- The Washington Times - Thursday, April 5, 2012


The backbone of Facebook’s enormous success is its estimated 845 million users, including every member of my extended family. Mark Zuckerberg deserves credit for creating a platform that has allowed millions of people around the world to find one another, stay in touch and share their pictures, stories and life. Although revolutions and coups have been a part of human history, Facebook has allowed for a more organized opposition to develop in totalitarian systems.

Now that Facebook has filed plans for an initial public offering, Mr. Zuckerberg stands to reap enormous rewards for his genius - as well he should. The IPO bandwagon will also allow those close to Facebook’s bankers and investment advisers to benefit, including Goldman Sachs’ top 499 clients, Russian oligarchs with checkered pasts, Morgan Stanley bigwigs, and early venture-capital investors such as Accel Partners and Hercules Technology. According to the Wall Street Journal, Accel’s stake in Facebook could be worth $9 billion. No problem there. This is the normal process in capitalism: Those who take the risk reap the rewards. No one should begrudge those getting handsomely rich from Facebook’s IPO. Besides, there is no doubt that Mr. Zuckerberg will give to his charities, as will others who will become millionaires and billionaires from this historic IPO. By all accounts, he has eschewed the lifestyle of rich and famous, and has already donated $100 million to support public schools in New Jersey.

But this IPO also offers a historic moment for Facebook to do the right thing: practice capitalism with a conscience. Imagine for a moment if instead of just selling to insiders, Facebook sold shares at pre-IPO prices to organizations such as the Wounded Warrior Project, or the Washington, D.C.-based Urban Alliance, or Paul Farmer’s Partners in Health programs in Haiti. The Urban Alliance provides internships to low-income students from Baltimore and the District, and has been ranked as one of the most successful nonprofits by the World Bank. Issuing 1 million shares to the Urban Alliance would allow this nonprofit to become self-funded in perpetuity - freeing it from the need to work with inefficient city bureaucracies. Assuming a $100 per share price after the IPO, the Urban Alliance would have $100 million to help low-income students succeed in life.

Furthermore, if high schools students with little chance of graduation could own a piece of Facebook instead of being just customers, Mr. Zuckerberg would extend the impact beyond the investor class and create wealth for his customers. For example, setting aside a nonvoting class of stock at 10 cents per share for 100,000 high school students in America and giving them each 1,000 at a post-IPO price of $100 translates into $100,000 that can go into training for skills students need to become plumbers or engineers, mechanics or welders. This would jump-start an apprenticeship bonanza in America.

This transformational approach is exciting to contemplate, but it’s far different than the current plan, which seems to revolve around a Wall Street precedent of boosting the stock price by keeping fewer shares available. I would ask, how much is enough for the already wealthy investors? According to a financial analysis, only 5 percent to 7 percent of the company’s shares will be available to public investors. While there are all sorts of rationalizations for having such a small public offering relative to a company’s size, the real reason is to create an initial shortage of stock so the share price runs up when public trading starts. This is what many would call savage capitalism, and Mr. Zuckerberg, by his own account, is not a member of this club.

Another transformative action Mr. Zuckerberg could take would be to move the company from the prosperous enclave of Menlo Park, Calif., which has already seen housing prices rise 35 percent since Facebook announced its IPO, to a place such as Detroit or Baltimore, or Ward 8 in Washington, D.C., where unemployment stands at 33 percent. Imagine for a moment the economic impact on Baltimore’s Ellwood Park neighborhood if Facebook relocated its headquarters there. According to the Baltimore Neighborhood Indicator Alliance, 7 percent of homes in Ellwood Park are vacant, nearly 30 percent of school-age children are chronically absent, and homeownership continues to plummet and struggles to break 30 percent. The Wall Street Journal reports that the average net income of Facebook’s 3,200 employees is $312,000 annually. The arrival of 3,200 employees and their families each with disposable incomes of $312,000 annually would attract more businesses to this struggling city, bring top teachers, lead to a more accountable local government, create jobs and inspire hope for the hopeless.

Every user of Facebook should ask Mr. Zuckerberg to practice capitalism with a conscience by not only allowing those who took an early risk to get rich, but also allow those less fortunate to share in the rewards and opportunity.

Rob Sobhani is CEO of the Caspian Group.

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