Life Zucks: Facebook faces a major investor revolt
Proposals for radical change include stripping Mark Zuckerberg of his dual role as chair and chief executive
Facebook will be met with a string of demands for reform at a meeting with shareholders this week as it becomes the latest tech giant to face down investor activism in Silicon Valley.
The social network will be hit with a “whole quiver full” of proposals for radical change, including stripping Mark Zuckerberg of his dual role as chairperson and chief executive, and the removal of his outsized voting rights and allies on the Facebook board.
The measures are expected to secure votes from several top 20 shareholders.
Such proposals could garner “widespread support” from independent and institutional investors, according to one activist fund in favour of the measures, although they stand almost no chance of winning outright.
Zuckerberg controls about 60% of Facebook’s voting rights thanks to his class B shares, held by a handful of insiders, with 10 votes to one ordinary share.
However, a significant swing against management from shareholders could force further changes.
“The question really is how Wall Street will vote,” said Jonas Kron, head of shareholder advocacy at Trillium –Asset Management, which is supporting several proposals.
In 2018, a Trillium proposal for further risk management secured 45% of the “non-MZ vote” Kron said, leading to changes from the company.
“There is a whole quiver full of governance changes that need to be made,” the investor added.
Several of Facebook’s leading shareholders could issue their own protest votes against the company.
In 2018, Vanguard, Facebook’s second-largest shareholder after Zuckerberg with 6%, voted to withhold his renomination as director.
Top 20 investors including Vanguard, Fidelity, BlackRock and T Rowe Price have all previously either voted in favour or split their votes on reforms to Facebook’s governance.
According to a person familiar with the discussions, several leading funds have indicated they could support some reform proposals at Thursday’s vote.
Baillie Gifford, the Edinburgh fund, also voted in 2018 in favour of reforms for majority votes for new directors.
A similar proposal has been tabled in 2019.
Vanguard, Fidelity, BlackRock and Baillie Gifford declined to comment. T Rowe Price did not respond to a request for comment.
Shareholder advisory firms ISS and Glass Lewis have both come out in favour of supporting several of the rebel motions against Facebook’s board.
A motion to install an independent board chair has been proposed by several US state pension funds, including the New York City Pension Fund, which controls about 4.5-million Facebook shares worth about $800m.
Other proposals include creating equal voting rights for all shareholders, instituting a majority system of votes for new directors, to prevent Zuckerberg using his massive voting power to appoint directors without a contest, and improved transparency reports.
Shareholder advisers are also recommending investors withhold the renomination of long-time Zuckerberg ally Marc Andreessen, due to his investments in companies that were later acquired by Facebook.
The votes come just more than a year after the Cambridge Analytica scandal, which raised questions over Facebook’s handling of user data.
The company has also been embroiled in controversy over a data breach in September last year and faced scrutiny of its management, including Zuckerberg and chief operating officer Sheryl Sandberg.
– © Telegraph Media Group Limited (2019)