Facebook Abandons Plans to Change Share Structure, Avoiding Lawsuit

Facebook CEO Mark Zuckerberg, pictured here at the Allen & Company Sun Valley Conference on July 14, said a recent rise in Facebook’s stock price allows him to retain control for at least 20 years with the current two-class share structure

.. The share restructuring was aimed at ensuring Mr. Zuckerberg’s continued control of Facebook even as he planned to give away 99% of his family’s wealth over his lifetime.

 .. The reversal fits an increasingly common pattern for Facebook, which has repeatedly had to alter its position in the wake of public criticism over how it manages its powerful global platform.On Thursday, Mr. Zuckerberg said Facebook would provide congressional investigators with details of 3,000 ads bought by Russians during the U.S. presidential election, responding to pressure from lawmakers and others that it wasn’t forthcoming enough about how foreign entities used its platform to influence political discourse during the election.

.. That came after Facebook Chief Operating Officer Sheryl Sandberg this week said the company is adding more human reviewers to oversee its ad-targeting system after a report showed it was possible for advertisers to target ads to users interested in anti-Semitic and other hateful topics.

 .. Mr. Zuckerberg, whose fortune is estimated at $71 billion, said he doesn’t need the change in shareholding structure because Facebook’s stock has risen so much that he can fund his for-profit philanthropic organization, the Chan Zuckerberg Initiative, for at least 20 years by selling his existing stock without losing control.

Facebook shares have risen more than 50% since April 2016, when the plan was first announced.

.. Mr. Zuckerberg holds about 59.7% of the voting control of Facebook because he controls 86% of the company’s Class B shares, which have 10 times the voting power of Class A shares. Every Class B share he sells is automatically converted to a Class A share, which gets just one vote.

.. longtime Facebook director Marc Andreessen, who served on a special committee created to discuss the new share structure, was privately coaching Mr. Zuckerberg by text message on how to win over the other two directors on the committee, according to text messages disclosed in court documents last year.

In one instance, Mr. Andreessen texted Mr. Zuckerberg during a March meeting of the special committee with progress reports. “NOW WE’RE COOKING WITH GAS,” Mr. Andreessen wrote.

Why Companies Like Uber Get Away With Bad Behavior

In 2016, it reportedly lost $2.8 billion

.. Amazon, even in its darkest, loss-accumulating early years, was a piker compared with Uber.

.. For all its candor and specificity — rare qualities in corporate America — the report doesn’t directly address the sources of Uber’s misbehavior: its longtime chief executive, Travis Kalanick, and his chief enabler, the endlessly forgiving board of directors that is controlled by Mr. Kalanick and his cronies.

The Holder-Albarrán report recommends that the company consider eliminating its official “core values” like

  • “Always Be Hustlin’,”
  • “Principled Confrontation” and
  • “Let Builders Build,”

principles that “have been used to justify poor behavior.”

.. The requested repudiation of the company’s cultural values would be a repudiation of Mr. Kalanick’s cultural values. The entire mess that Uber is in is, ultimately, his doing.

But the report treated Mr. Kalanick with kid gloves, recommending only that a chief operating officer be appointed to take on some of his responsibilities.

.. Consider all that this presumes: that he is so invaluable that he can step aside — apparently no single person will be in charge during his absence — and work on self-improvement and then, his spot at the top held for him, return. He acts like the company belongs to him.

.. typical in Silicon Valley, encouraged by weak boards, investors who compete among themselves to be the most “founder friendly” and dual-class stock structures, similar to those at Google and Facebook, that give founders’ shares 10 times the voting rights as ordinary shares.

.. “Investors in high growth, financially successful companies rarely, if ever, call out inexcusable behavior from founders or C-suite executives.”

.. As long as the company keeps growing, the founder can be forgiven almost anything.