Independent support to end Mark Zuckerberg’s supervoting power increases
Weak governance structure to blame for upcoming FTC, Congressional probes and subsequent drop in Facebook share value
MENLO PARK — Facebook’s 8K filing with the U.S. Securities and Exchange Commission, which follows its annual shareholder meeting on May 30, demonstrates resounding opposition by independent shareholders to Facebook’s governance structure that has failed to provide oversight over the urgent issues plaguing the platform.
Independent shareholders called for change:
- Half of the Directors of the Board — including four of the seven returning Directors, and four of the five elected before 2018 — were opposed by over 30% of independent shareholders.
- Independent shareholder support for an independent chair reached 68% this year. This represents a significant jump from the 33% support this proposal received in 2017.
- A proposal to eliminate Mark Zuckerberg’s and other insiders’ supervoting class of shares again received support from over 80% of independent shareholders.
- A proposal to require that directors in uncontested elections be elected by holders of a majority of votes received support from 80% of independent shareholders.
Large shareholders’ support for Mark Zuckerberg and Facebook’s governance structure is at odds with calls for reform from Color Of Change, Majority Action, and institutional shareholders in support of governance reform, and places shareholder value at greater risk, following announcements that the U.S. House of Representatives and Federal Trade Commission are expected to scrutinize and investigate Facebook more closely. Since the announcement of impending investigations, Facebook shares dropped sharply, losing 10 percent of their value in the days since the annual meeting
The results follow the groups’ campaign urging investors to reform Facebook’s governance structure, which has given Zuckerberg controlling power over the company and led to cascading financial risks for shareholders as a result of its failure to make necessary reforms.
On May 6, Color Of Change and Majority Action filed an exempt solicitation laying out the case for investors to vote no on Zuckerberg. The groups targeted BlackRock, the largest institutional investor of Facebook that had not already previously voted against Zuckerberg, with a multi-thousand ad buy and a petition that garnered over 125,000 signatures.
Majority Action issued the following statement from Executive Director Eli Kasargod-Staub:
“A supermajority of independent investors sounded a clear signal against Mark Zuckerberg’s singular control of Facebook. Chair and CEO Zuckerberg and the board’s lack of a comprehensive plan to rectify the failures are causing substantial risks to long-term shareholder value. It remains to be seen whether Large asset managers like BlackRock have ignored the calls from ISS and Glass Lewis to hold Facebook accountable for its poor governance structure, prioritizing fleeting short-term profits over structural changes that would make the platform safer for its users and drive long-term shareholder value.”
Color Of Change issued the following statement from Senior Campaign Director Brandi Collins-Dexter:
“The independent shareholder votes reflect a resounding indictment of Facebook’s weak governance, allowing Zuckerberg’s singular control. The large shareholders that continue to support Facebook’s flawed governance structure do so at the expense of Facebook’s long-term shareholder value and Black users. We can’t wait one more year: government action is required. Color Of Change’s 1.5 million members have been pressuring Facebook to address safety and discrimination on the platform since 2015, and will continue to push for change through the civil rights audit. At the same time, the continued failure of Facebook’s board to adequately oversee the policies and practices of the company’s management underscore the urgent necessity for regulatory action.”
Color Of Change began demanding that Facebook address safety and discrimination on the platform in 2015 and made its first call for a civil rights audit – to comprehensively evaluate its failures – in 2016. Despite repeated high profile incidents and calls from civil rights groups, legislators, and more, Facebook’s response has been insufficient and the problems persist. In November 2018, the racial justice organization successfully pushed Facebook to agree – for the first time ever – to the public release of this audit. Facebook issued a progress report in December 2018 that failed to provide clear timelines for implementation or benchmarks for success to measure accountability. The next phase of the audit is expected to be released in June.