Do Facebook, Zynga care about shareholders?
With the founders firmly in charge, it seems they sometimes have other priorities, which makes this writer mad.
Back in the day, company founders and CEOs cared about their public shareholders. People had something called a conscience. Fast-forward to the 2000s and these same moguls couldn't care less.
Now, in an video interview with Reuters, Zynga's (ZNGA) CEO Mark Pincus says he doesn't base success on that pesky little thing called "stock price." (Ironically, in the video interview, Mark brazenly boasts a "Bubble Safari" T-shirt. You couldn't make up stuff this hilarious.)
So exactly how does Pincus measure success? Hold your laughter: "I am measuring our success in two ways: One is I am measuring it anecdotaly of 'Are we making an experience that gets through to our moms?'" Yup. Moms!!! Not shareholders. Moms!
Pincus goes on to shrug off his $183 million purchase of the overnight success OMGPOP (which has since lost its buzz) and says he will continue making risky bets. He also admits Zynga is not a powerhouse like Electronic Arts (EA) or Activision Blizzard (ATVI), rather a company that is a new startup every month. As public investors begin to understand this truth, expect more to bail on the stock,which has already been hammered from a 52-week high of $15.91 to the current price of $5.
As a businessperson, I have a ton of respect for Mark Pincus. He's built a business at world-class speed. However, I find the hubris and lack of respect for public shareholders is a disgrace -- not only to Pincus and his C-Suite, but to the American public markets and IPO system.
Damien Hoffman is the editor-in-chief at Wall St. Cheat Sheet. As of this writing, he did not own a position in any of the aforementioned stocks.
More from Wall St. Cheat Sheet
Back in the day, Amazon's Jeff Bezos made a related quip. This was in a PC Week interview in the late 1990s, when AMZN had never turned a profit and didn't seem interested in doing so.
Bezos answered the interviewer's question about Amazon's profitability by smirking (it seemed) that business wasn't really basically about profitability; that wasn't its lifeblood. This answer made the rounds and right quick. I believe it was two quarters later, amidst reports of extreme pressure being directed at Bezos, the books were suddenly showing profitability.
Heaven best help Zuckerberg and Pincus. Their hubris certainly won't - nor will it be benign.
Stockholders clamoring for money money money at the expense of the customer is where the problem is at.
I'll be the first to admit I dont think Zuckerberg has made all the right decisions. But the tone of this article, frankly, disgusts me.
In the old days, shareholders cared about the companies they owned. They held onto the stock for years at a time and followed the long-term prospects of a company. Now stocks are traded like baseball cards and the price swings wildly based on a story that the CEO wore a T-Shirt to an interview. Nobody seems to care about the long-term plans for a company, they are more focused on the guidance for the current quarterly numbers (the actual numbers don't even matter anymore, it is the guidance driving the prices).
Management that worries only about meeting the current quarterly accounting numbers tend to make decisions that are bad for business in the long run (e.g., selling a profitable division, cutting R&D expenses, etc.).
He may not have expressed it as well as he could have, but I think Pinkus is on the right track long term by focusing on creating quality products that appeal to a wide audience, then letting the money matters take care of themselves.
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.