In early June, I attended the annual Social Investment Forum Conference with many activist investors and advisors in attendance. Many of those people were also at the Facebook (FB) annual shareholder meeting. Nearly every session mentioned FB for one reason or another, all with pretty serious concerns, including those of the SEC.
First, their stock structure is designed so some stock shares have “super voting” power. This means the “super voting” shares count for more than one vote, and other shares have the one vote as is the usual practice. Think superdelegates in politics. While Mark Zuckerburg technically owns about 20% of the stock, with the help of a few insiders he actually retains about a 60% voting share. That passes on to his heirs! It is unprecedented and is designed to create corporate royalty.
Their diversity is non-existent unless you are an Asian or white male.
Their lack of transparency on privacy, impact on elections and media, and things like psych operations is stunning.
The impact they have on users is not being disclosed. It is unclear if they are even looking at it at all.
The SRI industry has put forth many resolutions to get Facebook to change. The most interesting was to set up a Risk Oversight Committee to look at things like media influence, mental health, nefarious infiltrators etc.
While Facebook insiders and Zuckerberg retain the majority votes many independent shareholders are dissatisfied.
- 83% of independent investors voted for a shareholder proposal that would require the company to provide one vote per share and eliminate the dual class shareholding structure that currently allows insiders to control the direction of the company.
- More than ⅓ voted against the re-election of Zuckerberg and COO Sheryl Sandberg to the company’s board. This is a rare move and demonstrates a huge lack of confidence.
- 45% were in favor of FB establishing a Risk Oversight Committee of its board.
- 41% voted for a proposal demanding a report on how FB manages content governance, including election interference, so-called “fake news,” hate speech and online sexual harassment.
According to attendees Zuckerberg did address the crowd saying changes are on the way. We’ll see.
The influence of Facebook is massive and growing fast without much thought to the implications. We are catching up to those now. Unlike Google, which is equally problematic in many ways (we have a resolution at Google to tie executive pay to racial representation in company), how long FB will remain as it is continues to be a question. Still, the implications of social media are all the same. We need these guys not to have so much power.
Mention of specific securities is not a recommendation to buy or sell that security.