Facebook, Inc.: A Look at Corporate Governance

Abstract

This case examines Facebook's corporate governance by reviewing information in the company's proxy statement. Students become familiar with the nature and type of information in proxy statements. They also learn how to examine various facets of executive compensation and corporate governance such as the use of stock options and restricted stock to compensate executives, dual class share structures, board composition and characteristics, controlled companies, and classified boards. Excerpt UVA-C-2411 Rev. Aug. 23, 2018 Facebook, Inc.: A Look at Corporate Governance Sarah Jones returned to her desk after the half-hour meeting with her manager, Joe Thomas. She was excited about her first assignment as an analyst at Salomon Partners, an investment research company that sold reports to a variety of clients. Thomas had asked her to write a report on the governance structure at Facebook, Inc. He had recently read an article in the Wall Street Journal suggesting that technology companies were increasingly using multiple classes of shares when going public. He anticipated having to field questions about what that meant for his clients who had invested in, or were thinking about investing in, Facebook, as he knew the company had an interesting governance structure. Thomas wondered what he could learn from Facebook. He asked Jones to investigate, and he suggested she start by reading Facebook's annual proxy statement. Company Description Facebook was a large US social media and social networking company headquartered in Menlo Park, California. According to its website, Facebook's mission was “to give people the power to build community and bring the world closer together. People use Facebook to stay connected with friends and family, to discover what's going on in the world, and to share and express what matters to them.” In addition to the social networking site Facebook.com, the company's products included Instagram, an online community for sharing visual stories using photos, videos, and messages; Messenger and WhatsApp, both messaging applications; and Oculus, a virtual reality platform. The company's revenues, which totaled $ 40.7billion in 2017, came primarily from advertising. The company had more than 25,000 employees at the end of 2017. (Facebook's consolidated balance sheets and consolidated statements of income are presented in Exhibits 1 and 2.) . . .