More than two-thirds of outside shareholders support proposal to make the chairman role an independent position.
Public pension fund leaders from New York, Illinois, and three other states renewed their call for Facebook Chief Executive Mark Zuckerberg to abdicate his role as chairman, citing escalating support among outside investors in the company.
Shareholder acrimony is bound to only add to the intensifying pressure Zuckerberg already faces from lawmakers and federal regulators. The Wall Street Journal on Monday reported the Federal Trade Commission, which is on the verge of hitting Facebook with a multibillion-dollar fine for privacy violations, was granted the rights to launch a probe of the social-networking giant for monopolistic practices.
“Facebook’s insular boardroom must be cracked open because the company has no accountability to its users, its investors, or our democracy,” New York City Comptroller Scott Stringer, whose fund controls over $750 million of Facebook stock, said in a statement on Tuesday. “Naming an independent board chair is a necessary first step that is supported by shareowners who own the majority of Facebook shares, but whose voting power is not commensurate with their ownership.”
Illinois State Treasurer Michael Frerichs added “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.”
Facebook declined comment on the statements, as well as similar remarks from treasurers from Connecticut, Rhode Island, and Pennsylvania.
The stock FB, -0.55% edged up 0.1% in afternoon trade, but has slipped 2.1% over the past three months. In comparison, the Nasdaq Composite Index COMP, +0.64% has slipped 0.2% the past three months and the S&P 500 index SPX, +0.82% has gained 1.2%.
The long-time combatants were emboldened by results from last week’s Facebook shareholders meeting, released late Monday. It showed 68% of outside shareholders supported a proposal to make the role of chairman an independent position – a significant jump from the 51% support a similar measure earned in 2017.
“This level of support is rarely seen in shareholder proposals,” Jonas Kron, senior vice president of Trillium Asset Management, which owns $8.5 million worth of Facebook stock, told MarketWatch in a phone call on Wednesday. “The last two years of never-ending controversies and missteps has led to the growing realization that there is too much power in one person’s (Zuckerberg) hands.”
Outside shareholders have become increasingly vocal in their disapproval of how Zuckerberg and the company he co-founded have handled a vast technology platform that now reaches 2.38 billion monthly active users and has enormous influence over nearly every aspect of social interaction worldwide.
But their steady drumbeats of demands, which stretch back to early 2018, aren’t likely to be met because Zuckerberg and other insiders control nearly 60% of Facebook’s voting power via a special class of shares that wield 10 times the voting power of standard shares
Stringer, Frerichs and the state treasurers of Pennsylvania and Rhode Island, all of whom have public funds with Facebook holdings, in October joined a shareholder proposal to strip Zuckerberg of his chairmanship.
The proposal, initially filed by Trillium Asset Management in June, listed a litany of reasons, including the Cambridge Analytica data breach; Russian meddling in the 2016 presidential election; social media addiction; and the spread of “fake news.” The group subsequently added a breach in September that affected 30 million Facebook accounts, as well as the exodus of WhatsApp and Instagram executives to its grievance.
“Zuckerberg and others control a vast majority of voting shares, yes, but he would be wise to learn from the lesson of Alphabet, whose co-founders brought in Eric Schmidt as CEO,” Kron said. “Bringing in an independent board chair would serve Facebook well.”
Last month, former Facebook Chief Security Officer Alex Stamos suggested Facebook hire Microsoft Corp. MSFT, -0.64% President Brad Smith as its CEO, and Zuckerberg slide over to chairman. Smith helped the software giant make peace with government regulators in the early 2000s when it was under heavy scrutiny for its business practices.