Facebook - Could a Better Board Improve Shareholder Return?
As the tide of public perception turns against big tech, Facebook [FB] stands out as one of the most vulnerable firms. Being dependent on essentially selling the personal information, the likes and activities of its users Facebook has always occupied a somewhat precarious position in the tech economy. Coupled with the fact that its product is not exactly a necessity for life the firm is likely to always be in a somewhat risky position.
With the ongoing issues of user privacy, third party data scraping and the questionable use of user data in at least two Presidential campaigns weighing heavily on the company’s stock price, the question is what can the company do to fix or at least minimize these ongoing political and regulatory risks?
While the natural inclination used to be to look at the inexperience of CEO Mark Zuckerberg, that’s no longer a legitimate excuse now that he has over 10 years of experience at a major public company in an industry that is both new and unusual.
The next place to look is the Board of Directors; do they have the diversity of skills and experience to oversee a company of this size and complexity? This is where Facebook appears to be weak. With only one outside director who is female, three firm executives on the Board and skillsets that seem focused on the tech industry with a little bit of financial know how thrown in. Advertising, legal and media experience seem to all be somewhat lacking and in hindsight would appear to be critical skills for a Board such as this to have.
Fundamentally, this apparent Board weakness is probably a function of Zuckerberg’s own controlling interest in the Company. While it might feel safer to have a Board you have control of history shows that it’s better to have a diverse set of independent Directors who ask the tough questions and are not afraid to hold a CEO’s feet to the fire.