One of Facebook‘s most important early backers, Silicon Valley investor Peter Thiel, has gradually been selling more than 90% of his original stake in the company. Thiel remains one of six outside directors on Facebook’s eight-member board. But he shouldn’t be there any more.  Facebook’s 28-year-old founder, chairman and CEO, Mark Zuckerberg, needs all the help he can get from fellow directors who are committed to the social-networking company’s success going forward. Look at Facebook’s faltering stock price, down nearly 50% from the company’s going-public price of $38 a share in May. Look at Facebook’s trouble convincing investors that it can keep ad revenue growing as users switch to small mobile devices that aren’t ad-friendly. What once seemed like an unstoppable juggernaut now looks like a company in turmoil.  Six or seven years ago, Thiel was a big part of the answer. He provided $500,000 in capital to Facebook in 2004, winning a 10.2% stake for his trouble, when most investors hadn’t even heard of the company, let alone seen it as an important new factor in the world of online media. People familiar with Facebook’s early years say Thiel provided a lot of helpful advice and guidance to Zuckerberg as the company got rolling.  During the past few years,however, Thiel has been a man headed for the exits. In his book “The Facebook Effect,” company biographer David Kirkpatrick broke the news that Thiel had sold half his Facebook stake in a private transaction in 2009, reducing his stake to about 3% after allowing for the issuance of addititional shares to newer investors.  “The range of what it may be worth from here is extremely big,” Thiel told Kirkpatrick in early 2009. “It may be worth a lot more. It may be worth nothing at all.” Thiel went on to frame the dilemma even more sharply, saying that people even then felt a great anxiety about Facebook. As Thiel put it: “Is this going to become the most successful thing ever, or is it going to weirdly spiral out?”  When Facebook went public in May, Thiel and his associated investment entitities sold 14.3 million Facebook shares, netting more than $500 million. According to just-released Securities and Exchange Commission filings, Thiel and his venture capital entity, Founders Fund, last week sold a further 20 million shares, collecting about $400 million.  Thiel now holds just 5.6 million shares, or 0.3% of the company, giving his stake a current market value of about $112 million. Under American corporate governance rules, he still has a full vote in the Facebook boardroom, the same as any other director. But as a practical matter, his economic interests have moved on.  Thiel had his chance to cash out a huge fortune from his Facebook prescience, and he made the most of it. That’s cold comfort to Facebook’s big cohort of new shareholders, most of whom have bought shares at prices far above Facebook’s latest market close of $20.01. If Thiel leaves the board soon, that will create an opportunity to fill his seat with a new director who can better represent the IPO investors.  Within the past month, the Los Angeles Times and Time both ran commentaries arguing that Facebook might need a new CEO. Not to be outdone, Mashable asked its readers if Zuckerberg should step down; 42% declared that the young CEO was “in over his hoodie.” That makes for exciting headlines. But trying to install a new CEO is an absurd remedy that would hurl Facebook into far deeper trouble.  Facebook’s decelerating growth curve alarms people who bought the stock in the past year at puffed-up valuations. All the same, the Zuckerberg-led management team is making sane decisions about what to do next — and no armchair critics have come up with better alternatives. The fact is, Facebook is a hypnotic, quirky rule-breaking creation that burst into the big time only because of the vision and gritty determination of its founder.  Facebook’s IPO prospectus made clear that the company is a Mark Zuckerberg production, with the founder holding an astonishing 57% of voting rights himself. Anyone who isn’t comfortable with Zuckerberg’s giant role at the company shouldn’t own the stock. The right way for investors to channel their current unease is to look closely at the board, and to think about what types of directors could best nudge Zuckerberg to do more for his new public shareholders.  When Amazon.com and its founder, Jeff Bezos, looked to be going off course in 2001, after the dot-com collapse, directors of the Seattle online retailer did what boards are supposed to do. They didn’t fire the founder or ease him aside. They just tightened the reins a bit, making sure that he got the business back on track. Facebook deserves a board that’s willing to do the same.
One of Facebook's earliest backers, director Peter Thiel, has sold so much of his stock that it doesn't make sense for him to remain on the board.