SAN FRANCISCO — Wearing a hoodie may be the least of Mark Zuckerberg’s problems now that Facebook Inc. has become a public company.
Facebook’s 28-year-old founder and chief executive took some flak for his attire when the social networking giant was pitching its initial public offering to investors. Zuckerberg will remain Facebook’s most powerful shareholder after what has turned out to be a modestly successful IPO.
But after an impressive run as tech entrepreneur-slash-trailblazer, Zuckerberg must now pivot to a new role — that of corporate executive who answers to a host of new stakeholders led by Wall Street.
One corporate governance expert said the Zuckerberg post-IPO control of Facebook should shield him from corporate or regulatory pressures that the company will inevitably wrestle with. Zuckerberg will retain 55.8 percent of the voting power of Facebook’s outstanding shares.
He will also have “the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors, as well as the overall management and direction of our company,” according to a Facebook filing with the Securities and Exchange Commission.
But despite all that power, experts says, Zuckerberg faces perhaps the toughest chapter in his career.
On the one hand, the fact that Zuckerberg — who has joined the ranks of other tech pioneers such as Steve Jobs, Bill Gates and the Google founders Larry Page and Sergey Brin — will still be in charge may be what has drawn some investors to Facebook, argued Santa Clara University law professor Stephen Diamond.
“From the point of view of investors, it might be viewed as an advantage,” he said, noting that investor may be saying, “Mark Zuckerberg is the person we want to invest in.”
Zuckerberg’s “skill set is what got the company where it is today — that’s what they think they’re investing in,” he added.
“The problem is that if things go wrong — and something will go wrong — shareholders are likely to be concerned that Zuckerberg may not be capable of dealing with some of these challenges,” he said.
Those concerns, he noted, are “what the hoodie debate is about.”
“It’s basically a substitute for discussing the implication of having so much power in single individual,” he said. An individual, he noted, who is “young and relatively inexperienced.”
And that apparent inexperience has led to what some analysts see as some jolting decisions. They point to Facebook’s $1 billion purchase of Instagram, the online photo-sharing site, which reportedly surprised members of the company’s board.
“That was a very capricious decision,” said Roger Kay of Endpoint Technologies Associates. “My sense is he’s not patient enough to run that company.”
He said Zuckerberg may do well “as long as he is riding the wave and it’s fun and have everything coming through.”
“But if he misses his numbers, which seems likely, then he will have unfun activity to do, and the unfun activity is primarily explaining to Wall Street and laying off people,” he added.
Wedbush analyst Michael Pachter echoed this view, saying Zuckerberg now has to deal with investors, “and he may not find it very much fun.”
“The majority has acquiesced in giving voting control to Zuckerberg so he can essentially do what he likes,” he said. “But if they are unhappy with his decisions, they will be vocal.”
And one of the areas in which Zuckerberg will be scrutinized, he said, is “how to balance growth in revenue with his desire to maintain a pristine user experience.”
“There is a natural tension there, as more advertising has the potential to diminish the user experience, and his bias so far has been to sacrifice revenue potential in order to preserve the user experience,” Pachter said. “That may not correlate to investor expectations that Facebook will roughly quadruple revenues in the next few years.”
Still, Diamond noted that “with the significant ownership in Zuckerberg’s hands, I think it will be a long period of time before they are overly concerned about quarter-to-quarter numbers.”
“People are ecstatic, so that would buy them time,” he added.
It’s time that Zuckerberg could use to learn from other young entrepreneurs and tech pioneers who suddenly found themselves leading corporate behemoths that faced intense scrutiny.
“He has the advantage of having seen how they dealt it,” Diamond said, citing the “Google boys” as the search giant’s founders, Page and Brin, are often referred to.
He noted that Zuckerberg could have followed Google’s lead and chosen the “Eric Schmidt model.” That is, to bring in an experienced executive to serve as CEO or as “the adult in the room.”
Schmidt, a veteran technology executive, was hired to run Google, although it was widely known that he worked closely with founders Brin and Page. That changed last year when Page took over as CEO and Schmidt became executive chairman.
“It did didn’t work at Google,” Diamond said. “It worked for a few years. But then Schmidt had to step aside. ... Capitalism is not a collective system. People need to know in business who the boss is. There has to be a leader and it has to be clear. The triumvirate at Google didn’t turn out to be the best structure. So Facebook seems to have learned from that.”
Zuckerberg has kept the CEO role but brought in Sheryl Sandberg, a respected tech executive, as chief operating officer.
Diamond said Facebook took the “traditional” approach: “The guy who has the most chips runs the show.”