The New York Times has a dutiful sidebar to its incendiary story about the way Facebook’s leadership handled the past year of problems, with “six takeaways” from the investigation.
All six are interesting, especially if you’re focused on the intersection of Russia, U.S. politics and Silicon Valley. You can read it here.
But there’s one takeaway that’s not in there that’s more important than any of those, because it explains not what went wrong (Patrick Lencioni calls these downstream symptoms) but rather why things went wrong.
And here it is: A CEO having total, imperial control over a public company is a really, really terrible idea. Not just for investors, or the board, or employees, or customers—but for the CEO themselves.
Takeaway part B: When that CEO has also developed arguably the most important communications platform since the Internet itself, well, that’s an even bigger bummer!
Welcome to Facebook! Through Facebook’s oft-copied and truly terrible dual-class share structure, Mark Zuckerberg, founder, CEO and all-around grand pooh-bah, controls the company with unassailable authority. Stocks can go up, stocks can go down (and down, and down, and down) but as I mumbled into the wind during the company’s IPO in 2012, there is nothing and no one that can override Zuckerberg when it comes to running the company, and good luck with that! It should have been a concern all along, but oddly 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. 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. (Don’t believe me? Go back and read pages 20-21 of the S1.)
If anyone is still wondering why that may be a problem, the Times offers 7,100 words of damning evidence that not all is well in Face-land.
I’ll save you 30 minutes and boil it down:
1. Zuckerberg and his right-hand Sheryl Sandberg had a fixed worldview about how to run the company;
2. They made a series of strategic and tactical decisions based on those assumptions;
3. They were wrong.
Whether it was poo-pooing the idea that Russia was using the platform to influence American politics, or focusing on lobbying lawmakers instead of finding fixes, or messing with people’s privacy in unsavory ways if even inadvertently, they simply got a lot wrong.
Then they made it worse by brushing aside the views of others—like their board and members of the executive team—who might have helped them make better decisions. (Actually, they may have wanted to get more opinions before making mistakes, but whatever, you get it.)
It happens. Actually, it happens at a lot of companies big and small. We all know that. But in Menlo Park, California, center of the global-social-industrial-Internet complex, there’s a difference: A) The stakes are enormous, and B) there’s nothing anyone can do about it.
Yes, the stock can go down, activists can come in, ISS can make noise and Congress can make, er, vague threats and call a hell of an entertaining hearing, but at the end of the day, the only one who matters, the only vote that counts, is Mark Zuckerberg.
Ok, thought experiment: Imagine that Mark Zuckerberg is just an really smart thirty-something dad with a limited set of life experiences, zero experience leading in any business other than his own, a very healthy ego and billions of dollars tied up in his company? Now: What if the kinds of smarts he needed to take it this far are different from what he’ll need to move from here? Then: What if your company really needs an Alan Mulally-like figure, but your ego won’t let you bring him or her —or someone like him or her—in? What happens then?
The answer: Nothing!
That’s the real issue with the dual share-structure that doesn’t show up in the S1, but maybe should: Investors should be aware that the CEO is a human, and he is as trapped as the shareholders are in this inane scheme. While it all seems fine now, short of a superhuman act of self-awareness and ego suppression, if things go wrong, this will end badly because this guy is a brilliant, awkward Harvard dropout from Westchester, not St. Francis. And they will go wrong. Good luck!
Facebook has always been a pure-play bet on Mark Zuckerberg and his vision of connecting the world’s people in exchange for permission to mine and monetize their personal information thirty-six ways from Sunday. Investors, customers, lawmakers and employees were good with that as long as the stock was rising, the cat pics were posting without eroding global democracy and the options were in the money. Now? Not so much, it seems.
Okay, that’s enough out of me. Let’s grab three takeaways from this one takeaway story:
• People who really read fine print are seldom surprised by bad things happening (They’re all in there! That’s what lawyers do!).
• Accountability makes leaders stronger, not weaker.
• Absolute power…well, you get the idea.
The big question now: Does he?
Read more: Reading The Signs On Mark Zuckerberg