Facebook shareholders are getting fed up with Zuckerberg but can’t do anything
latimes.com
latimes.com
See also: "Here’s an unpopular opinion: We’re lucky Mark Zuckerberg is in charge" ( https://medium.com/swlh/mark-zuckerberg-facebook-stock-drop-... )
In many ways I believe that Zuckerberg is the sole reason that Facebook hasn't crashed and burned at this point.
And as for those that don’t get acquired, I think we can all take a quick look at Snap’s market performance and bleeding execs. That’s not to say that FB will not be disrupted - everyone eventually is. Just that it doesn’t seem likely to happen anytime in the near future.
Still, I'm almost shocked by how viscerally unsympathetic I feel towards these shareholders. I genuinely believe their stewardship would be worse for both Facebook and its users: they'd mismanage Facebook into the ground and, along the way, would utterly compromise users in increasingly desperate attempts to turn things around.
I also find it puzzling. Then again, as with cults or other bottom feeding fads and the increasingly ubiquitous, various and sundry addictive mires and dark patterns, to avoid the trouble in leaving, it is best not to enroll in the first place.
That would be absolutely glorious.
We probably need a better filter. I stopped using fb years ago, same for twitter. No regrets
What the Internet has lost in terms of mystique and pioneering freedom, it has gained in terms of utility and convenience, IMHO.
The main reason I would like to go back to 1999 would be because I would be 20 years younger :)
Maybe I've got a bad case of the "back in my day", but I feel more and more that "mystique" is what makes life worth living.
Watching a lot of movies from the 60s-90s recently, it's striking how much more effort we needed to put into everyday life back then.
Want to meet a friend? Call their number, hope they're home and arrange a time. Want to watch a movie? Drive to the video store and hope they've got what you want. Out of food? You're driving to the nearest restaurant, no Uber Eats. Want to find out the median rainfall in Fiji? You're waiting for the library to open and digging through a stacks of musty old books.
Nowadays, everything's instantaneous - you want something, you get it. We've lowered the bar for almost everything.
If consumption and enjoyment no longer require any effort, doesn't that devalue the entire experience? What does that mean for life in general? Don't you think that humility comes from knowing the effort required to know or acquire things?
This is an interesting perspective, surely. But the premise for reducing effort in some areas, as has always been the case with economic growth, is that we can focus that same limited effort on exploring new horizons, standing on the shoulders of giants, living in paradises of dreams past.
Look to the stars, for they will never limit your ambition.
I think you mean that you enjoyed the first years of the Internet after it became known to the general public in 1993.
The first year of the Internet was 1969.
Added in anticipation of a nitpick: some writers like to reserve the word "Internet" to refer only to the period after the great switchover to Internet Protocol in 1986, but it was the same hosts hosting the same services (e.g., mailing lists, FTP sites, Netnews and Telnet) before and after the switchover.
I want a feed of freinds writing everyday bullshit and that just got worse by time untill I no longer use Facebook. It's like chat apps like MSN Messenger that stayed the same for years with no problems what so ever.
The issues with corporate social media are now well understood by large swathes of the public.
The incumbents are still standing due to their powerful network effects - if they lose those, the public may be a bit more discerning in where they head next.
Are they? Most of the people I know are still all "gimme my feed, gimme my like buttons", and couldn't care less about anything, as long as they get to read about their parent's neighbour's cat's cousin's trip to Whereverville, or see latest pictures of our Nancy's baby boy.
Mark Zuckerberg, as bad as he is, is not the worst case scenario.
Why not take real voting rights away from all stocks, and leave it with the company/effective owner?
It is indeed really difficult to sympathise with the shareholders.
Generally speaking, this idea we have these days that activist shareholders can come in and dictate how a company is run is insane.
And you don't vote by selling your stock, you vote via proxy ballots. Which too many individual investors don't do.
I think businesses whose primary source of income is advertising to their users can't really avoid being unethical. Facebook is just one of the biggest case studies of that model. The business model is rotten from the core, but I don't think it's Zuck's fault. Any other CEO would also have to grapple with that in a way that will inevitably hurt users and help advertisers.
If I were Zuck I would maybe consider trying to start a new tech company with a completely different business model. "They 'trust me'. Dumb fucks." aside, I don't really think he's a bad guy. No worse than Schmidt or Dorsey etc., at least.
Him and Sheryl Sandberg.
Then again, maybe societies would be better off if Facebook crashed and burned.
We all make mistakes. The important part is to learn from them and do not repeat them.
Since the beacon, Mark has always been sincerely recognized his mistakes, ask for forgiveness and try to fix those mistakes.
I see maturity and integrity of character in this.
Things that the young Zuckerberg did not have (ex: https://techcrunch.com/2011/06/25/im-ceo-bitch/ and https://i.redd.it/cqyiaxm1j6n01.jpg ).
I find remarkable that was able to quickly grow up and become a better leader.
Isn't Facebook's MO that they do basically whatever they want and when called out for shady stuff they issue some sincere apology and try again?
Even with all the privacy issues, I think the original idea has merit and could make Facebook more than just what it is now. And while I haven't thought this through properly, I think it's possible to find a way to pull off much of what they promised while respecting the privacy of their users.
Perhaps I'm wrong, and they gave up on the Graph API because they knew what would happen, but I can't help but wonder if the main reason they went the route they did is because of lack of imagination and a desire to 'make money' in a more conventional way (advertising?).
He had explicitly talked about the average SV' short term mentality multiple times: "It's still a little short-term focused in a way that bothers me," Zuckerberg says of Silicon Valley. "There's people who want to start a company not knowing what they want to do, or just to flip it." ( https://www.forbes.com/sites/tomiogeron/2011/10/31/mark-zuck... )
When it is time to cash out investors do whatever they can to pump up the valuation of a company even if it ends up creating handicaps for the future. When that happened to FB, Mark Zuckerberg was able to oppose to it.
Fb was like Friendster/MySpace then it copied twitter then they bought ig and copied stuff from there. Snapchat.
So just look what the trend is. And currently there is ig and messaging. So you see they’re putting back messaging in the main app bc people have abandoned messenger.
Which is Mark Zuckerberg? Probably a bit of both.
In case of both VC-funded and publicly traded companies, investors/shareholders mostly don't give a damn about the company or the product, they just want to flip it for more than they put in. That promotes extremely short-term thinking and abusive business practices. A "dictator" who actually cares about the company and the product is better.
Also, most institutions aren't particularly short-term in their outlook (if you are an institution buying a stock that has a valuation like FB...you have to be taking the very long view). Where the short-term "meme" comes from is analysts (whose bark significantly outweighs their bite) and the pressure that failing companies get to preserve shareholder value (and the real-world evidence here is that managers win close to 100% of the time and take shareholder's money down with them).
In my experience, I have seen countless companies decimated by unaccountable managers (no super-voting shares to my recollection, just weak oversight). I am not aware of any public company harmed by short-term thinking. The only possible exceptions are private equity (but for different reasons, still terrible) and acquisitions...but in the latter case, this happens for a ton of other reasons too. In most cases, there is no pressure.
Tbh, I don't even understand the logic...you can invest heavily, and that isn't showing up on your income statement immediately. It is true that most investors don't understand the difference between ROI and marginal ROI (these situations probably represent a good chunk of my lifetime returns) but companies feel limited in what they can disclose (and I have had conversations with non-US companies to that effect) and, in the end, the market always works it out.
The reason for that is that I didn't buy any. Shouldn't I get some for free? Maybe other people are willing to pay just like maybe other investors are on board with his ownership structure. But that doesn't give me any Facebook stock.
Maybe the government could step in? How can we fix this situation?
Anyone have any ideas?
A reminder for those with short memories, a recap of 2018:
https://www.vox.com/technology/2018/12/21/18149099/delete-fa...
Was enough for me to permanently delete my account. So zuck fails my standards.
It's all about how social media companies are forced to pursue profit above all else and this harms society.
Your average public corporation has a fiduciary duty to maximize profit for its shareholders. So arguably, we are lucky that Facebook is not your average public corporation. Zuck has plenty of money, and he's pledged to give almost all of it away, so he is probably motivated by more than just profit. He has been talking the talk about fixing social media, let's see if he walks the walk.
Hope FB crashes and burns ASAP.
EDIT: assumably the downvotes are from people who are unaware of the situation. https://us.spindices.com/indices/equity/sp-500 FB is the 4th largest exposure.
Also, in contrast to what some commenters believe, you cannot short FB from your retirement fund. https://www.irs.gov/publications/p590b is the relevant part from the IRS rules
I wouldn't want my passive investment vehicle to be actively influencing the companies I am investing in.
https://about.vanguard.com/investment-stewardship/how-our-fu...
Not clear to me how they decided how to vote.
https://about.vanguard.com/investment-stewardship/perspectiv...
Yes, this is an issue that is largely debated, and there are some very interesting conflicts of interest - just curious why you specifically think it's so bad.
So how much money (and by extension votes) these index funds wield is not connected to the quality of their contribution to governance. It also seems to me like there isn't much accountability and visibility into how they are voting from the perspective of people deciding which index fund to invest in.
So you have people collecting massive amounts of clout, but no feedback loop ensuring that they lose that clout if they underperform at that particular task.
Also one of the talking points of passive investing is that the trained professionals aren't as qualified or smart as they think they are. Active management risk is something to be avoided. As some of these funds grow in size they wield significant power and introduce active management risk. You just don't see it because the fund still tracks the index.
I know that last bit is splitting hairs. Some active management always occurs otherwise how can companies function.
One question is why should a passive fund be treated differently from an active fund in terms of how they contribute to governance? One difference is some of these index funds are absolutely massive and wield more power then a typical active fund.
https://www.seattletimes.com/business/vanguard-founder-john-...
Which makes sense to ME, but you can be sure your investment vehicle is actively directing everything you're investing in, towards whatever benefits the short-term value of whatever you think you're helping.
Possibly excepting certain arrogant companies like I dunno, Amazon, Uber: stuff that is essentially ungovernable, especially when you can't get controlling interest of the thing.
Since you are not actively investing in FB or any individual company, you can’t vote (since you passively invested in an index). Seems fair to me.
In any case, the point of a S&P500 fund is to get exposure to ALL companies, roughly in order of their size. Facebook is a big company, so any fund should have a chunk of it.
One most certainly can, as most recently I sold calls from my Fidelity rollover IRA. Now can I literally short stocks from my IRA? I just tried it, and I'm not given the option (whereas I am on another account). Maybe that's a feature I don't have turned on, or maybe I can't literally do that from an IRA. But if I can trade options contracts, I could effectively do the same as shorting.
https://www.irs.gov/publications/p590b
> Generally, a prohibited transaction is any improper use of your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.
> The following are some examples of prohibited transactions with a traditional IRA.
> - Using it as security for a loan.
If your IRA let you sell calls, you likely own the underlying equity.
Surprising how many people aren't familiar with the rules and just downvote
Ah, of course, borrowing the shares and all. Hadn't given it a lot of thought, frankly; short trading stays away from the IRA.
If your IRA let you sell calls, you likely own the underlying equity.
For sure, trying to get rid of the underlying stock that I didn't want anymore. I'd be shocked if one were allowed to use their IRA to trade, say, naked puts. But without looking to see if I've done it, I'll assume one can buy puts (with a trade for the underlying stock) because I buy calls all the time using the IRA.
Read down the list, and it's "this company set back technology and grew by consistently backstabbing partners and customers alike... this company set back the country by taking billions of dollars and then didn't build the infrastructure the fees were for... these companies grew by secretly mass-spying on everyone in ways that were already illegal in other modalities... this company killed all those people through arguably criminal negligence, and walked away..."
(I'm a big proponent of passive index investing, and I don't mean to discourage it. Bogle-style US total-market or S&P 500, balanced with Barclay's US bond index. All the better that it's passive, so you're reminded less of how sausage is made, while you try to make sure you won't retire as a homeless street person.)
https://www.dividend.com/news/2017/11/03/companies-multiple-...
1) There are mutual funds that do stick to "value" stocks i.e. low P/E ratios, which would exclude companies like FB.
2) If you really want to, you could take a short position that cancels the exposure to FB in an S&P index fund. (I don't know how legal that is in a retirement fund, but I know you can buy ETFs that have short positions in them, so it should be legal in principle.)
3) People hold actively managed funds in their 401ks (though I don't advise it myself), and those funds may decide against such stocks as FB.
Fair point that large-cap index funds will have notable exposure though.
[0] https://money.usnews.com/money/blogs/the-smarter-mutual-fund... (from 2014, but the number likely hasn't changed substantially)
I saw that with a family that owned a condemned property. They couldn't rent it but they sure could borrow against the land price (ever rising) minus the cost of demo'ing the old building.
I also think stocks tend to keep up with/beat inflation and thus are better than cash as a store of value.
So long as asset value inflates, it's good for cash via loans. The moreso if asset inflation > nominal interest rates.
If there is an 0.01% chance of paying $10,000 dividend, or 100% chance of paying $1 dividend, the expected payout is the same.
Without this feature something isn't really a stock, at least not in spirit. It's more like the shittiest of trash-tier junk bonds.
"Fixed return" isn't really relevant from a practical standpoint because shares and junk debt both have volatile prices, and price is what actually matters when it comes to securities like this.
It's absolutely relevant. Sometimes junior debt trades a little bit like equity but the point is that bonds mature whereas equity exists for the lifetime of a company.
>... price is what actually matters when it comes to securities like this.
Absolute return is what matters, not price. The return of a bond - junk or otherwise - is known on day one of a bond issuance in the absence of default. That makes fixed income a fundamentally different asset class to equity.
Even a junior perpetual junk bond is different to equity. The junk bond's coupons would be fixed, whereas dividends vary according to company profits.
For literally everyone else, it is, in fact, price that matters.
I made the distinction between price and total return above because an asset's price can remain more or less constant while still being a profitable investment: for example a utility company with a high dividend yield.
Let me try another tack. Would you rather own non-voting equity or junior debt in a company that is about to strike a deal that will make them wildly profitable?
Considering the stock is up nearly 60% in the last 4 months, it seems like most shareholders aren't upset at all since the stock is being bid up by investors regardless of the "survey/poll" by one of the proxy sponsors.
The author ends with "Of course, they knew that when they bought their shares, so what do they really have to complain about?"
Exactly. Shareholders, especially funds like Trillium Asset Management, knew of the share and voting structure of FB. It's pretty much shareholders share in the profits while Zuckerburg controls the company. So why write an entire article ( much of it blatantly anti-zuckerburg and anti-facebook ) about it? What an odd article. It, like most facebook related articles recently, comes off as biased hit pieces with no substance.
when did this powerful structure come into existence in the history of Facebook and who was responsible for it? was its origin with Peter Thiel's initial investment and was it his idea to make it so the founder would preserve their power?
If we can imagine hypothetical circumstances under which he could be forced out, or lose control of the graph it would be a good bet to watch for events that might set that in motion.
Right now, they're using leaks to discredit him and to isolate him from mainstream political support.
The most plausible play is one where they leverage antitrust to "break up" the company, leaving him in control of the advertising business and his shares intact, while getting the graph into hands who can be more "politically accountable," that is, more connected, who can then use the graph for direct political ends. Democrats are making noises about it already, and oddly, he may have more allies among neocon Republican types who would prefer to deal with an internet dictator or king than a slippery progressive committee.
Conspiracy? Hardly. It's just incentives.
Zuckerberg has clearly kept control of Facebook with the idea that he had a "mission". While various folks might justifiably doubt Zuckerberg's integrity, it seems reasonable that an entity like Facebook should be run with some commitment to longer term integrity and principles. Whatever process exists clearly should be insulated from day-to-day share prices and the multiple stock voting types achieves that.
Oppositely, activist shareholder coups generally aim to extract as much money as possible as quickly as possible from a given company. It seems unlikely this approach would involve more privacy protection, less manipulation, etc. Just the opposite.
The problem of a private entity becoming the host of a lot of essentially public discourse certainly remains. The thing is that I personally trust the powerful enemies Facebook has found (mainstream media, various elected officials, etc) even less than Facebook, which speaks a bit to problems this society is having.
It just seems like the only one getting fed up with Zuckerberg is the media. They can take any ordinary sounding news and turn it into a vilification of Zuck or facebook. It's so blatantly obvious, I'm loosing respect for a lot of these so called "professional" media outlets ~ it would seem the quality and objectivity of their articles are going downhill, at least with regards to the tech industry.
I'm sure if Zuckerberg sold most of his shares, relinquishing control of FB votes, the media would find a way to twist that into bad news as well.
Up until now, Facebook has consistantly provided excellent returns for investors, and this has also allowed other companies, like Snap, to have similar shareholder voting rights. Investors have yet to penalize a company at their IPO or overall stock price for this practice, but I wonder if we may see a change in that attitude if Mark Zuckerberg and Facebook's other shareholders start to have significant public disagreements.
Buying a stock with such an awful capital structure is like betting on someone else's poker hand. It's great if you think they're a great poker player, but when they begin to do foolish things, you have no say. And then to complain about the situation you created is ludicrous.
They can sell.
Probably wouldn't drop the share price that much, given that Zuckerberg owns almost all of the "real" shares, and if a dramatic number of shares were sold, they'd probably find their way to Facebook.
But they wouldn't have to be fed up shareholders.
He's never going to change.
It reviews the evidence related to dual-stock companies. Facebook is such as company since there are class A and class B shares (which have 10 times the vote power).
Here is a follow-up article that is worthy of attention as well: https://corpgov.law.harvard.edu/2019/04/17/whats-the-problem...
Apple is buying back stock
Elon is playing some game around taking Tesla private again
And mark, well he does have to, because he’s in control
Can you provide some examples of failures?
Examples needed.
As long as the unsupported assertion is confidently stated in a short, declarative sentence, that's good enough for me.
I'm no fan of Facebook (in fact I am the opposite), but damn.
What data? User's data? Algorithms? There's little value in FB's algorithms, the value is simply in its usage by users, content creators and advertisers.
Without those, FB is worthless.
EDIT: for those downvoting, please point to a retirement vehicle that does support shorting
The S&P500 has roughly 11 sectors to it. Each one with its own ETF options. Each one of those sectors is also broken down by industry.
So in Facebook's case, you could get an ETF for the 10 sectors besides "Communication Services". Communication Services has less than 30 stocks. You could get an ETF for specific industries within Communication Services or just pick some of those stocks you like the most to add to your portfolio. Facebook's industry has only 4 other stocks I believe - Google (2), Twitter & TripAdvisor.
Of course the main downside to managing your own portfolio is re-balancing it.
But this is something I've considered from time to time when I feel very bearish on a certain company or industry that I feel my automated portfolio is overweight on.
Selling the stock is meaningless, since the crux of the problem is that the problematic individuals control the majority of the votes, while holding a minority of the shares. Look at FB. Zuck personally has 3.98 billion votes. All the other shares only have 2.4 billion votes. So everyone sells, drives down the price of the stock, and then what? Control doesn't transfer. Literally nothing changed. Hell, it might even get worse, if Zuck decides to purchase Class A shares himself.
Then those people aren't shareholders in a company whose management they find unacceptable. Problem solved, from a certain point of view.
Do you really think his lifestyle is going to change if he was suddenly worth a mere 660 million? (That’s a 99% reduction.) I don’t think you really have a grasp on just how obscenely wealthy this man is, and how little it actually effects him.
And wealth, as Mr Hobbes says, is power.
And anyway this is missing the point. Even if Facebook got delisted. He still controls Facebook. The cost of the shares means literally nothing.