Facebook needs to step up its transparency

Ironic though it may be, the world's largest social network (with a misson "to make the world more open and connected") needs to step up its commitment to transparency.

As I write this post, Facebook stock is down another 7% today to $27.50. That's a 28% drop from the $38 IPO price two weeks ago, and an even harder fall for the retail investors who got in at between $40 and $42 a few minutes after the stock went public.

Meanwhile, Mark Zuckerberg who at IPO instantly became the 29th richest person on earth according to Bloomberg's Billionaire Index has fallen off the list completely, even as he and his new bride have tried to enjoy their honeymoon. There have been cries for Zuckerberg to end the honeymoon early and make a statement, just say something! to calm investors.

Others have sensibly pointed out that an abrupt end to the Zuckerberg honeymoon might indicate panic and further unsettle investors. The optics around a message can be as important as the message itself, particularly if you really have nothing new to say.

More to the point, Facebook's executive team needs to step up to the realities of being a publicly traded company. That means quickly addressing accusations that insiders and participating bank partners knew a lot more than was public concerning falling revenue projections. Investor lawsuits have already been filed, the SEC is kicking off an investigation and Congressional hearings clearly are coming soon (expect a circus act of grand-standing Congressmen salivating at the opportunity of grilling Zuckerberg on behalf of aggrieved investor constituents).

“Facebook was not originally created to be a company,” Zuckerberg wrote in a letter to potential investors that was part of Facebook’s filing. “It was built to accomplish a social mission — to make the world more open and connected.”

It's a fantastic thing to have an aspirational mission–it's what drives employees to greatness. But you also have to have a steadfast commitment to integrity in everything you do, including how material information is shared. Zuckerberg needs to return to work Monday totally committed to unearthing and releasing true and complete answers to the accusations. And he needs to commit to conduct open investor webcasts regularly, assuring that his new bosses, stockholders big and small, receive the information they are entitled to.

- Jon Harmon

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  1. [...] on June 1, I argued here that Facebook‘s CEO Mark Zuckerberg needed to lead an effort toward greater transparency in [...]

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