Cooperatives can learn something from Facebook, especially when they are hunting about for ways of accessing external investor capital. Mark Zuckerberg wrote a crucially important letter in February 2012 to potential Facebook investors where he stated his mission for Facebook:
“We don’t build services to make money; we make money to build better services”
This statement applies equally well to cooperatives. Cooperatives don’t exist to make money per se. Cooperatives exist to provide valued services for members, whether that be collective purchasing, processing of produce, or whatever. It is the quality and economy of this service that defines the cooperative.
What is interesting, especially in context of the May 2012 IPO and consequent fall in share value, is that Facebook investors didn’t pay attention to the implications of Zuckerberg’s statement. They paid a 60x multiple of earnings when Apple and Google were trading around 15x. Facebook’s profit margin was also already at 50%, leaving questions as to the future upside.
If there was any doubt that they might be in for a rocky start, Mark Zuckerberg did nothing to comfort them. In fact, he made it clear that he would not comfort them, listen to them, or be in any way distracted by the demands of investors. He did this by structuring the company to ensure he retained near-complete control of it with 57% of voting rights although he would retain only 22% ownership.
Zuckerberg is not naive. He is simply focussed on the long term, and he believes that this means putting the needs of members before those of investors:
“By focusing on our mission and building great services, we believe we will create the most value for our shareholders and partners over the long term - and this in turn will enable us to keep attracting the best people and building more great services. We don't wake up in the morning with the primary goal of making money, but we understand that the best way to achieve our mission is to build a strong and valuable company”.
Cooperatives should take their lead from Mark Zuckerberg and issue similar statements when consorting with external investors. I imagine that less grief would have followed Satara’s partial listing if they had been this clear and uncompromising about the interests of kiwifruit growers. It is also particularly relevant to the impending public offering of investment units in Fonterra’s Shareholder Fund. It would be refreshing (and reassuring) if Theo and John were to state the following in a public letter:
“Fonterra doesn’t build dairy processing and marketing capabilities to make money; we make money to build better dairy processing and marketing capabilities, so we can provide sustainable returns to our New Zealand dairy farmer members”.
If the Facebook IPO is anything to go by, investors would simply ignore this statement and focus instead on what they wanted to hear. However, dairy farmers would derive great comfort from it and it would establish a clear moral authority in any future disputes with investors. In fact, a Zuckerberg-esque intention statement included in the prospectus would limit potential future claims by investors regarding breaches of the Securities Act and Fair Trading Act. Certainly no one could then argue they were misled by the cooperative when it acted solely in the long-term interests of dairy farmers.