Facebook boss Mark Zuckerberg accused of 'hubris' over float
Published 14/02/2012 | 07:53
FACEBOOK founder Mark Zuckerberg has been accused of "hubris" in a strongly worded attack by one of America's leading shareholder groups on the social network's plans for a multi-billion dollar flotation.
ISS, which advises more than 1,500 institutional investors on corporate governance, criticised Mr Zuckerberg's plan to use a dual share structure to maintain control of voting rights at Facebook even after the flotation.
The prospectus published last month by Facebook disclosed that the 27-year-old will control almost 57pc of voting rights on all key decisions at the company.
"This is a governance profile with a defence against everything [except] hubris," ISS said in a report sent to clients yesterday.
ISS's criticism may have given some investors pause for thought before buying into an initial public offering that could value Facebook at $100bn (£63bn), making it the largest technology flotation ever.
"This IPO event itself presents a Hobson's choice: accept governance structures which diminish shareholder rights and board accountability, or miss out on what appears to be one of the hottest business models of the internet age," ISS said in the report.
The dilemma was underlined in a prospectus that revealed that under Mr Zuckerberg's leadership, Facebook made a profit of $1bn in 2011. Less than four years ago, it was losing money.
So far, concerns over the float have focused on whether Facebook can sustain the growth in advertising, which accounted for 85pc of its revenues last year, without alienating its users.
Given Facebook's growth, allowing Mr Zuckerberg control may look sensible now, ISS argued. However, it said that "the real dilemma of Facebook's dual-class structure will only become evident when (or in a best-case scenario, if) an autocratic model of governance makes it less viable than a competitor whose governance gives owners a voice proportionate to the economics they have at risk."
Facebook could not be reached for immediate comment.