dissatisfaction with Zuckerberg's recent decisions and his reign in general. But with Zuckerberg's control and the votes accumulated against them, why would they be bored?
"The goal is to give investors the opportunity to express an opinion as to whether an independent chairman of the board is a good idea or not and to give this information to the board," said Jonas. "If a majority of outside shareholders agree with that, even if it's only 40%, it's an opinion that I think will suit everyone, should be taken seriously."
Investors need to remember that in companies controlled by their founders, when conditions are difficult, they do not really have a voice. They may try to send messages to management and the board of directors through, for example, shareholder resolutions, but the controlling founder / shareholder always has the last word.
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