MSNBC.COM - Investors, social media watchers and Facebook users may be looking
forward to the social network's expected public stock offering later
this year, but corporate governance experts aren't quite so
enthusiastic.
Earlier this month, Facebook filed for a $5 billion
IPO -- a deal that would be one of the biggest public stock offerings
ever and values the social media juggernaut at about $100 billion.
Those
sorts of numbers, coupled with the company's strong brand name, are
likely to draw interest from individual investors eager to buy a piece
of the company. Governance experts caution, however, that while buying a
hot company like Facebook feels good now, potential investors should be
wary of the stringent executive control structure outlined in the
company's IPO registration document.
"Right now you have a situation at Facebook where there's a
benevolent dictatorship, but my concern is they tend to become
malevolent dictatorships, and that can hurt you when it comes to the
pinch," said Aswath Damodaran, a professor of finance at New York
University's Stern School of Business.
Damodaran
notes that, based on information in the company's filing with the
Securities and Exchange Commission, Facebook's founder and Chief
Executive Mark Zuckerberg would retain complete control of the company
for the foreseeable future and would even have the right to appoint his
own successor before he dies.
Facebook has also set up defenses
against takeovers and proxy fights, when shareholders unite to force
changes at the directorial and management level. click here to read more
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