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Currently, there are more than 150 million active internet users in United States and 500 million users globally. According to Facebook fact sheet, more than 95%active internet users have Facebook accounts. Therefore, Facebook Inc. has become a powerful marketing and social communication platform. As internet usage is growing drastically, opportunities of advertising are evolving and companies are continuing to use the platform for meeting their market targets. Facebook Company is growing as a corporate company following its IPO that took place on 2012. Its shares in the market are competing favorably with other companies in United States economy. According to NASDAQ, Facebook shares are trading at $57.15. Since its founding, there is an increase in the company’s investment and acquirement of other companies. The thesis of the paper is an analysis of Facebook Inc. highlighting its corporate governance and its investment.
Facebook is an online platform offering social networking services to its clients. The company started on February 4, 2004. The online networking platform got its name from some American university students who founded it. In its initial stages, the company had its users limited to the American university students (mostly Harvard University). However, following its acceptability to the students, the founders expanded its users and it was available to other colleges in Boston area.
The website-based social network got support from its users and it gradually became available to anyone aged 13 years and above. According to Search Engine Journal, article by Albert Costill “25 Amazing Facts About Facebook”, as a social networking platform, in United States, more than 67% of internet users have Facebook accounts. Apparently, in United Kingdom, more than 82% internet users enrolled for Facebook. As a result, the company has become the most popular social media channel among internet users globally. The paper is a Facebook analysis (Mayrhofer, 2013).
Part 1: Corporate Governance Analysis
As a corporate company, Facebook uses a corporate governance structure and approach in governing and managing its operations. Their corporate governance system aims at balancing interests between the stakeholders (shareholders, customers and its management) of the company. The company’s management comprises of a board of directors who govern its operations. The chief executive officer (CEO) of Facebook is Mark Zuckerberg. He has been the CEO of the company since it started its operation in 2004. He has the responsibility of setting the direction and as well product strategies of his company (Daft, 2012). Apparently, he has the responsibility of leading the design team of Facebook’s services to its clients and as well developing the company’s core infrastructure and technology. Therefore, in the company’s operation, he governs and directs the product’s strategies (Jones, 2012).
On the other hand, Sheryl Sandberg is the Chief Operating Officer (COO). She is responsible for overseeing the company’s operations. This is inclusive of the market sales, the marketing strategies of the company, the company’s development, its public policy and as well company’s human resource. She is second ranked from the CEO of the company. From the COO, in its corporate governance, David Ebersman acts as the Chief Financial Officer (CFO) of Facebook. He is responsible of the finance department of Facebook.
He leads the facilities and as well, the technology teams in the company. Lastly, in its corporate management, Mike Schroepfer is the Vice President of Engineering department of the company. In addition, he is the Chief Technology Officer at Facebook. He controls the company’s creativity, culture of speed and exploration of the company to new products and services offered to its clients. As the company’s engineer, he gives the company advice on new products and services to invest and offer to their clients (Sanders, 2011).
Other individuals in the board of directors of Facebook include; Mark Andreessen who joined in 2008. Prior to joining Facebook, he served as chairperson of the board of directors of Opsware Company. More so, he is a member of board of directors to other competitor companies such as eBay and Hewlett-Packard. Erskine B. Bowels, who joined in September 2011. Other than being a member of the board of directors at Facebook, he is a member of the board of directors at Morgan Stanley, Belk Company.
Susan Desmond-Hellmann, the second woman in the board of directors of the company and joined in March 2013. She also serves as a member of the board of directors at The Protector & Gamble Company. Donald E. Graham and Reed Hastings are also members of the board of directors and as well members of the compensation committee of the company. These individuals play an important role in the decision making process. Most of Facebook’s members of board of directors are as well members of other board of directors to other companies (Jones, 2012).
Facebook’s compensation packets
Zuckerberg, the CEO of the company has a salary of $503,000 and a bonus of $266,000. More so, he has allowances (perks) amounting to $1.2 million. He is the highly paid member of the board of director. Other members of board of directors receive a salary of $181,000 and total bonuses of $208,000. They do not have a profit sharing ratio. In Facebook Company, there is no severance agreement between the CEO and his employees. This is a threat to the employees, as they do not have a compensation in case of termination of their employment. Apparently, it is an ‘investor friendly’ policy used by the CEO (Mayrhofer, 2013).
Importance of compensation schemes and the independence of Directors in Facebook
In the company, compensation schemes established for recompensing employees and boards of directors are important to the company in motivation of employees. This is through recognition of their hard work and creativity in exploring new products and services to their clients (Jones, 2012). Motivation of workers improves and promotes their idea contribution to the company. On the other hand, through their internship promotion, they the compensation scheme of $74,700 attracts more people into the company. This generates more interests in new positions for creative graduates. Lastly, with the company’s compensation scheme, there is exploration of new markets and new products. This is due to the increased interests and support of new ideas to the company (Daft, 2012).
Apparently, independence of directors in Facebook is another important corporate managerial strategy in running the company. It is through independent board management that the stakeholders operate without bias (Mayrhofer, 2013). In Facebook, the board of directors and other employees believe and operate at the interests of the company. More so, in Facebook, while facing their economic challenges, through the independent board of directors, Facebook Company enjoys the ability to negotiate some already set agreements such as compensation package schemes.
This is through determination of the best executive compensation schemes. Facebook faces competition in the social networking platforms from other companies such as Twitter and Google+. As a result, the company require an independent board of directors that makes appropriate decisions for its operation and develops strategies aiming at dealing with the high competition. Its independent board of directors gives it negotiable solutions of dealing with competition from other social media companies. Therefore, independent board of directors directly influences Facebook’s operations (Sanders, 2011).
Financial market concerns
Following the company’s initial public offer, the company experienced a 28 percent jump in comparison with the one percent gain for the Standard & Poor’s 500 Index. According to Bloomberg, following the share gain, 49 analysts started following the company in a bind. More so, 38 of the analysts recommend Facebook Inc. having an equivalent buy rating. Apparently, 16 analysts have their share-price targets below the trading prices. This has a translation that at an average of 12-month price, analysts have a price target of $79.92. This value is above the closing value of the company of $70.10 with a 1% rise (Jones, 2012).
This indicates that analysts have little upside view of the company’s stock (Mayrhofer, 2013). This has an effect on the company’s operation as it may force some competitors and as well, some other bulls to make an adjustment on their share projection. According to an analyst at BTIG in New York, Facebook’s initial public offer ripped the public’s past expectations. According to his recommendation, he made a proposal of buying the shares at $68. This was when the shares traded at $49. This is an indication, as the biggest social media company went public; it had many analysts interested in its shares and as well its performance in the market. Information provided by the company’s analysts is important to investors as it gives them a way of comparing the company with other companies. Investors use the data with evaluations from analysts as their investment methodology (Sanders, 2011).
In the stock market, the company is competing well in comparison with other companies in the United States Exchange (Daft, 2012). Currently, the company is selling its shares at a high value of $61.89n and a low value of $60.18. The trading volume in the market of its shares is 54,189,197 shares. However, Facebook Inc. has its projections based on the current performance in the stock exchange. According to NASDAQ “Facebook, Inc. Stock Quote & Summary Data”, the company has a projection of $72.59 high value of their shares and low value of $22.67. This is a one-year projection. Apparently, in this period, the year will have a share volume of 74,400,394.
Part 2: Stockholders analysis
Stockholders of Facebook Inc.
The company went public on May 18, 2012. Facebook Inc. has 40 stockholders. Some include; Mark Zuckerberg, the founder and as well the CEO of the company. He has a share of 28.2% of the total shares valued at $24 billion. The other stockholder of the company is Accel Partners. The Venture Capital Investor has a share of 10%. Their investment in the company is $8.5 billion. This is an institution investor in the company. Dustin Moskovitz is the other stockholder of the company with 7.6% shares in the company. He is an inside stockholder of the company as he is a former employee of Facebook. His total share value is $6.5 billion. Another owner of the company is Digital Sky Technologies (Daft, 2012). This is a corporate investor to the company and has 5.4% shares of the company. Apparently, the corporate’s share worth is $4.6 billion.
Eduardo is another stockholder of Facebook with a percent share of 4% and a value of $3.4 billion. He is among the inside stockholders since initially he was an employee in the company (Sanders, 2011). Similarly, Sean Parker has a 4% share and value of $3.4 billion in the company. Peter Thiel is not only a stockholder but also a member of the board of directors of the company with a share value of $2.13 equivalent to 2.5% shares. In the list of stockholders, there is Sheryl Sandberg, a current employee of the company with a share value of $86million. This is equivalent to a 1% share in the company. Microsoft, a technology-based company, is another stockholder and as well investor in Facebook. The corporate investor has a share value of $1.36 equivalent to 1.6% shares of the company. Greylock Partners is another venture company in Facebook Inc. The venture company has a share value of $1.275 billion equivalent to 1.5% shares of the company (Jones, 2012).
Institutional investors and inside holdings of Facebook Inc.
Facebook Inc. has 8.28% institutional investors. They include Microsoft, Digital Sky, Goldman Sachs, Interpublic, T. Rowe Price and Fidelity Investments (Daft, 2012). Facebook does not have foreign listing of its shares. Insiders of the company are stockholders with more than 5% of shares of the company other than the managers and board of directors. They include former employees, corporate investors, and as well venture capitalists. Insider holdings of Facebook have a total share of 27%. These insider holdings of the company plays a role in the decision-making process regarding changes and gripes that affect the shareholders. Over the previous years, the insider holdings of the company are involving themselves actively in purchasing and selling their shares during stock exchange. Example according to NASDAQ “FB Insider Activity (SEC Form 4), Accel traded 17,215,595 in 2012 (Mayrhofer, 2013).
Importance of knowing investors of Facebook Inc.
Investors of Facebook and any other firm, helps in determining the liability of the company. This is because investors determines the continuity of the company depending on their history of investing. Facebook Inc. investors such as Microsoft has their history of their investment. More so, in the decision making-process affecting other shareholders, they highly contribute. Therefore. Knowing the investors of the company is important in valuing an investment opportunity (Mayrhofer, 2013).
Part 3: Capital Budgeting Decisions
Specific type of projects Facebook Inc. invests in
Facebook Inc. invests in technology-based investment opportunities. The company invests in areas where it has experience in such as messaging platforms like WhatsApp and Instagram. Facebook on the other hand has project plans of bringing internet to third-world nations through their drones, lasers and satellites. The company has a Facebook’s Connectivity Lab that works on the internet.org platform. This connectivity project by Facebook is in partnership with other communications giants such as Nokia, Qualcomm and Telecom. Through this project, Facebook anticipates to use the air-and space-born methods and ensure that people in the third-world nations (with more than 5 billion people) have access to the internet (Sanders, 2011).
More so, Facebook has other projects on open software development. Facebook Inc. aims at developing software projects aiming at contributing to the community and as well help other companies learn on building their websites and as well, infrastructure stacks. They include; GitHub, Hadoop projects, LLVM, and GNU grep. Generation of these investment projects is through decisions made by the management (Daft, 2012). Mark Zuckerberg plays a great role in determining the valuation of these projects. Some of the investment projects the company invests in are from competitors. Example is in WhatsApp and Instagram. Similarly, with the aim of reducing competition from other social media platforms, Facebook Inc. observes the social platforms gaining popularity and posing competition. Acquiring WhatsApp was through this idea since the mobile social network was gaining popularity and posed a strong competition to Facebook (Mayrhofer, 2013).
Facebook projects are profitable. Considering the case of WhatsApp and Instagram, Facebook is getting large profits from these investments. Apparently, following their open source software platform, Facebook Inc. is benefiting by giving web experiences to other companies. This on the other hand is a profitable investment to the company as it is developing new profitable projects for its users and the company. Apparently, improving on their client’s experiences, the company is improving the quality of their services and as well attracting more clients. With the connectivity project, the company has an anticipation of giving more than 5 million people access to the internet. Apparently, since Facebook Inc. is an internet-based company, it implies that the company will have more users (Jones, 2012).
Shift to different projects in future
In the future, Facebook has a likelihood of investing in other types of projects. With their interests in Oculus Virtual Reality (VR) (a company that is not deal with social media), it provides services for creating 3D discussion forums. With the high interest posed by Facebook Inc. it shows that the company is changing its investment forums. It is important to understand changes in the investment pattern and type of Facebook Inc. projects since it gives the investor a clearer approach on the valuation methods and as well methods used in determination of these projects. Apparently, it gives the investor a better approach on the company’s performance regarding changes on people’s interests. Learning possible changes in investment of the company gives is an investing strategy as it aims in understanding the future trends of the company (Jones, 2012).
Facebook Inc. as a social networking platform is an example of a well-ran corporate company. With its investors, managers, board of directors and as well its employees, it falls as a well-governed and cohesive company. On the other hand, the company’s ownership and its operation has an attribute to its great performance. Facebook has different projects aimed at improving the quality of services to their clients. Partnership with other companies such as Instagram is factor attributed to its performance. Lastly, acquisition of other companies as well is an important aspect in Facebook Inc.
Sanders, C. (2011). Practical packet analysis: Using Wireshark to solve real-world network problems. San Francisco, CA: No Starch Press.
Jones, R. H. (2012). Discourse analysis: A resource book for students. Milton Park, Abingdon, Oxon: Routledge.
Mayrhofer, P. (2013). Interdependencies in the discovery and adoption of Facebook applications: An empirical investigation. Wiesbaden: Springer Gabler.
Daft, R. L. (2012). Management. Mason, Ohio: South-Western Cengage Learning.
Communication technologies have often sought relevance in an increasingly noisy and crowded communications universe. The recent upsurge in social media has completely changed the way people communicate. Some of the most notable social sites that have grown exponentially include MySpace, Facebook, Twitter and Google Hangout. There is a fear amongst many persons that these continuous interactions that occur through technology might replace the old fashion face to face interaction (Blumsack 18). Their worries are justified given the fact that a lot of conversations in the 21st century are taking place using social media. This paper will show that indeed social media is overtime overtaking face to face communication.
Awash in technology, the person can often hide behind a Facebook post, text, or even a tweet. The person through social media can be able to project any image that he or she desires and go ahead and create the illusion of their choosing. In the social media, communication is blurred as one can be whoever they want to be and with the lack of the ability to obtain nonverbal cues, their following are none the wiser.
Social media therefore hinders face to face communication (Blumsack 34). People might think that they understand a person because of the Facebook post they have posted, however, this actually incorrect. It is of the essence to note that as human beings, the only real method in which people can connect is through true and authentic communication. Studies have shown that indeed around 7% of the communication is often based on the verbal word and written text (Bedijs 43). However, 93% of communication is often based on nonverbal body language (Bedijs 43). It is important to therefore, note that it is only when a person hears the tone of the voice or look into someone eyes that they are able to know that when they say they are fine that means that they are not in any sense of the word fine.
Social media are slowly killing face to face communication. This is despite every metric showing that the world is interacting at breakneck speed through increased frequency through social media. However, with almost 93% of communication stripped away, persons are trying to forge relationships as well as make decisions based on several words, Emoticons, Snippets and abbreviations (Blumsack 83).
However, they might not be accurate representations of the situation and the truth. Research has shown that the Generation Y and the Millennial who will comprise more than 50% of the workforce by the year 2020 would prefer the use of instant messaging and also the use of social media as contrasted to stopping by and talking to someone at the office (Bedijs 35).
Therefore, social media are slowly hindering face to face communication, and it is increasing the communication quantity rather than quality. Therefore, in what can be described as an ironic twist, the social media that was to make people more social is making people less social. It is of the essence to understand for that effective communication to occur, each and every party should be genuine and accurate.
However, this is not happening with social media as it is replacing human contact altogether and eroding a whopping 93% of communication that could have otherwise been very important to the deciphering of the information sent. It is not a surprise that this change has already started to take shape given that a person go an entire day without having any face to face interaction meeting with people. This statement can often resonate both in the individual as well as the professional life of a person.
From any angle that one looks from, social media can be described as anathema to privacy. Through social media, persons learn things about people and they about us. In fact, thanks to social media, persons often know that if the nearest co-workers was to be a tree she would have been a willow, that Jeffrey lives and dies with his eagles, Peters brother was killed in a road accident and so on and so forth. It is critical to understand that although all this might be seen as shaping a community, it completely destroys privacy.
For example, the bikini-clad body in the beach at Captiva might undermine the respect an employee has worked hard to earn from the superiors, peers and subordinated in the workplace (Altshuler 12). The same might be said of a drinking party that went down amongst friends. Social media makes people detail their private thoughts and expose the information to the world, for example, who are you in a relationship with? Who do you poke? Who are your friends? These are some of the revealing questions that social media needs answers that are entirely private (Altshuler 19). The information is then put out there in the public. Social media are a haven for personal information and unfortunately most of the time this personal information gets out into the public.
In conclusion, Social media are hindering face to face communication as majority of communications in the 21st century often occur through texting, emailing or social media. There is a need for face to face communication as it contains almost 100% of the communication as compared to social media that does not have the body language communication which accounts for around 93% of communication (Bedijs 43). Further, social media are a big impediment to privacy as one shares his or her personal information in this media.
Altshuler, Yaniv. Security and Privacy in Social Networks. New York, NY: Springer, 2013. Internet resource.
Blumsack, Larry. Face-to-face Is the Ultimate Social Media. Belmont, Massachusetts: Zoka Institute, 2010. Print.
Bedijs, Kristina, Gudrun Held, and Christiane Maass. Face Work and Social Media. , 2014. Print.
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