Shares of Facebook are near an all-time high and just notched an amazing $6 billion in profits for the third quarter of this year. Yet the two-people who run the giant social-media outfit, chief executive Mark Zuckerberg and chief operating officer Sheryl Sandberg, are facing pressure from their own employees and now shareholders who are dismayed over their handling of politically sensitive issues and their response to growing calls for regulation, FOX Business has learned.
The anxiety over how Zuckerberg and Sandberg have dealt with these issues has some major investors questioning whether the duo need additional help running the social network, and possibly whether they should relinquish their current positions, investors tell FOX Business.
Technically, it is impossible to remove Zuckerberg from the company he founded in his Harvard University dorm room in 2004 since he maintains something known as “super-voting stock” where he can veto any major decisions made at the company or by its board. Sandberg, meanwhile, remains one of Silicon Valley’s most prominent executives, widely credited with Facebook’s success after its 2012 public offering while molding herself into one of the world’s top thought leaders as the author of the best-selling books including “Lean In: Women, Work, and the Will to Lead.”
But now many investors are concerned Zuckerberg and Sandberg may not have what it takes to deal with the thorny political issues Facebook faces following two years of scandal and controversy involving data-sharing improprieties, the proliferation of fake news that some say may have swayed the 2016 presidential election and more recently concerns over political advertisements making false claims on the platform.
These scandals have sparked bipartisan calls to intensify regulation on social media companies like Facebook, and some politicians like Massachusetts U.S. Senator and Democratic Party presidential hopeful Elizabeth Warren have said the social media giant should be broken up to reduce its power and influence.
Such new regulation—including the growing possibility of breaking up Facebook at some time in the future–would likely lead to lower profits and lower stock prices not currently reflected in the lofty valuations of the company’s shares. Yet, concern over these issues and how they are being handled by Facebook has quickly dimmed the stars of both Zuckerberg and Sandberg so much that major investors have begun to quietly pressure the board to consider some change in management of the company, according to people with direct knowledge of the matter.
Those changes could include bringing in more managerial firepower with expertise to deal with Congress and other regulators. Other changes discussed include Zuckerberg relinquishing his role as CEO and taking a more creative position inside the social network, and Sandberg leaving the company altogether, investors tell FOX Business. People with knowledge of Sandberg’s own intention says she has privately expressed wariness about her job at Facebook, which she has held since 2008, and may leave on her own accord within the next year. Another person close to Sandberg says she has no plans to step down in the immediate future.
The pressure on Zuckerberg and Sandberg has intensified in recent days after social-media competitor Twitter and its CEO Jack Dorsey announced that the company, unlike Facebook, will no longer be taking political ads because of the outsized influence they have on such platform to sway public opinions by deceptive means. The announcement sparked a wave of criticism against Facebook given the various controversies that engulfed the company including how fake news circulated by Russian-troll farms and fraudulent ads bombarded the platform and may have helped elect Donald Trump president in 2016.
Zuckerberg has publicly told investors he has no plans to stop taking political ads, which he says represent just a fraction of Facebook’s revenues. But investors tell FOX Business he is under pressure from executives and employees inside the social-networking giant to crack down on false political advertisements. These investors say the internal pressure will likely force Zuckerberg to compromise on the political ad controversy, possibly policing his site more and banning ads that make fraudulent claims.
A Facebook spokesman had no comment, but would not deny the issues cited by these sources. A company spokeswoman who works for Sandberg declined comment.
“It would be a mistake if investors wanted to find different leadership outside of Sandberg,” said Gene Munster, managing partner at Loup Ventures, LLC, a research and venture capital firm. “While she hasn’t been perfect, she has created incredible value for shareholders. There may be a factor of does she want to do this because I think she’s going to run for office, so I wouldn’t be surprised if she left but I would be surprised if she was shown the door.”
As for Zuckerberg being kicked upstairs, Munster says that would have to be his decision because he “essentially has the authority to fire the board.”
But investor pressure can prod executives like Zuckerberg to make changes that even impact their own jobs. In 2001, Google founders and Sergey Brin and Larry Page brought in Eric Schmidt to run the search engine outfit and grow the business amid investor angst about their ability to manage a newly public company. Zuckerberg could make the move to a more passive role inside Facebook if investors start selling shares, which hasn’t happened yet, or if he realizes he needs an executive skilled at navigating Congress and regulators who can also enact business changes.
That pressure, could lead to Sandberg’s exit, said one Wall Street adviser involved with major Facebook shareholders.
“There are a lot of non-fundamental things to watch with Facebook… but the company is doing well on financial metrics,” Chief Technology Strategist at Wedbush Securities Brad Gatswirth tells FOX Business. “If anything, there may be frustration with public policy, privacy, and data… Those concerns won’t go away.”