Facebook Inc.’s governance structure resembles a dictatorship, requiring investors to surrender rights to founder Mark Zuckerberg, according to Gamco Investors Inc.’s Larry Haverty.
Zuckerberg, chief executive officer, now controls 56.9 percent of voting power at Facebook, the company said in a filing to raise $5 billion in the largest Internet initial public offering on record. He also has the right to appoint his own successor, a “disquieting factor,” said Haverty, a portfolio manager at Rye, New York-based Gamco, in an interview. Facebook still is a company that a growth-stock investor “absolutely” wants to own, Haverty said.
“I don’t know whether dictatorship is the right word, but it more or less defies every vestige of shareholder democracy known to man,” Haverty said today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “I don’t think it’s how business should be run.”
Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment.
Corporate-governance experts and the California State Teachers’ Retirement System have acknowledged concerns that the social-networking company raises corporate-governance issues.
Zuckerberg is running the company “as an adult, even though I’m not comfortable with the governance,” Haverty said.
Gamco isn’t an investor in Facebook. The money manager may wait for Facebook to have “some sort of an accident” before it buys shares because the stock will be expensive after its IPO, Haverty said in an interview on Jan. 30.