Former employee and whistleblower Frances Haugen testified before Congress last week that Facebook CEO Mark Zuckerberg owns 55 percent of the company’s voting stock.
This is significant, she says, because it is “a very unique role in the tech industry.” “There are no similarly powerful companies that are as unilaterally controlled,” she said. Or, to put it another way, “no one is currently holding Mark accountable except himself,” according to another part of the hearing.
He is essentially Facebook’s “key man,” a person who has final say in business decisions and without whom the company would suffer greatly. Experts told reporters that one person’s control over a contentious family of platforms affecting hundreds of millions of people is cause for concern.
“I don’t think it’s a stretch to argue that Mark Zuckerberg is the most powerful person who’s ever walked the face of the earth, and I think that kind of power being held by one person is generally a bad idea,” said Whitney Tilson, a former hedge fund manager and CEO of Empire Financial Research.
Company founders with majority control of a company are not uncommon. It’s most common in the tech industry, where dual-class structures are common. Google co-founders Sergey Brin and Larry Page, for example, left the company in 2019 but remained on the board, retaining majority control of the company.
“You don’t typically have companies like GM, Ford, or Bank of America that are controlled by a single investor,” said Chris Haynes, an associate professor of international affairs and political science at the University of New Haven. “This is not typical.”
Proponents of the arrangement frequently claim that it allows company leaders to focus on long-term success without being distracted by short-term pressures. “Having a company controlled by a single person, ‘the brainchild’ when it comes to tech companies, it does make the company much more nimble, and they’re able to really turn a dime,” Haynes said, referring to the fact that they don’t have to get a large number of investors on board to make a decision.
It can, however, slow things down. According to Facebook, Zuckerberg’s disproportionate control “could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support.”
According to critics, the control can shield companies from concerns that can harm society and investors, as well as cause volatility. Facebook has had a rough few weeks after documents leaked to the Wall Street Journal by Haugen revealed that Zuckerberg and other insiders were aware of the company’s platforms’ negative effects on the public but dismissed those concerns.
Joy Poole, a former Facebook employee who now works for the consulting firm Emergence, told Insider that lawmakers should “absolutely” look into how regulation could determine how much of a majority stake CEOs have in their companies. However, there may be more pressing concerns.
“Mark Zuckerberg has majority control over a company with enormous global influence,” Poole said. “I don’t believe for a second that if he had 49 percent control, we’d magically find answers to the complex questions we’re dealing with here.”
However, Tilson believes that last week’s hearing with Haugen and her disclosure of internal documents to the US Securities and Exchange Commission could change things, though this is unlikely.
According to Tilson, if the SEC investigation finds that Facebook misled investors by failing to disclose research showing negative effects on teens, among other findings, the agency may demand that he resign.
