Of all the ballyhoo over the Initial Public Offering of Facebook, one thing has largely escaped the media’s coverage of supposedly the “biggest tech IPO of our lifetime.” Shareholder proposals.
It was a bad day for NASDAQ, as there were major delays in everyone (including the author) wanting to get in on the action. After a day of trading, Facebook closed the day up a whopping $.23 per share. For me, I just wanted to buy one share. Then I worried (irrationally) that the stock price would go up by a jazillion percent, leaving me penniless at margin call. I think I have watched Trading Places one too many times in recent years.
So, I cancelled my order. Or so I thought. Around 5:30, Sharebuilder confirmed I got my share at $39.05. I mean, I wanted one share for the novelty of voting. I don’t have the liquid assets to by 2,345 shares like my friend Richard did. I don’t know if I’ll get to keep my one share or not, and I really don’t care.
But what strange future does the IPO of Facebook bring? Potentially a series of highly controversial shareholder initiatives. There are bad ways to respond to stupid proposals by, say, liberal Catholic nuns, and then there are awesome ways to respond. Insert T.J. Rodgers, who concluded his amazing smackdown to a snooty letter from a nun with:
Cypress stands for personal and economic freedom, for free minds and free markets, a position irrevocably in opposition to the immoral attempt by coercive utopians to mandate even more government control over America’s economy. With regard to our shareholders who exercise their right to vote according to a social agenda, we suggest that they reconsider whether or not their strategy will do net good — after all of the real costs are considered.
Google, while not a direct competitor of Facebook, has already faced some of the same problems — and come out, often times, on the losing end (China, anyone?). It is instructive to look at some of the shareholder proposals (which rarely succeed) Google has had to deal with. In 2007, shareholders of Google, including me, voted down an anti-censorship proposal that, as PCWorld describes, would “have stopped Google from engaging in self-censorship.”
Earlier this month, Bristol-Myers Squibb had a shareholder proposal from PETA supporters, that according to AP would require the company to “publicly report on its handling of laboratory animals and to seek other ways to test experimental drugs.” That proposal also failed.
A 1995 paper by April Klein and John Klose, Shareholder Proposals and Corporate Governance, concluded that:
“We find the likelihood of a firm being the target of one or more corporate governance shareholders to be significantly related to firm performance, the size of the firm, and the likelihood that the firm’s board will be sympathetic to changes in shareholders’ rights…. We hypothesize that the votes are determined by the costs and benefits to shareholders associated with voting for or against these proposals.”
Can you imagine Mark Zuckerberg, who has reportedly ruled Facebook with an iron fist, being receptive to conservative, liberal, and crazy groups using his company to make a point? Or absent a point, seriously trying to change the company he created?
For all intents and purposes, Mark Zuckerberg may not be like how he was portrayed in the 2010 film The Social Network. In fact, somebody I know who went to college with him once told me he’s not a terrible person. And she is actually friends with Zuckerburg on Facebook, so I believe her.
However, the potential for zany shareholder proposals, like the internet, is pretty broad. Bullied kid commits suicide? Let’s make Facebook do something. Hateful comments that make you oppose free speech? Let’s make Facebook do something. Trouble with free speech in <insert country in the news>? Let’s make Facebook do something.
You can see where I am going. These things will be dicey. A friend of mine in college set up a off color political group when Facebook was still exclusive to the Princeton Review’s top 300 colleges, and found himself (and his group) banned from Facebook. Close friends of mine can guess which friend it is, but here’s a hint: his name rhymes with Knobby Pet Singer.
Infuriated that, while definitely off color, the group didn’t actually do any real harm — he wrote Mark Zuckerberg to complain. Mark Zuckerberg responded, and defended his actions. That friend is back on Facebook today, and since SLU didn’t use gmail then, the evidence — even though I saw it with my own eyes — is gone for good. That was many years ago, now.
Facebook has grown, just as the internet has, and with that growth so, too, has the list of complications also grown. For those who may/may not own a share of Facebook (or 2,345 shares) get ready for a dizzying array of shareholder proposals in the coming years. You’ll laugh, you’ll cry, and if you read all of them, you’ll kiss many hours goodbye.