One of the main responsibilities of the CEO and the upper management is to steer the company towards profit. If the company loses money because of the CEO, that would make the CEO a bad and jobless CEO. Right?
Not in Facebookland. The social network just announced its first set of financial results since the May IPO and they show a $157m loss due to payments to shareholders such as CEO Mark Zuckerberg and senior management staff. Excluding that payout, Facebook would have made a profit of $295m, the BBC reports.
The social network is now making less money from each user - 955 million people according to latest figures - as it becomes more difficult to generate advertising revenue. Facebook's operating profit margin - while still pretty healthy - fell to 43% compared with 53% a year earlier.
Now, it is true that the company has the right to take good care of its multibillionaire boss and its multimillionaire staff. However, given the lackluster performance of Facebook's stock since the IPO and the drastic slowdown in revenue growth and margins reported today, it is difficult to justify the "share-based compensation expense" (according to the "Oxford dictionary of mumbo jumbo", that means making newly minted millionaires and billionaires richer). After all, if a company is not performing well, the upper management including the CEO should share the responsibility.
Make no mistake, Mark Zuckerberg is still the genius that created the third most populated country on Earth from his dorm room at Harvard just 8 years ago. But "he needs to get out of the way – not because we can judge him a disaster based on a single’s earnings period, but because he isn’t playing to his strength", writes John Abel at Reuters. "Facebook needs its spiritual leader and chief innovator in a hoodie. But it doesn’t need him as CEO, placating investors in a collared shirt. There are plenty of people who could manage the Facebook business. But there’s only one Mark, who needs to focus on product strategy, not investor relations."
By staying on as CEO, Mark Zuckerberg might be wasting his potential and that of the company. And by paying him and the rest of the upper management large compensations, Facebook begins to look more and more like a bank. A bad one. Just like a bank, the social network operates with the assets of millions of people. It now has 955 million profiles rich with lucrative private information. And just like a bank, Facebook celebrates losses by rewarding its upper management and CEO.
That kind of culture - rewarding underachievement - was one of the reasons for the financial crisis. Facebook has plenty to worry about.
Not in Facebookland. The social network just announced its first set of financial results since the May IPO and they show a $157m loss due to payments to shareholders such as CEO Mark Zuckerberg and senior management staff. Excluding that payout, Facebook would have made a profit of $295m, the BBC reports.
The social network is now making less money from each user - 955 million people according to latest figures - as it becomes more difficult to generate advertising revenue. Facebook's operating profit margin - while still pretty healthy - fell to 43% compared with 53% a year earlier.
Now, it is true that the company has the right to take good care of its multibillionaire boss and its multimillionaire staff. However, given the lackluster performance of Facebook's stock since the IPO and the drastic slowdown in revenue growth and margins reported today, it is difficult to justify the "share-based compensation expense" (according to the "Oxford dictionary of mumbo jumbo", that means making newly minted millionaires and billionaires richer). After all, if a company is not performing well, the upper management including the CEO should share the responsibility.
Make no mistake, Mark Zuckerberg is still the genius that created the third most populated country on Earth from his dorm room at Harvard just 8 years ago. But "he needs to get out of the way – not because we can judge him a disaster based on a single’s earnings period, but because he isn’t playing to his strength", writes John Abel at Reuters. "Facebook needs its spiritual leader and chief innovator in a hoodie. But it doesn’t need him as CEO, placating investors in a collared shirt. There are plenty of people who could manage the Facebook business. But there’s only one Mark, who needs to focus on product strategy, not investor relations."
By staying on as CEO, Mark Zuckerberg might be wasting his potential and that of the company. And by paying him and the rest of the upper management large compensations, Facebook begins to look more and more like a bank. A bad one. Just like a bank, the social network operates with the assets of millions of people. It now has 955 million profiles rich with lucrative private information. And just like a bank, Facebook celebrates losses by rewarding its upper management and CEO.
That kind of culture - rewarding underachievement - was one of the reasons for the financial crisis. Facebook has plenty to worry about.
The corporate documents give the shareholders very little say in the management of the company. Zuckerberg is there to stay. The bloom is off the rose and this stock has further to fall.
ReplyDeleteThat is true, sadly. Facebook needs Zuckerberg, its creator and inspirational figure, just not as CEO. How can they solve this puzzle?
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