Facebook and CEO Mark Zuckerberg are having a hell of a year. Some big investors want to push Zuckerberg out as chairman, the company seems to see one big data breach after another, ad demand may be down as Barrons reported yesterday, and some former insiders have turned against the company (not counting that innovative people like the founders of Instagram who have recently left Facebook).

Then again, you could be an angry user of the service whose data was compromised or a company that was lured into video ads by allegedly wildly inflated metrics. Then you're probably having a worse year because you're paying the price.

It's the tech ask-for-forgiveness-not-permission syndrome in high gear that has backfire on the company, as well it should. Extreme disregard for risk is just as poor a management philosophy as utter timidity. And when you're in a position that potentially insulates you from contrary viewpoints, you're being about as risky as possible.

Facebook's IPO that solidified Zuckerberg's control on the company. The shares structure gave him more than 57 percent of the votes on any issue. A further change cemented his hold on Facebook permanently, as Forbes reported in 2016. That remains true even if stock became the basis of future acquisitions or employee compensation. Should Zuckerberg donate or liquidate his shares for charitable donations, he still remains in charge.

Walking hand in hand with complete control is absolute responsibility. Every misstep that Facebook has taken--every lax attitude, act of indifference, or questionable practice--sits on Zuckerberg's lap. Anything that goes wrong is his fault. And, slowly, Facebook is experiencing a ratchet of tightening pain.

Bank of America Merrill Lynch dropped its target point by more than 7 percent because analyst Jason Post wrote that "ad checks have been mixed and suggest that strategic initiatives may be impacting ad supply and spend for branded advertisers," as Barron's reported. MoffettNathanson analyst Michael Nathanson said that "Facebook and Instagram data points are less uniform than we have ever witnessed." In other words, the equity analysts can't clearly see what's going on and they think ad usage is off.

The result shouldn't be surprising. When advertising media significantly overstate their metrics, advertisers will get suspicious, double-check their results, and quite possibly spend their money elsewhere.

With all the furor over political ads on Facebook and the potential for influencing elections, it must come as disturbing to many that Facebook was the largest political advertiser on Facebook, as VentureBeat noted.

A quick search of Facebook's political ad archives shows that most of the ads Facebook have purchased are meant to promote the company's recent changes to make political ad purchasing on the platform more transparent, as well as to secure elections.

So, Facebook is advertising heavily to Facebook users, trying to reassure them that the company really is trying to help improve its actions in elections. And, maybe, in the process to calm down some people who might be among the ones demanding that elected officials do something about the company.

How bad it is? Some big investors filed a shareholder proposal to boot Zuckerberg out as chairman, leaving him as CEO only and bringing on an independent chair. A split between the two roles is usually seen as a good move for corporate governance.

Practically speaking, it won't happen unless Zuckerberg consents, given his control of voting shares. But it is a slap in the face and a question of his leadership.

The investors only have themselves to blame, in one sense. They signed on knowing how the deck was stacked in Zuckerberg's favor. The potential for profit seemed too strong.

If Zuckerberg were really smart and practical, he'd acquiesce and bring in a seasoned and truly independent board chair. This is similar to intelligent entrepreneurs building an advisory board to get insights. Everyone needs to hear when others see them as heading down the wrong path. Not to say that other people are always right. But when your power is too entrenched, many of your employees and advisors become too fearful for their positions to be honest.

A good dose of honest criticism, and strong and deep actions based on it, could do Facebook, and its users and advertisers, a world of good. Will it happen? Oh, probably not. Absolute power is not warping and dangerous, but also intoxicating.

Published on: Oct 25, 2018
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