OMG! Hey Mark Zuckerberg, Where's the Trust?
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the latest bit of drama from the Face book IPO saga, one dirty little seven letter word has reared its ugly head: Control! According to the latest filings, through both his shares as well as the agreements with other investors, Mr. Zuckerberg’s voting power approaches 60% of total shares. What does this mean for fellow shareholders? Mr. Zuckerberg believes his say on shareholder matters such as capital allocation policies, corporate governance, as well as who sits on his Board to name a few, matters much more than yours! Is this self-serving? Perhaps. Ironic? Definitely, especially since it’s coming from the leader of the digital “social revolution” known as Facebook.
To be fair, control arrangements are not completely unheard of on Wall Street or Main Street for that matter. Given Mr. Zuckerberg’s apparent brilliance as well as the blood, sweat, and tears he has poured into his endeavor, little be it for me to stand in his way and tell him what to do with his corporation. The problem is; however, once you go public it no longer is just ‘your’ corporation. There are these pesky little things called shareholders whom you are legally obligated to not only report to, but also to serve in a fiduciary capacity if you will. All of your actions and decisions on behalf of Facebook now must be for the ultimate benefit of your shareholders!! And therein lay the irony of control. Although I don’t know Mr. Zuckerberg personally, I do know a thing or two about the qualities of exceptional managers that should be sought by investors. If you think about it, as a shareholder you are in essence entrusting the company’s management team with your hard earned investment dollars. In that context, doesn’t it make sense to ensure that the individual at the helm of your investment is the type of person whom you would want your children to grow up and marry? In this respect, brilliance is no replacement for integrity, honor, and an unwavering dedication to maximizing shareholder value.
While I have not studied Mark Zuckerberg as a manager, there are two facts about this story that leave me unsettled to say the least. First, this is a monumental IPO that has been built up by the press over the course of its long awaited debut. Similar in fashion to many over hyped IPO’s in companies that appear to be the next greatest investment, Facebook’s debut will result into a deluge of wealth for a small handful of insiders seemingly at the expense of those “lucky enough” to get in on the offering. The fact that this IPO will create not millionaires, but yes Billionaires with a B, and multiple one’s at that, should be enough to stir anxiety in the minds of the most ardent of Facebook followers. Second, here comes that dirty little word again. With nearly 60% voting control, Mr. Zuckerberg can stack the odds deeply in his favor. Will he apply initiatives designed to maximize shareholder value for all or will he wield his power for his own benefit. Only time will truly tell, but the one thing that is clear is the mechanism to enable the latter is firmly in place.
Fool blogger Mike Finarelli does not own any positions in any securities mentioned above.