Strategy

Facebook Is Exhibit A In The Case Against Dual-Class Shares

Mark Zuckerberg, CEO of Facebook

If there’s one takeaway from the recent news about Facebook that pretty much everyone should be able to agree on, it’s this: A CEO having imperial control over a public company is a terrible idea. Not just for investors, the board, employees or customers—but for the CEOs themselves.

Through Facebook’s dual-class share structure, Mark Zuckerberg controls the company with unassailable 60 percent authority. Shares can go up, shares can go down (and down and down), but there is nothing and no one that can override him. It should have been a concern since before the 2012 IPO, but a moonshot stock price and cries of “change the world” have a way of slathering over cracks in a foundation.

Business, when played best, is a team sport. No one—not even someone smart enough to start Facebook—is smart enough to see around all the twists and turns that come from running an enterprise of such sheer complexity, scale and centrality to society. The world’s best-run companies—not the fastest-growing companies—but those that are built to outlast any one leader, have lots of guardrails and plenty of accountability.

Not Facebook. What Zuckerberg says goes—right into the grave. That’s right: He can even name a successor to take control of the company in case of his death.

So what happens when Zuckerberg gets it wrong? We’re getting a pretty good idea right now, after Zuckerberg and his right-hand, Sheryl Sandberg, stuck to their flawed assumptions about the business and botched a series of key strategic and tactical decisions as a result. Along the way, they brushed aside the views of others—from their board and members of their executive team—who might have helped. To paraphrase their now-famous mantra, they moved fast, and things got broken.

CEOs making mistakes are pretty common, of course. They’re human. But in Menlo Park, California, center of the global-social-media-industrial complex, there’s a difference: A) The stakes for society are enormous; and B) There’s nothing anyone can do about it.

Maybe activists will bang their pots and pans, ISS will give the company a thumbs down and a divided Congress will make threats and call a hell of an entertaining hearing (or worse: they could actually try their hand at regulating—a scary thought). But at the end of the day, the only one who matters, the only vote that counts, is Zuckerberg’s.

Facebook has always been a pure-play bet on one brilliant Harvard dropout and his vision of connecting the world’s people in exchange for permission to mine and monetize their intimate personal information. Investors, customers, lawmakers and employees were good with that as long as the profits were popping, the cat pics were posting (without eroding global democracy too much) and the options remained in the money.

And now? Like everything else at Facebook, that depends on Zuckerberg, and Zuckerberg alone. He deserved better.

Read more: Too ‘Bad To The Bone’ For A Facebook Facelift?


Dan Bigman

Dan Bigman is Editor and Chief Content Officer of Chief Executive Group, publishers of Chief Executive, Corporate Board Member, ChiefExecutive.net, Boardmember.com and StrategicCFO360. Previously he was Managing Editor at Forbes and the founding business editor of NYTimes.com.

Share
Published by
Dan Bigman

Recent Posts

Beyond The Buzz: How The Mid-Market Can Unlock AI Outcomes Not Hype

In today’s economy, speed wins. Insight wins. Execution wins. And the companies that can’t deliver…

2 hours ago

Doing Deals In Times Of Turbulence

Why now is the moment to act.

2 hours ago

How CEOs Are Redefining Success In Their Second Act

The University of Chicago Leadership & Society Initiative offers a bold new path—helping leaders harness…

3 hours ago

A CEO State Of Mind—In County Government

Why companies like Nokia are betting on Middlesex County, New Jersey—where smart governance meets private-sector…

3 days ago

How Kardex Remstar Is Working To Build American Automation

The warehouse automation equipment maker is investing in a strong supply chain by building production…

3 days ago

Six Questions To Bring Insight Back To Strategy

Strategy processes are getting squeezed. Answering these questions will set you up for building and…

3 days ago