I'm fascinated by the motivations of the people who are freaking out because Mark Zuckerberg won't hang out with them all day and talk about how awesome Facebook is:
Mark Zuckerberg wants at least $5 billion from Wall Street investors, but those investors will not be getting much face time in return. ...
"We don't think that he should be hiding from the investors," said Carin Zelenko, the director of the capital strategies department for the International Brotherhood of Teamsters, whose pension and benefit funds have more than $100 billion invested in the capital markets. "He wants investors to put their money behind him, with the confidence in him personally, as the person who built this company and who's going to lead it and control it. He should be accountable to those people who are investing." ...
"Investors are crazy to want to get in bed with a company where the guy who controls it doesn't even pretend to care about the rest of the shareholders," said Greg Taxin of activist investment firm Spotlight Advisors, who will not buy shares. "That seems like a recipe for disaster."
So that's obviously nonsense right? Like, he should run the company and the shareholders should bask in the company's awesomeness and that should be that. "Pretending to care" is not a key skill set for a CEO, or, I mean, I guess it is, but you shouldn't go around demanding it. I'm with this guy:
"I would always like access to the CEO, but the best use of his time is in running the company," said Dan Niles, chief investment officer at AlphaOne Capital Partners. "I worry more about a CEO who seems to spend too much time talking to Wall Street and the media."
Yes. What is the counterargument? I guess there are three possibilities. One is that investors like to be able to influence management. That must be the motivation of the Teamsters and the Spotlight guy.* Investors like to feel big, as witnessed by Carl Icahn but also the unions that are BAFFLINGLY touting how awesome it is that they got Goldman to make the tiniest possible change to its corporate governance.** But they also think that they can add value for themselves by telling companies how they should be run, whether that's a question of board structure or financial management or business operations. This is ... not a plausible explanation in the case of Facebook, I'd think, because there is little evidence that Zuckerberg would be open to persuasion even if you could hang out with him all day but also because this does not seem to be a particularly financial-engineering-dependent business and honestly who is better at operating a social network, the Teamsters capital strategies person or the guy who they made a movie about him and it was called The Social Network? These activists complain about not getting face time but stop well short of saying "also if I met with Zuckerberg I have this awesome tip for him about how to improve revenues" or whatever.
The second is that investors and analysts like to be able to get inside information from companies. Right? Is that what the AlphaOne guy means by "I would always like access to the CEO"? And I guess this doesn't always have to be illegal; the CEO could give shareholders insights into operations that don't quite amount to material nonpublic information. If you believe that companies are supposed to be run for the benefit of shareholders, one thing that you could wonder about is how the word "shareholders" works over time. Like, if the Teamsters own 100 shares, and you meet with them and tell them "we're seeing some weakness in the teeth whitening and Ivy League dating markets" and they dump their shares before the inevitable crash, you helped your shareholder at the time of the meeting but you screwed someone else who is now your shareholder. I dunno. My view is that this is pretty zero-sum and it's hard to care that much that a company wouldn't give investors nonpublic insights into its operations but I guess if you're those investors it's a thing you want.
I wonder though if the main explanation is that some investors and analysts - the ones who talked to Reuters - view Hobnobbing With Important People as a key perk of their job. And Mark Zuckerberg, smug and underdressed though he may be, has to be at least in the top 10 most rockstar public company CEOs when the IPO prices. You can be all "I was talking to Mark yesterday" or "Zuck and I shared some goat that he'd just killed" or "Zuck-o and I just ... hung out ... on a Google+ hangout ... in a Google+ hangout? ... something" and your kids will be impressed. There's probably some misalignment of incentives here. Much like the AlphaOne guy worries about the CEOs who spend too much time talking to Wall Street and the media, you could worry a little about your investment manager spending too much time trying to get meetings with celebrity CEOs. (And talking to Reuters!) Maybe he's pushing the CEO to do value-enhancing things ... maybe he's learning valuable market-moving information ... or maybe he's just using your money to buy status and coolness that he wouldn't have on his own. Come to think of it Zuck might relate to that.
* I guess? Am I wrong that if you're an activist investor the first screen that you run is like "not companies with one 27-year-old controlling shareholder-founder-CEO"? Of course he's not buying shares.
** Really. Goldman refused to split its CEO and chairman roles but was willing to appoint a 75-year-old retiree the "lead director" so he gets a more comfortable chair or something. And this is the response:
“Wall Street greed and conflicts of interest drove our economy into a ditch,” said AFSCME’s President Gerald W. McEntee. “Today’s move is a step in the right direction to make sure Wall Street CEOs are held accountable to their shareholders and that taxpayers are not on the hook for their risky bets.”
No it f'ing isn't.