At first blush, it would seem that there won’t be much pressure on CEO Mark Zuckerberg to perform. After all, he controls 57 percent of Facebook, giving virtually no room for dissenting voices. Where voters can’t talk, however, money can. If Zuck thinks he’s going to be free from pressure to perform, he’s likely mistaken.
So far, what we’re seeing is window dressing. The fact that he didn’t meet with Wall Street analysts for the pre-IPO roadshow meeting was an obvious slight (that some have applauded), but at this stage of the game, it’s a luxury.
Here’s the pressure that Zuck will probably face down the road:
Wall Street: Zuck is free to do what he wants as long as he doesn’t need more capital. And, he’s already said to be planning a secondary offering … which means it isn’t inconceivable that he’ll want to go back to the equity capital trough in the future. This will only be possible if the Street has faith in him, since Zuck has complete control of the company. If he puts up good numbers, he’ll be fine. If not, he’ll suffer the consequences.
Clients: without the products that advertisers (and other buyers) want, Facebook will lose revenue (or at a minimum, miss opportunities). At some point, this could mean compromising the end-user experience, which has been Zuck’s overwhelming priority so far.
Talent: the employee shareholders may not have a meaningful vote, but they can leave the company. If the stock price heads south, they lose some of their wealth. At that point, the prospect of joining a new pre-IPO start-up will start to look pretty good. A Facebook brain drain will have implications for both client spend and future capital raises.
Future products: Facebook isn’t a big deal-maker, and it tends to finance its own new initiatives in-house. COO Sheryl Sandberg said as much at the Business Insider IGNITION conference back in December. To do this, Facebook will need capital – and it may need more than the company can accumulate on its own. This brings us back to how the Street feels about Facebook, above.
For all its corporate governance limitations, Zuck is not free from outside pressure, and he’ll have to do more than develop a rockin’ product. Even when you control the company, there are still plenty of people you have to keep happy.
Photo: Andrew Feinberg via Flickr