
Facebook shareholders are getting fed up with Zuckerberg but can’t do anything - smsm42
https://www.latimes.com/business/hiltzik/la-fi-hiltzik-mark-zuckerberg-facebook-20190416-story.html
======
ChrisCinelli
My experience tells me that FB has been better off in the _long term_ having
Mark's dictatorship than having to deal with a horde of short term investors
that wanted a way to make quickly a return even if it meant burning users
down.

See also: "Here’s an unpopular opinion: We’re lucky Mark Zuckerberg is in
charge" ( [https://medium.com/swlh/mark-zuckerberg-facebook-stock-
drop-...](https://medium.com/swlh/mark-zuckerberg-facebook-stock-drop-
shouldnt-step-down-a4277737152e) )

~~~
mrweasel
I think you're right. If we think that Zuckerbergs decisions where bad, in
terms of user privacy, just wait until impatient shareholders are in charge.

In many ways I believe that Zuckerberg is the sole reason that Facebook hasn't
crashed and burned at this point.

~~~
bartread
Tend to agree. I'm no fan of either Facebook or Zuckerberg. My attempts to
leave it all behind have thus far proven unsuccessful, and the fact that FB
owns both WhatsApp and Instagram doesn't help.

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.

~~~
nullc
If they burn facebook to the ground this may be better in the long run both
for the users and for society at large.

~~~
confiscate
I disagree. That would feel like going back to the year 1999

~~~
avinium
> That would feel like going back to the year 1999

That would be absolutely _glorious_.

~~~
Kurtz79
I enjoyed the first years of the Internet as well, but as fun and exciting the
early web, IRC ad Usenet forums were, there was no Google Maps, no Wikipedia,
no next-day shipping of almost everything, no Youtube... many things I could
live without today as I did at the time, but overall I think they have a
decent utility.

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 :)

~~~
avinium
> What the Internet has lost in terms of mystique and pioneering freedom, it
> has gained in terms of utility and convenience, IMHO.

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?

~~~
m_fayer
Hear hear. It's like the programming mindset has been applied to day to day
life. Ruthless pursuit of efficiency and automation, maximum and continuous
delegation to the system and machine - these things suffuse everything and are
even elevated to the status of values. It makes sense with something as error-
prone and cognitively challenging as code, especially considering how well
suited machines are to handling it. But now these values have been transferred
into the business of daily human living and taken to an extreme. How good an
idea that is, and what the end results will be, those things aren't obvious to
me.

------
diego
Well, they can sell the stock. If you don't believe in the CEO and can't fire
him, you get out. Sounds like same shareholders are trying to stage a coup,
good luck with that.

~~~
TAForObvReasons
If you have a 401K or other retirement vehicle, you very likely own FB shares
as part of your S&P500 exposure. There really isn't an "S&P499" that includes
everything but FB

EDIT: assumably the downvotes are from people who are unaware of the
situation.
[https://us.spindices.com/indices/equity/sp-500](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](https://www.irs.gov/publications/p590b)
is the relevant part from the IRS rules

~~~
arielweisberg
If you own an index fund does the fund actually vote?

I wouldn't want my passive investment vehicle to be actively influencing the
companies I am investing in.

~~~
arielweisberg
Oh they do. Interesting.

[https://about.vanguard.com/investment-stewardship/how-our-
fu...](https://about.vanguard.com/investment-stewardship/how-our-funds-voted/)

Not clear to me how they decided how to vote.

~~~
lightbyte
I only opened up the "500 Index Fund" PDF but it was interesting to note that
they voted against almost every proposal that was brought by shareholders

~~~
scarletham
Yes, and they voted against the proposals mentioned in the article, except for
equal share class voting rights.

------
basetop
If they are fed up, they can just sell the shares and move on. Honestly, what
is newsworthy about shareholders being upset with a CEO? There are
shareholders upset with every publicly traded company.

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.

~~~
dosy
> Zuckerberg owns or controls 88.1% of Facebook’s Class B shares, which each
> have 10 votes at the annual meeting — 3.98 billion votes overall. There are
> only 2.4 billion Class A shares, which are the only shares ordinary
> investors can buy. So any proposal Zuckerberg doesn’t like will fail by
> nearly a 2-1 margin, assuming all Class A investors vote together, which
> never happens. (Zuckerberg owns 0.5% of the Class A shares.)

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?

------
motohagiography
Have commented before that something as politically powerful as Facebook's
graph will be the focus of machinations. Zuckerberg is certainly not the most
evil person who could run that company, but it means he's got to be sure he
can fend off every _more_ evil person who thinks s/he can.

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.

------
smallgovt
For those commenting that shareholders should sell, it's possible that
shareholders believe there's upside with Zuckerberg at the helm AND even more
upside without him. So, selling doesn't make sense.

~~~
save_ferris
Why would they be getting this frustrated with him if they saw upside with him
at the helm?

~~~
dsfyu404ed
If the CEO is tripping over a dollar to pick up a penny he's still picking up
a penny but investors have a right to be irked that he's not picking up the
dollar.

------
thorwasdfasdf
All the article is saying is that Zuck owns most of the votes therefore the
other stock holders can't vote against him.

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.

~~~
ineedasername
You can't say it's just the media when the whole point of the article was to
expound upon the 4 shareholder-driven ballots about being fed up with the
management structure.

------
paulpauper
As a Facebook shareholder, i could not be happier. plot the performance of
Facebook vs. the S&P 500 since the IPO. Facebook s a money-printing machine
thanks to mobile ads, which includes Instagram. There will always be
shareholders who dissent. Has Facebook made mistakes, yeah, not but enough to
make me sell.

~~~
DSingularity
Question, aside from reduced confidence in future value of future value and
side from better opportunities elsewhere — what would make you sell a company
that is making good money?

~~~
vthallam
Not op, but I'd sell if I think there's no upside anymore.

------
anbop
In 15 years Zuckerberg has manufactured half a trillion dollars out of thin
air. Canning him would be like firing Tom Brady: not necessarily stupid but
not a decision you would want to make hastily.

~~~
JMTQp8lwXL
It wasn't like he alone created that half a trillion in value. Facebook
employs thousands of people. He was at the right place at the right time.

~~~
anbop
Yes, but if not for him, those thousands of people would be creating that
value for people other than Facebook stockholders.

~~~
smsm42
A lot of these stockholders are institutional investors or people investing
through them in index funds, mutual funds, ETFs and such, so for them it
probably wouldn't matter - if another company had taken place of Facebook,
they'd invest in that instead, with the same result.

------
jliptzin
They knew what they signed up for when they bought the stock. No sympathy for
them whatsoever.

~~~
i_am_nomad
This is the only reasonable outlook on the situation, sadly. People knew who
and what Zuckerberg was when FB went public. Investors hoping to ride the hype
and then dump him when convenient are the true “dumb fucks.”

------
areyouseriousxx
I feel as though this piece is a bit alarmist, but I'm curious if we are
approaching the first big test of these ownership structures of public
companies where the founder(s) maintain majority power.

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.

------
JackFr
Sell the stock.

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.

------
a3n
> Facebook shareholders are getting fed up with Zuckerberg but can’t do
> anything

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.

------
noname120
Here is a related article that is highly interesting:
[https://corpgov.law.harvard.edu/2018/04/15/are-dual-class-
co...](https://corpgov.law.harvard.edu/2018/04/15/are-dual-class-companies-
harmful-to-stockholders-a-preliminary-review-of-the-evidence/)

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...](https://corpgov.law.harvard.edu/2019/04/17/whats-the-problem-with-
dual-class-stock-a-brief-response-to-professors-bebchuk-and-kastiel/)

------
strikelaserclaw
I'm no fan of zuckerburg but as far as generating money for FB, he's the man
for the job.

------
craftyguy
Sure they can, they can dump their shares of facebook. If enough of them do
it, the share price will fall. Nothing motivates big shot CEOs to attempt
change than the price of their stock tanking.

~~~
jbverschoor
Why would you think so? They already raised money with their stock. And mark,
or anyone with enough capital, would rather be in full control than have to
report/listen to shareholders.

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

~~~
craftyguy
mark is not trying to take facebook off the market, so I'd be willing to bet
that he and other corporate officers are going to react to share price. the
vast majority (I've seen estimates of ~98%) of his wealth is still tied
directly to facebook stock.

------
jshaqaw
Dual share class IPOs always seem fine when a company is in its hot growth
mode and the founders have a halo. They very rarely end well. Shareholder
democracy works. A CEO who is able to convincingly explain their long term
vision to markets and has earned credibility has nothing to fear from the
short term hordes.

~~~
treis
>They very rarely end well.

Can you provide some examples of failures?

~~~
bickfordb
Snapchat

~~~
skinnymuch
But Snapchat’s initial decision to be a “camera” company. Along with their
redesign likely would’ve been done anyway. Regardless of voting structure.
After both of those you can say things would’ve changed. But not before. And i
don’t see how you can say Snap would be in better shape now with the ousting
of the founders and their control since the redesign. What would have been
done differently?

------
willio58
Isn't this easy? Just sell your stock.

------
echo85
They can do something. sell.

------
pbalau
FB shareholders are bloody pleased with how the stock rebounded after last
year. I am, not only 60+percent over, but I also have a crapload of tax
credits.

------
elchupanebre
"Facebook shareholders ... can’t do anything" \- that's not true. They can
sell FB stock.

------
sbov
All of those missteps in the article seem extremely unlikely to have been
avoided regardless of governance.

------
moomin
The problem isn’t that Zuckerberg isn’t up to the challenge of running
Facebook. It’s that no-one is.

------
xbmcuser
They can do something sell the shares they own. They bought them knowing he
will have control.

------
Giorgi
Yeah, poor shareholders can't kick founder from his OWN freaking company am I
right?

------
lotfidev
They knew what they were getting into when they started investing.

------
OnorioCatenacci
So am I missing something here? If they think Zuckerberg is so damaging to the
company why don't they sell their stocks and invest in a company they feel
good about?

~~~
caconym_
Because waaaaaaaah. Why should I not be able to have my cake and eat it too,
regardless of who else is left holding the bag and/or other negative
consequences that may result?

I'm no fan of Facebook (in fact I am the opposite), but damn.

------
unstatusthequo
Bullshit. Shareholders can sell their shares. Enough of that and institutional
abandonment ought to do the trick.

------
lowdose
We should bail zuckerberg out and open source the data. Every country chip in
a couple billion and its done.

~~~
ucaetano
"open source the data"

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.

------
theseatoms
They can sell their shares.

------
quotha
They can always sell

------
scottrogers86
They can sell...?

------
eVeechu7
They can sell.

------
microdrum
They could sell their stock.

------
cmurf
They can become former Facebook shareholders. Nothing says they can't sell
that stock if they don't like the compulsory leadership regime they originally
signed on to.

------
timavr
This article is so one sided. Either you have votes or don’t have votes.

------
TAForObvReasons
For those commenting that shareholders should sell, FB is in the S&P 500. In
standard 401K and other accounts, there is no way to own an S&P499 product
that has no exposure to FB. Many of us are indirect shareholders and don't
really have a compelling alternative

~~~
amha
You could short FB.

~~~
TAForObvReasons
You cannot short any stock from most retirement funds

EDIT: for those downvoting, please point to a retirement vehicle that does
support shorting

~~~
mattferderer
I didn't downvote but the closest I know you could do to this is buy an
inverse ETF that is heavy in Facebook. I don't think there are any inverse
ETFs that would even have more than 10% Facebook.

------
jonathankoren
The idea of giving supervotes to founders is always going to come back and
haunt investors. Uber is stuck with Travis. Facebook is stuck with Zuck.

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.

~~~
vkou
It's in Zuck's personal interests to maintain a high share price, because his
lifestyle is predicated on borrowing money against the current worth of his
shares.

~~~
jonathankoren
Zuckerberg is worth 66 billion dollars.

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.

~~~
dredmorbius
That depends tremenously on how his wealth is tied up, what is liquid, and how
collateralised it is.

And wealth, as Mr Hobbes says, is power.

~~~
jonathankoren
All of that is moot. It’s writing off 99%. I can see no situation where he
couldn’t protect 1% of his wealth, or even just 0.1%.

And anyway this is missing the point. Even if Facebook got delisted. He still
controls Facebook. The cost of the shares means literally nothing.

