Facebook is going public. That isn’t really new for this sector because Groupon has already moved in that direction. One would assume that any company going public would want to be open and transparent, and that it would separate governance from management. Based on its Registration Statement it is evident that Facebook is not moving in that direction.
The current owner, Mark Zuckerberg, will retain a large say. All decisions will be heavily influenced by his wishes. Zuckerberg is taking the stance that Facebook is a ‘controlled company.’ As such, it would not have to maintain a majority of independent directors on its board. Also, the board would not have a compensation committee or deal with other governance issues.
According to Reuters, the lack of a governance structure is creating an issue for the California State Teachers’ Retirement System
Facebook’s corporate governance rules, which give shareholders little say in how the social networking website would be run as a public company.
It is contended that
The company’s ownership structure and bylaws go against shareholder-friendly corporate governance practices put in place in the United States after years of investor activism. Reuters
This structure is very different from the way non-profit and public-sector boards operate. These boards are expected to separate governance from management. This means that the board is independent from management. The board has a defined role and it evaluates its effectiveness as well as the success of the CEO.
All over the world groups are calling for more openness in government and private sectors, yet it is clearly possible in the democratic societies in North America to operate outside those standards.
