Shareholders challenge Zuckerberg’s reign over Facebook
Facebook is ubiquitous across our social and political lives — its platforms shape so much of how we connect, what we learn, what gives us hope and what makes us afraid. Facebook is just as inescapable for investors, as its size makes it automatically a part of just about any 401(k) portfolio. We all have to live with Facebook’s decisions — that’s why today, at Facebook’s shareholder meeting, Majority Action, Color of Change, and countless others are calling for the company’s leadership to finally take responsibility for the consequences of Facebook’s myriad and cascading failures and fundamentally overhaul its irresponsible governance practices.
From hate speech and calls to violence to the Cambridge Analytica breach and Russian exploitation of the platform to influence the 2016 and 2018 US elections, Facebook’s response to serious issues has repeatedly been to understate the problems and avoid adequate solutions. The latest hit comes from the Federal Trade Commission, which will reportedly fine the company between $3 to $5 billion and require additional oversight of Facebook privacy practices, as part of a settlement with the company over a violation of a 2011 consent decree.
Reputational damage to the brand, fines and investigations, and policy and regulatory risks are mounting. In the midst of this chaos, trust from shareholders and consumers is quickly eroding — causing a crisis for Facebook leadership including CEO and Chair Mark Zuckerberg whose failures have been regularly exposed in the global media.
Yet to this date, Facebook has not provided comprehensive accounting to investors of the causes of failures and oversight, let alone a comprehensive plan to rectify them.
Instead, multiple departures of top executives from Facebook, WhatsApp and Instagram citing disagreements about privacy and safety have consolidated Mark Zuckerberg’s control, compounding the inadequacy of its board and governance checks on the CEO and Chair. Zuckerberg holds an outsized influence over Facebook in his joint role as CEO and Chair with 10–1 unequal voting rights that give him 57.7% of the total votes. While independent holders own most of the company and take the economic risk, Zuckerberg alone can elect or block any director and determine the outcome of any proposal.
And indeed shareholders (who are structurally shut out from any meaningful control of the company’s direction) have been calling for governance change, all of which have been ignored by Facebook’s board. Last year, proposals to allow one-vote per share and allow for a simple majority vote — both efforts to limit concentrated power — each garnered over 80 percent of independent shares. Thirty-five percent of outside shareholders, including Facebook’s largest outside shareholder, Vanguard, withheld votes from re-electing Zuckerberg last year.
Despite these previous calls from shareholders and the growing evidence to the contrary, Facebook’s board continues to state that its “current governance structure is sound and effective,” with Zuckerberg opposing all shareholder proposals for improved governance and reporting.
With unchecked power over the company and millions of users’s security and civil rights at risk, Zuckerberg should not be his own boss. As long as he continues in his existing roles, he will not have the trust of his shareholders to lead the company to account for its failures to date.
Together with Color Of Change, Majority Action filed an advisory urging Facebook shareholders to withhold their support for the nomination of Mark Zuckerberg to the board of directors, as well as call on Facebook to empower holders with equal voting power, an independent chair, increased transparency to better manage risks and democratic elections of new board members.
Now is the final warning call from shareholders to make a meaningful change to Facebook’s governance — ignoring it again will likely lead to even greater scrutiny and regulatory intervention to curb Zuckerberg’s concentrated power.
