(The Facebook Campus: One, Hacker Way. Photo by Tom Foremski.)
Lucy Marcus, a leading advocate for reform of boardrooms, is highly critical of Facebook's corporate structure, following a "Shareholder Spring" where the boards of many large companies faced angry shareholders.
In annual meeting after annual meeting around the world, boards have been taken to task by investors and other stakeholders on a wide range of issues: remuneration, board composition, competence, diversity, voting control, dual stock, and more... No sector has been immune; no director has been untouchable.
Yet Facebook has adopted a structure that enables co-founder Mark Zuckerberg to retain complete control following the IPO, it's as if it were a private, and not a public corporation.
Facebook swims against the tide of a global movement toward transparency, engagement, and checks and balances.
Foremski's Take: Facebook was not interested in reforming Wall Street with its IPO, as Google tried to do with its dutch auction process and snubbing the big investment firms. So it's not surprising that Facebook isn't interested in adopting a more open company governance structure.
In fact, Facebook [$FB] has copied Google's [$GOOG] corporate structure as closely as it could, and even improved on it. The two-tier shares where insider's shares have ten times the voting power is common to both companies. Mark Zuckerberg figured out an additional way of keeping control that Google's founders missed: he managed to retain the voting rights of shares he had sold in secondary markets.
Ownership of Facebook would have to broadly dispersed by the main shareholders, and the two-tier share structure eliminated, before Facebook's board could be made answerable to organized shareholder actions.
That's not going to happen anytime soon. Mr Zuckerberg has made it plain that he isn't interested in the money. In fact, he is selling shares primarily so he that he can pay the taxes on the shares that will vest in the coming year. His actions show he is very motivated in keeping total control over Facebook.
Google founders also have no plans to loosen their control over the board and recently took steps to make sure insiders held majority control even as they sold their shares. Both companies believe that their founders can do a better job running the company if they don't have to deal with potential shareholder actions. Companies such as Yahoo! have battled with many groups of shareholders over the past ten years, creating a big distraction for management.
Mr Zuckerberg has no interest in a "Shareholder Spring" just as he had no interest in the "Arab Spring," which had been dubbed by the media as a "Facebook revolution."
In his IPO letter Mr Zuckerberg spoke nobly about the "huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future."
Yet nowhere in his IPO letter does he mention the "Arab Spring," which would be a perfect example of the way Facebook has already helped "transform society for the future." [He likely didn't want to mess up his future chances in China.]
Mr Zuckerberg is not motivated by social activism and transformation, as the founders of Google were, setting up the Google Foundation, adopting an ambitious 'don't be evil' mantra; and being highly motivated to use money and influence to develop important advances in energy, transportation, and even space exploration.
The founders of Google really do want to change the world, and in ways that go far beyond their day jobs; the dull business of publishing an index of digital content.
Mr Zuckerberg still finds his Facebook world quite interesting, and unlike Google's founders, he's less interested in things outside of it. He wants to build the infrastructure for this new emerging Internet, the social Internet, this two-way-and-every-way-connected Internet.
In his IPO letter he writes:
The scale of the technology and infrastructure that must be built is unprecedented, and we believe this is the most important problem we can focus on.
It's clear that Mr Zuckerberg has no intention of being distracted from his infrastructure mission by a "Shareholder Spring" or an "Arab Spring" or any other type of distraction, even the IPO.
When the IPO was announced, Facebook distributed hundreds of posters in work areas with the instruction: "Stay Focused & Keep Shipping."
Focus is good, but a narrow focus by a company as important Facebook, is not a good thing. And it's not good for shareholders. I've often written about the importance for companies to know and understand the culture of the society in which they exist. All businesses are cultural artifacts and they cease to exist when they lose sight of that connection. A narrow vision has rarely been a virtue.