GMI RATINGS: Here's Why We Gave Facebook A 'D' For Corporate Governance

By Paul Hodgson โ€“ CCO and Senior Research Associate

GMI Ratings doesn’t rate IPOs. The information contained in their S1s, the document filed with the SEC describing the public offering, is either incomplete for our purposes or subject to change, or both. That’s not to say that we don’t write about IPOs. We’ve written about this one on Forbes, twice. And on the GMI Ratings blog.

None of what we had to say redounded much to Facebook’s reputation as a potentially well-governed company.

But now we have an official rating.

D.

Not a good start.

So, apart from the dual class stock, the controlling shares, the monotone board, the bizarre compensation for CEO Mark Zuckerberg โ€“ yes, he does get compensation โ€“ as if that weren’t enough, what was it that ground out that D rating?

Red flagged key metrics included:

  • Board is not majority independent
  • Related party transactions
  • Overboarded non-executive directors
  • Discretionary incentives
  • Evergreen equity plans
  • Excessive severance and perks
  • Long list of shareholder rights abuses

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