The media has been having a field-day with the fact that the composition of Facebook's Board of Directors is not yet known...just months before Facebook's pending IPO.
What is known, though, is that it's an "all male" board and this fact has invigorated arguments for equality at the top governance level in the company, especially from groups like the California State Teachers Retirement System(CalSTRS).
One of the reasons proffered by Facebook and other Internet companies like Zynga, to keep their board composition a secret, is that they really don't want (very legal) proxy takeovers to occur.
(Proxy takeovers or proxy fights allow either:
1) Shareholders who disagree with a company's management decisions or direction, to install new management - one more amenable to shareholders' wishes.
Or
2) When there is a takeover bid, for the acquiring company to install a management team that's more amenable to the acquiring companies' wishes...making it easier to takeover the target company from its original founders).
So what Facebook and other Internet companies like Zynga and Groupon, have been doing, of late, is that when they file their IPOs, they keep the names of their board members a secret, or they may only include the names of a few board members, on their prospectuses, who will be offered up for elections within a year.
Doing this, enables them to stagger the election of board members, to prevent a proxy takeover, as an acquiring company really can't influence board members whom they know absolutely nothing about.
So the question is, if you're an entrepreneur with a successful company like Facebook, would you want keep the board members' names a secret?
I definitely would.
Even though you give up some control when you do get equity funding [in that your venture capitalist (VC) must sit on your board of directors to ensure that the VC's ROI projections will actually be realized]...
...You really don't want your hard work to go down the drain and you end up with a pittance, when your company is acquired by another, with deeper pockets.
So what I'd suggest to tech entrepreneurs and company owners, is to watch this Facebook IPO very carefully - Mark Zuckerberg (Facebook's founder) and his team have made and are making very crucial decisions in Mark's best interest.
Which is the direction in which entrepreneurs eying an IPO, should want to go.
It may displease a few shareholders, but you regain controlling interest in your company.
[Most shareholders don't mind founder's controlling interest, as long as the company is giving them above-average returns on their investment.
The only investors that may have problem with this, are the so-called "activist investors" interested in proxy takeovers].
Please read article, "Analysis: Investor activists see little to "like" in Facebook", to see the other corporate governance strategies that Facebook is employing, to protect its founder's best interest.
Update
[Well, while Reuters is reporting that the members of the board aren't known, Hispanic Business is reporting that the members of the board are known - and that they are "founder and chief executive Mark Zuckerberg, Internet entrepreneur Marc Andreessen, former Clinton White House Chief of Staff - Erskine Bowles, Washington Post Chief Executive Donald Graham, Netflix Chief Executive Reed Hastings and venture capitalists James Breyer and Peter Thiel".
We will be following this up to see if these persons are just a few, or the total compliment of the board].
Gillian
Sources Include
1) Proxy Fight Definition, via Wikipedia.org, accessed February 13,2012
2) ROI Definition via Investopedia.org, accessed February 13,2012
3) Takeover Bid Definition via Investopedia.org, accessed February 13,2012
4) Article, "Analysis: Investor activists see little to "like" in Facebook" by Paritosh Bansal, Reuters (US Edition), February 9,2012
5) Article, "Facebook's All-Male Board Draws Investor Scrutiny -- But Don't Count On Change", Bianca Bosker, HuffingtonPost|Technology, February 8,2012
6) Article,"Facebook Blasted for Male Board Bias" by dpa Deutsche Presse-Agentur GmbH, via HispanicBusiness.com, February 8,2012
Hey Cruiberor,
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Gillian Campbell
Editor, Owner – Market Opportunities Unlimited (MOU) Blog
Posted by: Gillian Campbell | March 02, 2012 at 08:19 PM
Hey everyone! I'm new to this sphere, but I'm really interested in it. Could you give me some advice where I should start from?
Posted by: Cruiberor | March 02, 2012 at 03:56 AM