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Facebook Inc. has always had an absolute leader, cemented by a stock clbad structure that has maintained control of Mark Zuckerberg's voices even when he has sold millions of shares. Some investors grumbled, but most were happy to remain silent while the stock jumped. This week's dive reversed this dynamic, increasing calls for change at the top.
"This is never a problem until things go wrong," said Brian Wieser, an badyst at Pivotal Research Group. He thinks that a change in Facebook's leadership is inevitable, and said the latest figures could hasten that. "It's really hard to imagine maintaining the status quo." A spokeswoman for Facebook declined to comment.
Thursday, Facebook fell 20%, which cost investors 120 billion dollars – the biggest single-day loss in history. Shareholders who had survived months of renewed debate about Facebook's role in the company and the ethics of its business model suddenly turned their backs when they realized that growth had run out. Facebook's main application. Growth rates will decrease with "one-digit percentages" for each of the next two quarters, said David Wehner, Chief Financial Officer.
The loss of faith encouraged voices that asked Zuckerberg to share more of his voting rights and to give up his role as chairman of the board for a more independent personality.
"Zuckerberg is only responding to Zuckerberg," said Jonas Kron, director of shareholder advocacy for Trillium Asset Management, who last year backed a shareholder proposal to replace Zuckerberg as chairman of the board. d & # 39; administration. Since Thursday 's sale, he has received new phone calls and e – mails from other investors expressing his support. He refused to identify these people.
For over a year, Facebook and other social media companies have been under fire from policymakers and regulators for leaving false news, Russian trolls and manipulators proliferating on their services . Now that they are cracking down, it's spoiling growth, frightening investors. Authentic accounts and real information can be good for longer term business. But Kron said that Facebook could have avoided some problems if Zuckerberg's power was controlled by an independent president.
Other major technology companies such as Microsoft Corp., Apple Inc. and Alphabet Inc. share the roles of CEO and President. Twitter Inc. suffered its own stock market crash this week, down 21% on Friday after stagnant user growth. He is about the same age as Facebook and has a similar mentality to that of the founder, but he already has a separate executive chairman.
Zuckerberg has too much power, said John Streur, managing director of Calvert Research and Management. Earlier this year, he worried about Facebook's approach to privacy and customer data. In April, when he realized that engaging with the company would not change much, his fund sold his Facebook shares.
"Facebook's governance structure remains below industry standards, with a large amount of authority concentrated in the founder and CEO," said Streur. "Shareholder rights are not well respected, limited controls are in place around executive compensation, and concerns have been raised about the effectiveness of risk monitoring, including risks to life privacy and security. "
This is not the first time shareholders have publicly expressed their dissatisfaction. In 2012, the California State Teachers' Retirement System asked Facebook to separate the roles of CEO and President and to dispense with the stock structure that gave Zuckerberg such a hold. In April, Chris Ailman, chief investment officer of the pension fund, said the Facebook data privacy crisis was fueled by Zuckerberg's almost total control. Calstrs held more than 4 million Facebook shares at the end of March, according to data compiled by Bloomberg.
When Zuckerberg attempted to put together a plan to sell almost all of his stock while keeping control, some investors sued. Last September, just before the lawsuit, Facebook retreated.
In a Facebook post, Zuckerberg stated that he no longer needed the new stock structure because the stock of the company had grown so much that he was able to to fund his philanthropy without selling too much of his participation. This week's plunge will force the CEO to unload more of his stock to keep the same level of donations.
Zuckerberg's own words show how much the company could benefit from an independent director at his board of directors, Kron said. In blog posts and during his congressional appearance in April to explain how a Trump campaign-related company accessed millions of information, Zuckerberg said Facebook had not taken sufficient notice of his responsibility.
"It's exactly what an independent president does," Kron said. It has been difficult to badess how much of the backlash of Facebook's previous policy of allowing developers of third-party applications to exploit user data could have been avoided by having somebody use it. One with a broader, interrogative perspective.
Trillium submitted a proposal to separate the roles of CEO and President a few days before Wednesday's disappointing results. Another similar in 2017 won the votes of 51 percent of uninitiated investors, according to the investment firm. Kron expects this number to increase this time.
"It's hard to escape the conclusion that there are systemic problems in the way Facebook has been managed," writes Wieser de Pivotal in a note before the results. Even if Mr. Zuckerberg maintains his right to vote, having more independent board members would give at least more votes to shareholders, the badyst added.
How should Facebook write the job description of a potential independent chairman? "Someone with gravitas, someone with vision, business and technology chops," Kron said. They would also need a "good understanding of social impacts. The ability to think about unintended consequences, "he said.
One suggestion: Bill Gates. The founder of Microsoft has experienced similar rapid growth, followed by a period of instability marked by a deadly antitrust battle. After a lost decade, the business has become stronger, with new leaders and new strategies.
"When Microsoft went on the other side, they had an independent chair," Kron said. "Bill Gates has given up his presidency."
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