Activist Facebook investors are again going to try to oust Mark Zuckerberg as chairman and abolish what they see as the firm’s unfair share structure.
In a Securities and Exchange Commission filing on Friday, Facebook gave notice of its annual shareholder meeting on May 30 and confirmed the investor proposals that will be voted on during the event.
Among eight stockholder proposals, there are two that will be familiar to Zuckerberg and the rest of the board: Investors are making another attempt to force governance changes on the social network.
One is titled ‘Stockholder Proposal Regarding an Independent Chair’ and makes the case for Zuckerberg to be dethroned as chairman of the board, with an independent executive hired in his place.
Business Insider broke the news of the proposal in July last year after revealing the plans of activist shareholder Trillium Asset Management, which had grown tired of the “mishandling” of scandals including the Cambridge Analytica data breach.
Responding to the proposal in the SEC filing, Facebook called on investors to vote it down.
“We believe our board of directors is functioning effectively under its current structure, and that the current structure provides appropriate oversight protections,” Facebook said.
“We do not believe that requiring the Chair to be independent will provide appreciably better direction and performance, and instead could cause inefficiency in board and management function and relations.”
The chance of it becoming a reality is extremely slim, despite it being backed by investors that control around $3 billion of Facebook stock. A similar proposal in 2017 was popular among independent investors but was crushed because of Zuckerberg’s voting power.
This is because of Facebook’s dual-class share structure. Class B shares have 10 times the voting power of class A shares, and it just so happens that Zuckerberg owns more than 75% of class B stock. It means he has more than half of the voting power at Facebook.
Rip up the share structure
Zuckerberg’s weighty power is why activist shareholders want to abolish the share structure. At the annual investor meeting, they will have the chance to vote on a proposal, which calls for the introduction of “fair and appropriate mechanisms through which disproportionate rights of Class B shareholders could be eliminated.”
It said: “Fake news, election interference, and threats to our democracy — shareholders need more than deny, deflect, and delay. We urge shareholders to vote FOR a recapitalization plan for all outstanding stock to have one vote per share.”
It is not clear which investor has drawn up the proposal, but Facebook again calls for it to be dismissed by shareholders, as they have during the last five annual meetings. “We believe that our capital structure is in the best interests of our stockholders and that our current corporate governance structure is sound and effective,” it said.
Facebook will almost certainly get its way. But the two investor proposals mark continued dissatisfaction among shareholders about the way Facebook is run following a year from hell for the company. It also shows that investors continue to believe that Zuckerberg has too much power.
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