Yesterday, John Abell of Reuters wrote a provocative piece entitled, “Facebook needs a new CEO,” where he argues that Mark Zuckerberg should step aside from his position as CEO and focus on research and strategy. Sarah Lacy of Pando Daily wrote a rebuttal entitled “Facebook Doesn’t Need a New CEO, Reuters Needs a New Technology Writer,” where in addition to her headline’s thesis she lauds the direction that Zuckerberg has guided Facebook in, pointing out that tech companies are usually more successful with their founders at the helm.
The two pieces debate market caps, the accuracy of positions attributed to certain people, the effectiveness of Zuckerberg in building Facebook, the role that NASDAQ played in the stock prices – all important things, but somewhat irrelevant to the issue of why investors don’t have confidence in Facebook right now.
Investors aren’t clamoring to see someone besides Zuckerberg as CEO of Facebook. They want assurance that their money will be well-stewarded. It is decidedly unsettling to have some of the worst case scenarios described in Facebook’s S-1 filings (such as out-of-control overhead expense and diminished Zynga returns) transpire during their first public quarter.
In that same document Facebook described the risk of having Zuckerberg controlling their board (because he has the proxy of a few key shareholders). This is most likely the position that Zuckerberg holds that makes investors nervous. Zuckerberg’s capability as CEO of Facebook is not as concerning with Sheryl Sandberg in charge of much of the day-to-day management. However, the guy who wrote to investors: “These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits.” and preceded to wax poetic about “the hacker way” doesn’t inspire a lot of confidence with investors that the value of their investment will increase. If Abell is correct in describing that 97% of investors are retail investors, then Facebook’s volatility will likely continue.
Google’s Sergei Brin and Larry Page have similar control of their board, with a small caveat – they make a ton of profit. If Zuckerberg wants to silence critics he needs to blow people’s revenue (and profit) expectations away – anything short of that will probably result in the same volatility that their earnings were greeted with this past Thursday.
The past is the past. Zuckerberg built a massive empire, NASDAQ handled their IPO poorly, Facebook stock lost a lot of its value. None of those are rectifiable at this point. What shareholders need are some rainmaking results or assurance that there are some checks and balances to protect their interests. By that criteria, Mark Zuckerberg stepping down as CEO doesn’t seem to be the answer.