Bernard O'Riordan, Clarity Media Trainer
Another day and another big company and its chief executive are facing a crisis of trust.
Hot on the heels of JP Morgan's woes, Facebook and its hoodie-wearing founder Mark Zuckerberg have gone from hero to zero following an over-hyped stock market listing that has seen its value tumble and left many ordinary investors under water.
Technology glitches and a communications breakdown by the Nasdaq exchange didn't help the situation.
The near $US20 billion fall in Facebook’s value since it floated on May 18 has sparked some furious finger pointing amid accusations of greed and deception by 28-year-old Zuckerberg, his board and the long list of bankers advising them.
The PR disaster follows claims Facebook advised some - but not all - of its underwriters to lower their earnings forecasts for the company before it officially listed.
If the claims are true, it means many large investors were warned of the revised outlook while smaller investors were kept in the dark about critical information.
In terms of public perception, Facebook (or Fadebook as it has been dubbed) is sporting a black eye not just for the seemingly graceless manner in which its shares were pitched and priced - but the “greed is good” way executives and insiders have grown their own wealth since by taking the company public.
Facebook’s problems aren’t going away any time soon, so if the company wants to manage reputational damage to its brand and executives, it might be time to draw a line in the sand.
It would be easy to blame others or try to ignore the current problems, but Zuckerberg is now accountable to shareholders and has to start acting like a CEO. That is his job. He has a responsibility to address and establish or re-establish trust in the social networking company sooner rather than later.
Investors, analysts and reporters appreciate frankness from the top, so there will come a point when Facebook and its bankers need to be as open, honest and transparent as they can be. And they will need to listen to the concerns and gripes of their new investors.
Zuckerberg might start by dealing with the elephant in the room: admit his own disappointment; refocus the debate on the value-added services within the business to justify its lofty valuation; and vow to rebuild confidence in the company as an investment.
Whether that means ditching the trademark t-shirt and hoodie and dressing like someone who’s running a company worth about $US85 billion is open to debate. Zuckerberg does need to remain true to himself and his vision for the company he started.
But it’s worth remembering that in a crisis, the way we dress and the way we speak can shape the public's perception of us in a split second.
Ultimately, the speed and clarity with which Facebook handles this crisis of confidence will determine whether it deserves to join the ranks of tech titans such as Google and Apple, or whether it follows a boom-bust cycle like so many other tech start-ups before it.
UPDATE 24/05/2012: Online Australian bookmaker tomwaterhouse.com is offering odds of $A5 that Facebook - friendless on Wall Street since its IPO - will recover from its crisis of confidence and finish the year worth the same or more than its $US38 listing value.
“The Facebook finger pointing has begun but there are many grounds for believing... the company’s share price will bounce back over the medium to long term,” said Tom Waterhouse, the managing director of tomwaterhouse.com.