Facebook’s Secret Strength

Since the May IPO that valued Facebook at $100 billion, nothing much has gone well for the social media giant. The price of shares steadily tumbled through the summer, down to about half their IPO value before a stirring talk by founder and CEO Mark Zuckerberg at the Techcrunch conference in San Francisco yesterday helped give the stock a small bounce.

But as Facebook owners freaked out by the weak share price already know, there’s really nothing they can do to make Zuckerberg do anything about it. That’s because, as I noted when Facebook first filed its IPO paperwork, the company’s corporate governance structure is unusual. Specifically, there is no governance structure to speak of. An absolute majority of voting power is controlled by Zuckerberg personally, and there’s no requirement for members of the board of directors to be “outsiders” to the company. The firm is publicly listed and you can buy and trade its shares on the stock market, but the company is Zuckerberg’s personal fiefdom, at least until he wants to cash out some of his voting shares.

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