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Mark Zuckerberg’s Biggest Challenge Yet

What’s next for Big Tech? Kara Swisher, one of the most plugged-in reporters in the tech industry, will join us this Thursday at 11 a.m. Eastern for our next DealBook Debrief conference call. She will discuss how the tech giants are dealing with the political and cultural storm over free speech, the risks and opportunities created by the pandemic and more. R.S.V.P. here. (Want this in your inbox each morning? Sign up here.)

Facebook’s hands-off approach to President Trump’s posts presents Mark Zuckerberg with the most serious challenge to his leadership in the company’s 15-year history. That’s according to more than a dozen current and former employees who spoke with reporters from The Times.

Hundreds of employees walked out (virtually) from work yesterday, to protest the company’s decision to allow inflammatory posts from the president on its platform.

• “The hateful rhetoric advocating violence against black demonstrators by the U.S. President does not warrant defense under the guise of freedom of expression,” one Facebook employee wrote in an internal message board.

Mr. Zuckerberg moved a weekly Q.&A. with employees to today, from later in the week, to address the criticism. At a session last Friday, Mr. Zuckerberg faced significant anger over his explanation of why Mr. Trump’s posts about the use of “state force” differed from other threats of violence, which are removed from the platform.

Rare public criticism of the company by employees is front-page news, with stories flooding the media today, featuring gripes both on- and off-the-record. Take your pick:

• “Facebook Employees Stage Virtual Walkout to Protest Trump Posts” (NYT)

• “Handling of Trump Posts Prompt Facebook Employees to Stage Virtual Walkout” (WSJ)

• “Facebook employees revolt over Zuckerberg’s stance on Trump” (FT)

The last word, from the markets: What crisis? Facebook’s shares closed up 3 percent yesterday. Premarket trading this morning suggests that they could get close to setting another record high today.

As unrest spreads following the death of George Floyd, businesses and their leaders continue to speak out against racism and confront the challenges posed by the protests.

George Floyd “could be me,” Ken Frazier of Merck, one of four black C.E.O.s of Fortune 500 companies, told Andrew on CNBC’s “Squawk Box” yesterday. Mr. Frazier was one of the first corporate chiefs to rebuke President Trump after Mr. Trump equivocated in his response to the white nationalist violence in Charlottesville, Va., in 2017.

YouTube executives encouraged employees to take today off to “focus on how to improve racial equality,” The Information reported. Lyor Cohen, the video service’s music chief, said that he would cancel all meetings, and urged his workers “to reflect, give yourself space to process, or take action in ways that feel right for you.”

Retailers have continued to express empathy for protesters even as they are boarding up stores and halting operations, write Sapna Maheshwari and Michael Corkery of The Times. “We can fix the damage to our stores. Windows and merchandise can be replaced,” Nordstrom said in a statement. “We continue to believe as strongly as ever that tremendous change is needed to address the issues facing Black people in our country today.”

Steven Davidoff Solomon, a.k.a. the Deal Professor, teaches at the U.C. Berkeley School of Law and is the faculty co-director at the Berkeley Center for Law, Business and the Economy. Here, he considers the meaning of Elon Musk’s unusually lucrative pay package.

This past week was a good one for Elon Musk, and not just because of SpaceX’s successful crewed spacecraft launch. Tesla awarded him more than $1.5 billion in stock as part of a pay package, with incentives that could ultimately be worth some $55 billion.

To understand this potential payday, and what it means for business and society, you need to think about Instagram.

The social network’s founders, Mike Krieger and Kevin Systrom, sold the business to Facebook for $1 billion in 2012. At the time that figure seemed incredibly high. Yet Mr. Krieger and Mr. Systrom helped build Instagram into a business now worth well over $100 billion — only to quit abruptly in 2018 over disagreements with Mark Zuckerberg.

They lost out a bigger payday not because they sold for too little, but because their pay packages at Facebook ended up being meager relative to the value Mr. Zuckerberg got from the deal.

The lesson that many founders take from Instagram is, “don’t sell too soon, for too little.” But Mr. Musk’s 2018 pay deal shows how executives can reap even more money, year in and year out, by sticking around:

• He does not earn a salary but is granted 12 sets of options that vest when Tesla hits various milestones tied to market cap, revenue and earnings.

• The first tranche, worth $1.5 billion at current share prices, was triggered when Tesla’s market cap stayed above $100 billion for six months.

• Future batches are released for each additional $50 billion added to the company’s market value. Tesla is now worth about $165 billion, meaning Musk is likely to get another tranche by year-end.

This is the epitome of pay for performance: Mr. Musk makes money only if shareholders make even more.

But who deserves the gains? The Instagram case posed this as a question of shareholders (Mr. Zuckerberg) versus founders (Mr. Krieger and Mr. Systrom). But in the new era of stakeholder capitalism, what about labor, community and others? This question could become more relevant if Mr. Musk moves out of California to a low-tax jurisdiction like Nevada or Texas.

In other words, it’s not about whether Musk deserves the pay but who else shares the rewards along the way.

Yesterday, the Supreme Court unanimously ruled against a hedge fund and a labor union challenging the constitutionality of the board that Congress created in 2016 to repair Puerto Rico’s broken finances. At stake were agreements affecting millions of people on the island and beyond.

“This is a real case about real things,” Justice Samuel Alito said at oral arguments last October. Specifically, it’s about the biggest government bankruptcy in U.S. history, which could set a precedent for pandemic-hit states struggling with debt. Puerto Rico’s financial oversight board filed a plan last year to cut the territory’s debt by a third, from $129 billion to $86 billion.

Justices rejected an effort to undo the restructuring. The hedge fund Aurelius Investment said that the board lacked authority to act because its members weren’t confirmed by the Senate. (The firm spent years fighting Argentina in court for a better deal on that country’s defaulted debt.) Federal appointments require Senate confirmation, but federal officers working in a local capacity — like the board members in Puerto Rico — do not, the justices concluded.

More problems for bondholders loom, with the board recently projecting that it will have $15 billion less than anticipated over the next decade to repay Puerto Rico’s debts, because of the pandemic’s impact on the island’s economy.

The pandemic has clearly battered the U.S. economy. The nonpartisan Congressional Budget Office released figures yesterday about how bad the damage will be.

The agency projected that it would cost $7.9 trillion in G.D.P. over the next decade, largely because consumers and businesses will rein in spending for years to come. The economy isn’t expected to return to its pre-pandemic trend until the end of 2029.

Shoppers expect low prices from the e-commerce giant, but Amazon scored a deal of its own yesterday when it sold $10 billion worth of bonds at a rock-bottom price.

Some of the debt was sold with an interest rate of just 0.4 percent, The Financial Times reports. The newspaper notes that this rate for three-year notes is barely above the equivalent for government debt, and set a record for the lowest rate ever recorded for a borrower in the U.S. corporate bond market at that maturity.

It’s the latest sign of hunger for blue-chip companies’ debt, fueled by Fed programs that effectively guarantee huge swaths of the corporate bond market.

Deals

• Steward Health Care plans to announce today that it has bought back control from the investment firm Cerberus, becoming one of the biggest physician-owned and operated health care systems in the U.S.

• One of China’s biggest chipmakers, Semiconductor Manufacturing International Corporation, filed for an I.P.O. in Shanghai that could raise $2.8 billion. (CNBC)

• Talk about tough timing: Viagogo, the online ticketing company, closed a $4 billion deal to buy rival StubHub from eBay in February — just before the pandemic halted all live events. (Forbes)

Politics and policy

• The acting head of the Office of the Comptroller of the Currency, which oversees the nation’s largest banks, warned that face masks worn for coronavirus protection could aid bank robbers. (NYT)

Tech

• Twitter flagged a tweet by Representative Matt Gaetz, Republican of Florida, for violating its rules against glorifying violence. (NYT)

• Why President Trump’s attacks on Twitter are good for the social network’s business. (Bloomberg)

Best of the rest

• Retailers’ latest headache: what to do with mountains of unsold clothes. (Reuters)

• Pandora, the jewelry giant, says it will use only recycled gold and silver by 2025. (FT)

• Those nifty SpaceX spacesuits? The astronauts who wore them for last weekend’s launch give them a “5-star review.” (NYT, Business Insider)

We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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