Facebook crumbles around his lonely king
Mark Zuckerberg seems increasingly alone on top of Facebook Inc., with leaders stretching out the doors as he promises a new direction that seems antithetical to everyone he has said about the company's plans for many years.
He can, of course, do what he wants, because the company really is a Mark Zuckerberg production and because he has always had what the Silicon Valley founders demand: founder control of his company. As more leaders leave, Facebook looks forward to moving forward under Zuckerberg's total rule.
FB, + 0.39%
has suffered seemingly endless controversy, including the past, which hosts a live stream of mass shooting in two mosques in New Zealand. Facebook was notified by the Christchurch police to remove the video, which was not found by any of Facebook's AI engines or people who searched for violent content, as opposed to Zuckerberg's explanation to Congress a year ago on how their systems are getting better find harmful content. Facebook said in a blog post this week that in the first 24 hours of the shootings, approximately 1[ads1].5 million videos of the attack were globally removed, with over 1.2 million of these videos blocked by upload.
The massacres occurred two days after a massive interruption, and one day after a senior leader left in the midst of unhappiness with Zuckerberg's new direction, outlined in a manifesto that was longer in words while concise in detail. It looks like Zuckerberg has buried himself in a foxhole, following his inner instincts and intuition for the company he started with his roommates in Harvard 15 years ago. Needham & Co. analyst Laura Martin, referring to recent events plus a threatening threat of regulation, said the combined risks create a negative network effect for Facebook.
Investors who may be pleased with the continued chaos know that their hands are bound even though they do not agree with how Zuckerberg rules his kingdom. Zuckerberg still controls about 60% of Facebook's votes. Retirement of a Key Lighthouse – Long-Term Product Manager Chris Cox – on top of the loss of Instagram's founders and WhatsApp, is signaling increasing internal turmoil, with a CEO more alone on top.
Read more about Silicon Valley Poor Business Management by Embracing Founder's Control
"There have been some significant high-level departures that have raised many concerns," says Jonas Kron, who leads shareholder requests at Trillium Asset Management, an employee-owned investment management company based in Boston. "So top it off with New Zealand and a 12-hour interruption, it's a bit hard to keep up."
In October, Trillium sent a shareholder proposal backed by several state treasurers , representing about 5 million shares, asks Facebook's board to appoint an independent leader.
"There is a lot going on, and the company will greatly benefit from having Mark Zuckerberg focus on management and implementation, and have an independent form of government that focuses on the board and the relationship with investors and governance, "he said.
Through the many crises the company has experienced following the US elections in 2016, Zuckerberg has seemed to suffer no one, but possibly CEO Sheryl Sandberg. The New York Times reported last year that Zuckerberg and Sandberg ignored repeated warnings about some of the many issues that have bedeviled Facebook.
There have been anecdotal reports of some Facebook employees looking for new jobs or not feeling comfortable and giving different opinions among Zuckerberg's tight controls. In January, CNBC reported on the company's cult-like culture and how the fear among some employees to provide honest feedback may have contributed to the scandals that have encroached on the company.
Cox was not the only key responsible for departing in recent months. In the fall, co-founders of both WhatsApp and Instagram disagreed over the directions Zuckerberg wanted to take their platforms a few years after their acquisition of Facebook. He had initially promised to leave the companies alone and run them as subsidiaries. In Martin's note, where the Needham analyst also downgraded shares to a team, she marked 11 leading 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, this means that the acceleration of depreciation is destroyed until the top executive's turnover ends," Martin says. to the sidelines until we see the senior staff turnover stabilizing. "
Pressure to produce continued revenue growth and generate revenue on its other properties, Instagram and WhatsApp, even as Facebook's user growth slows, has led Zuckerberg to make some serious decisions. These decisions can only lead to more controversy.
According to his privacy manifesto, which talked about encryption of all messages, many were concerned that Facebook would be increasingly used for more evil means and that the company would not be able to polish abuse on network or to assist police Roger McNamee, an early Facebook investor and co-founder of Elevatio n Partners, believes that even with encryption of messages, the company's core business model remains intact. Messages are "a small fraction of the data and metadata that are important," for Facebook's business model, he said, because it can continue to retrieve information about its users for targeted advertising through news feed and story activity.
"The Manifesto leaves the FB business model unchanged. It is not acceptable," McNamee said in an email. "The business model reinforces hat spread, disinformation and conspiracy theories, with increasingly serious consequences, such as New Zealand terrorism."
Read about McNamee's new book, which talks about the issues on Facebook and his solutions
If Zuckerberg's decisions and instincts are right or not, Facebook investors must trust him, because he still has voting control, the company's board and investors must just agree or vote with your feet, since they don't technically have any real case processing, some days Zuckerberg may end up as a poster child for the concept of gradual elimination of founder control and two-class stocks, a proposal that some Securities and Exchange Commission officials support, who will put some sort of time limit on the founding control of a company.
Jonas of Tri llium believes it is an imperfect solution.
"The better approach is just not to have two-class at all," he said. "One share, one vote."
But while more investors are talking to dual class stocks and founder control in public corporations, the concept is becoming even more popular, as a new wave of major IPOs is beginning to hit US markets. Ride-seeking app developer Lyfts prospect revealed that it will be public with two-class warehouses, with two founders, Logan Green and John Zimmer, expected to have control. It is after rival Uber Technology Inc.'s well-documented issues with its controlling co-founder, Travis Kalanick. And D.A. Davidson analyst wrote in a comment this week that Lyft got riders following the scandal's scandals in Uber, ranging from a culture of widespread sexual harassment to software used to trick regulators, ultimately leading to Kalanick's unfaithfulness.
At Facebook's next annual meeting, which is likely to be held in May, shareholders will be able to vote their dissatisfaction with some of Zuckerberg's new decisions and his government in general. But with Zuckerberg's control and voices stacked against them, why would they even bother?
"The goal is to give investors the opportunity to give an opinion on whether an independent board meeting is a good idea or not, and to provide that information to the board," said Jonas. "If a majority of external shareholders agree, If it's just 40%, there's a meaning I think everyone would agree should be taken seriously. "
Investors must remember that in founding companies, when they go tough, they really don't have much to say. They can try to send messages to management and board through things like shareholder decisions, but the founder / controlling shareholder always has the final expression.
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