rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Mark Zuckerberg tightens grip as Facebook's cash flows

Mark Zuckerberg tightens grip as Facebook's cash flows

Last updated on: April 29, 2016 11:13 IST

When Zuckerberg and his wife pledged last year to give away the majority of their Facebook shares to a new foundation they had formed, questions arose about how that might happen without him losing his grip on the company.

Image: The company's financial performance also supports the founder's strategy. Photograph: Stephen Lam/Reuters
 
 

Mark Zuckerberg picked a smart time to entrench himself.

Amid sparkling quarterly results that delighted investors, the $310 billion social-networking powerhouse said on Wednesday it is creating a third class of non-voting stock.

It will lock in control for the company's 31-year-old founder and chief executive. At least the weak corporate governance may help some good causes.

When Zuckerberg and his wife pledged last year to give away the majority of their Facebook shares to a new foundation they had formed, questions arose about how that might happen without him losing his grip on the company.

Though he already holds 60 percent of the vote thanks mostly to a dual-class structure that affords him super-voting stock, there were scenarios in which his stake could be diluted.

The philanthropic aims were one reason listed for the new Class C shares, which were rolled out similarly a few years ago at Google by founders Larry Page and Sergey Brin.

It also will help Zuckerberg cement control, however, if Facebook decides to splash out for a big acquisition or reward employees using stock.

Minority shareholders weren't completely ignored. Under the existing regime, Zuckerberg can hang on to his majority voting rights even if he quits.

The new plan empowers the board to force him to surrender them should he depart.

It's hard to argue with the idea that Zuckerberg is instrumental to Facebook's future right now.

The widely derided $1 billion acquisition of Instagram in 2012 and $19 billion purchase of WhatsApp a couple of years later are proving more successful than many outsiders expected.

The company's financial performance also supports the founder's strategy.

Facebook reported a 52 percent rise in first-quarter revenue as rivals Google and Twitter turned in more disappointing results.

That led to a 9 percent rise in the share price in after-hours trading.

Hot streaks, especially in technology, can be hard to sustain, however.

Concerns are quietly mounting that people aren't posting nearly as much personal news and pictures on Facebook.

A decline in usage might scare off advertisers. The company is responding with live video and messaging enhancements. Wherever things go from here, the billions of bucks stop with Zuckerberg.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

Jennifer Saba
Source:
© Copyright 2018 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.