At last week’s annual meeting, Facebook (NASDAQ: FB) shareholders sent a dramatic message to the board and Mark Zuckerberg when a shareholder proposal recommending an independent board chair received a 68% vote of main street and Wall Street investors. Facebook shareholders overwhelmingly support a significant change at the company. It’s time for Mark Zuckerberg and the board to plan for a transition.
“Now is the time for change. Facebook’s independent investors agree that it’s time for the company to separate the Board Chair and CEO roles. Right now, Mr. Zuckerberg is both Board Chair and CEO, serving as his own boss, and clearly it’s not working. The Board needs to be led by a strong, independent voice tasked to provide real oversight over management, address governance failings, help restore trust in the company, and better protect shareholders’ interests. We hope the company will use this as an opportunity to turn the page and take a decisive step toward building a more successful, sustainable company for the long-term.”
Illinois State Treasurer, Michael Frerichs
The vote for an independent board chair increased substantially compared to a similar proposal introduced in 2017 that received a vote of 51% among non-insider investors.
Investor demand for greater oversight and accountability has steadily mounted as the frequency and string of controversies has sparked extensive criticism and concern. The shareholder proposal, filed and supported by the New York City Comptroller; the treasurers of Illinois, Connecticut, Rhode Island, Massachusetts, Pennsylvania, and Oregon; and Trillium Asset Management asked Facebook to adopt a policy of having an independent board chair. Aligning with the governance model that has been adopted by Alphabet, Apple, Autodesk, and Microsoft would establish governance systems and processes that provide the most robust and effective risk oversight.
“A CEO who also serves as Chair diminishes the Board’s governance of company management. This is clearly what is happening at Facebook. There is a growing awareness among shareholders that the current lack of independent board Chair and oversight has contributed to Facebook’s inadequate oversight and mishandling of several controversies, increasing risk exposure and costs to shareholders.”
Rhode Island General Treasurer, Seth Magaziner
Connecticut State Treasurer Shawn T. Wooden stated:
“While the head of Facebook has served a dual role as board chairman and CEO, there have been numerous missteps -- from the role of its platform in election propaganda to the sharing of the personal data of tens of millions. They strike at the heart of the company’s business model, and demonstrate the necessity for better oversight of how Facebook is run. It has become increasingly clear that the current leadership structure hasn’t adequately addressed shareholder concerns over the board’s oversight of company management. The vote results for our shareholder resolution actually prove the point: With the majority of shares under his control, Facebook’s CEO effectively shut down a corporate structure that would have provided checks and balances between a company’s board and its management. Shareholders deserve better.”
“Facebook is one of the most powerful technology companies in the world. To concentrate the magnitude of this power in any one person is dangerous and risky for shareholders. Mark Zuckerberg had an opportunity—years ago—to be a leader for good corporate governance, ethical leadership, and transparency. When, and if, he relinquishes this power, he will be following in the footsteps of nearly every other large tech company who have already taken this step. Social media are central tools for communication between individuals, businesses, and public leaders, giving Facebook extraordinary power over our news, our privacy, our economy and, ultimately, our democracy. Absent significant changes to the governance and voting structure, shareholders will never get the oversight for which they have voted. I do not take the investments Pennsylvania makes as a state lightly, and will continue to fight for meaningful change at Facebook.”
Pennsylvania State Treasurer Joe Torsella
The key to understanding the vote results reported by Facebook today is that 4,010,720,956 of the votes are controlled by Mark Zuckerberg and a number of other insiders. Once those votes are removed, the calculation reveals that out of a total of 1,674,842,339 votes cast (excluding abstentions and broker non-votes as established by SEC rules), 1,139,241,589 were cast in favor of the independent board chair proposal. Facebook published the vote results on Monday afternoon at http://d18rn0p25nwr6d.cloudfront.net/CIK-0001326801/4d5ba024-45b4-409d-bfea-be53be1432a8.pdf.
“This outpouring of support for the proposal springs from a deep well of concern about governance at Facebook. Concentrating so much power in one person – any person – is unwise. We look forward to speaking with the board about how it can make the transition to an independent board chair now that so many investors have voted in favor of the proposal.”
Jonas Kron, Senior Vice President at Trillium Asset Management