What Are The Chances Mark Zuckerberg Isn't Facebook CEO In 2 Years?

Facebook, Inc. FB shares have shrugged off a massive outage of multiple Facebook platforms and damning whistleblower testimony in Washington this week and are now up 2.5% from Monday’s closing price.

But while Facebook shareholders may have avoided any major fallout from the whistleblower testimony, former hedge fund manager Whitney Tilson says Facebook founder and CEO Mark Zuckerberg may not survive the scandal.

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The Allegations: On Tuesday, former Facebook product manager Frances Haugen testified before a Senate panel, urging lawmakers to take action to solve what she deemed a “crisis” created by Facebook’s platforms. In her testimony, Haugen said Facebook routinely puts company profits over user health and safety and has designed algorithms that deliberately steer users toward high-engagement content that generates conflict among users.

“The result has been a system that amplifies division, extremism and polarization — and undermining societies around the world,” she said in her prepared remarks.

Zuckerberg responded to Haugen’s accusations in a Facebook post, claiming it’s frustrating to see the good work Facebook is doing be “mischaracterized.”

“We care deeply about issues like safety, well-being and mental health. It's difficult to see coverage that misrepresents our work and our motives,” Zuckerberg wrote.

Fallout For Zuckerberg: In his daily newsletter on Thursday, Tilson called Zuckerberg’s post “laughably bad.”

“In the face of Haugen's compelling testimony and her release of thousands of pages of damning internal company documents – which has led to overwhelming, bipartisan criticism – Zuckerberg's 16-paragraph, 1,316-word post doesn't once acknowledge any problem, much less any contrition, much less any indication that he and his company might need to do even a few things differently,” Tilson wrote.

“His tone deafness is matched only by his arrogance.”

Tilson said he agrees with the conclusion of Alex Stamos, director of the Stanford Internet Observatory and a former head of security at Facebook. Stamos said it’s unlikely any of Facebook’s problems related to user safety, content algorithms, misinformation and mental health will be fixed while Zuckerberg remains CEO.

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Zuckerberg currently controls 58% of Facebook’s voting shares, and Tilson said he is unlikely to step down on his own. However, Tilson noted the U.S. Securities and Exchange Commission is currently investigating Facebook for misleading investors, and the SEC could choose to force Zuckerberg out of the position.

The SEC took a similar approach in temporarily forcing Tesla Inc TSLA CEO Elon Musk out of his position as Tesla chairman as part of a fraud settlement back in 2018.

“I don't think it's likely – but it's not impossible,” Tilson said. “I think there's a 25% chance that Zuckerberg is no longer CEO within two years.”

Benzinga’s Take: Unlikely but possible seems like an accurate assessment of the likelihood the SEC will give Zuckerberg the boot. The SEC could have recommended Musk be removed from his position as Tesla CEO for misleading investors with his infamous “funding secured” tweet, so the SEC doesn’t appear to see the act of misleading investors alone as grounds enough for removing a big tech CEO like Zuckerberg.

Photo: Annie Spratt on Unsplash