Mark Zuckerberg Is Under Fire. Is Facebook Better Without Him?
By Matt Peterson
Oct. 26, 2021 8:44 am ETMark Zuckerberg’s departure from Facebook is so unlikely it’s difficult to even contemplate. At 37, he owns the majority of the company’s voting shares and is CEO and board chairman. He has used that position to generate vast wealth for investors, who have largely stuck by him as criticism engulfs the company.
But at least a few Facebookers have made the mental leap. And not just whistleblower Frances Haugen, who leaked documents that have been the basis of the recent round of damaging stories. As recently as 2016, Facebook’s board of directors imagined a company without the founder. Their analysis raised fears that should catch the attention of even the most bottom-line-driven of investors.
The problem is those voting shares. Were Zuckerberg to be fired for cause or be hit by the proverbial speeding beer truck, control would rest with him or his descendants. In that case, “attracting a qualified chief executive officer to succeed Mr. Zuckerberg would be significantly more difficult,” the board concluded according to documents filed with the Securities and Exchange Commission. Without a good successor, “the impact on us could be highly negative.”
To mitigate those risks, the board proposed, and shareholders approved, a plan whereby Zuckerberg would relinquish his controlling vote in the event of a challenging succession. The only problem: In 2017, the board reversed course. The plan to alter Zuckerberg’s shares was never implemented. And yet those risks described by the board remain.
Asked what the company has done about those succession risks, a Facebook spokesman sent an excerpt from the company’s latest proxy filing, which states: “The full board of directors has primary responsibility for evaluating strategic and operational risk management, and for CEO succession planning.” Beyond routine statements like that, the company has said little in public about any succession planning since the reversed 2016 announcement.
Facebook’s board may well have a plan for life after Zuckerberg. But if it didn’t, it would be in good company. Asked recently about the idea of succession at Facebook, leadership experts said that most boards simply aren’t prepared for the exit of a CEO. Making those plans can feel unpleasant, and when the top spot is as secure as Zuckerberg’s, it might seem as if there’s little harm in ignoring the issue.
The security of Zuckerberg’s job is itself a risk for investors. “When you have a monarchy, the monarch has to be infallible,” said Noam Wasserman, an expert on founder succession and dean of the Sy Syms School of Business at Yeshiva University. Zuckerberg is free to ignore his critics, his investors, and his board. “It makes it into a very high-variance company when you have this type of a situation,” Wasserman said.
And if the unthinkable happens? Corporate history is full of examples of new leaders rewiring the corporate culture to investor acclaim. But to succeed, a company needs a leader with real power, “not just a name CEO in name only,” said Bill George, formerly CEO of Medtronic and now teaching leadership at Harvard Business School. That might look like Alan Mulally, who took over Ford in 2006 when the company was projecting a $17 billion loss, and led it to the place where it was the only company among its peers that didn’t need a bailout during the financial crisis. “Bill Ford would not have been able to attract him if he hadn’t been really in charge,” said George.
Zuckerberg’s voting shares cast a shadow over the most likely succession scenario, in which he passes on the CEO spot but retains his board chair. At founder Bill Gates made a similar move with Steve Ballmer. But with the stock price largely flat over Ballmer’s 13-year tenure, there’s little to excite investors in that model. And it raises the specter of the doomsday scenario: Segway. As Wasserman pointed out, the company founded by visionary inventor Dean Kamen burned through nine CEOs in 10 years and never came close to Steve Jobs’s projection that it would be “as big a deal as the PC.”
Transitions can’t be done in a quarter, said Marcy Syms, who ran the Syms company when it was public and now advises leaders on succession planning. “You have to sell it to the Street,” she said. Tim Cook’s experience at Apple illustrates perhaps the best case: It took years of growth to erase the initial skepticism that anyone could take on Jobs’s vision.
When founders linger on the board, the question of who’s really in charge stays with them. Uber founder Travis Kalanick moved to the board after he resigned as CEO under investor pressure. The results were uncomfortable. “I had to come in and be very clear that the company was no longer his,” Dara Khosrowshahi, the successor CEO, told the New York Times recently. And while Khosrowshahi may have ended Uber’s toxic culture, the company still faces regulatory challenges around the world.
The Uber story shows that “business drives the executive, not the other way around,” said Roger McNamee. An early investor in Facebook and mentor to Zuckerberg, McNamee now believes that Facebook is damaging democracy. And yet the difficulty of replacing Zuckerberg may mean that for critics it’s better to contain Facebook through regulation. “I think Facebook is the worst actor today, but there are hundreds of companies desperate to replace Facebook in that role,” said McNamee. Facebook can thrive not just because of its CEO’s ambitions, but because a business environment driven by total returns enables it.
“Investors have had this incredible, almost 40-year ride,” said McNamee. “It’s not unreasonable for the country to ask, should we spend the next 40 years with a different set of values? It won’t be horrible for investors. It just won’t be as spectacular as we had.”
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The Time Facebook Contemplated Life Without Zuckerberg
