Facebook scandals
For how long can Mark Zuckerberg cling to office?
It is destroying political cultures. It allegedly smears rivals. It leaks data on its users, and manipulates them for its own cynical commercial advantage. Perhaps, worst of all, the chief executive doesn’t seem to have much of a clue what is happening inside the firm, or how to stop it. So much has been thrown at the Facebook founder Mark Zuckerberg over the last few months, it is surprising that he is still in office.
In truth, only his tight control of the voting rights in the $400bn (£311bn) social media giant is allowing Zuckerberg to cling on. In any normal company, he’d have been replaced by now – and rightly so. Even so, it is unlikely that will save him for ever. Of the four entrepreneurial giants of the technology boom – Bill Gates, Jeff Bezos, Steve Jobs and the Facebook founder – he is the one most likely to go down in history for being thrown out.
The latest scandal to hit the company follows a detailed investigation by The New York Times alleging that the company tried to smear its critics, including hiring a PR firm that attacked its opponent. Whether that is true remains to be seen. In a conference call on Thursday, Zuckerberg struggled to defend his empire, arguing that neither he, nor it appears much of the rest of the board, had any real idea what was happening. Much like his tortured appearance before Congress in the wake of the Cambridge Analytica scandal, Zuckerberg seemed ill-at-ease and unsure how to respond.
One scandal might not matter too much, but Facebook has been caught
‘So much has been thrown at Facebook’s chief, it is surprising that he is still in office’
up in a whole string of them this year, from Russian influence to political bias to mishandling data.
Its reputation has been trashed and its shares are down from $200 in July to slightly over $140 now. It is still formidably profitable, of course, pulling in $40bn in advertising revenue last year. But investors are worried that its rising unpopularity will eventually drive users away from it – and they may well be right.
The key question now is how long Zuckerberg can maintain control over the business he founded at Harvard. One of the remarkable features of the emergence of the giant tech companies is how stable they have been at the top. Anyone who knows any business history will know that is often not the case. Entrepreneurs are typically driven, iconoclastic, difficult, demanding, and impatient. Lots of them find it impossible to make the transition to running a big, stable, public company. In tech, that has not really been true. Bill Gates ran Microsoft brilliantly as it grew into the first giant of the industry, and then faded into the background. Jeff Bezos keeps the Amazon machine growing relentlessly and maintains total composure even as it becomes one of the biggest businesses in the world. At Apple, Steve Jobs handed over smoothly to Tim Cook before his death, and since then Cook has given a masterclass in how to transition from one form of management to another.
But Facebook is the exception. Something has clearly gone wrong. It does not appear to have proper internal controls in place, problems are not being highlighted or addressed, it has chased revenues and profits at the expense of its users, who remain its one real asset, and it has failed find a way of answering its growing number of critics. If your only real response to a public relations disaster is to hire Nick Clegg – a man with no commercial experience – as your head of communications, then there is clearly a deep problem.
The trouble is, the voting structure makes it virtually impossible to oust him. Facebook has two classes of shares, and – surprise, surprise – Zuckerberg owns a majority of the ones with the votes. Shareholders have already started calling for him to step down as chairman. So far that has been resisted. And yet it is very hard to see how he can cling on for much longer. True, it is hard to see the mechanism for change. But shareholder pressure might become intense, especially if its price keeps falling. Politicians may well step in to break up the business. Or – who knows? – Zuckerberg may well decide he needs to step back. One thing is increasingly likely, however. Of tech’s four great entrepreneurs, he will be the one who gets ousted from his company. And in truth, it will be in better shape after he departs.