A group of major institutional investors, assembled in a spate of shareholder activism, is calling for Facebook to appoint an independent board chair, a position currently held by Mark Zuckerberg, who also serves as CEO.
“There is no check-and-balance at Facebook without an independent board chair—and Mark Zuckerberg’s totalitarian grip as both CEO and Board Chair must end,” said New York City Comptroller Scott M. Stringer, one of the co-filers. “Facebook’s unrelenting turmoil shows why independence and accountability matter—and why power should not be consolidated around one person. Outside shareholders have sounded the alarm on the need for real oversight and governance reforms, and it’s time for Facebook to listen.”
The group is comprised in part by the New York State Comptroller’s Office, Illinois State Treasury, Rhode Island Treasury, Connecticut Treasury, Vanguard, BlackRock, MFS, AllianceBernstein, American Funds, BNY Mellon, Goldman Sachs, John Hancock, JPMorgan, Putnam, and State Street.
The group sought an independent board chairman in its 2019 shareholder proposal. It released evidence revealing mutual funds joined the supermajority (68%) of Facebook’s outside shareholders who voted against management’s opposition of an independent board chair.
Zuckerberg’s ownership of about 60% of the company’s voting shares would leave him with full control of the business no matter what happens at its governance level.
Environmental, social, and governance (ESG)-conscious investors used to flock towards technology firms, given their relatively low greenhouse gas emissions, but focused power at the top has struck governance concerns such as this, said Robert Eccles, visiting professor of management practice at Oxford University’s Saïd Business School.
The group claimed that mounting evidence asserts having someone as chair and CEO is “deeply problematic.” It pointed to PwC’s 2019 annual director survey, in which 57% of directors who sit on a board with a unified chair/CEO reported it is difficult to voice dissent.
A number of investors voted to keep Facebook’s governance structure the way it is. Those investors included Morgan Stanley, T. Rowe Price, Fidelity Investments, Dimensional Funds, Neuberger Berman, Schwab, Invesco, and Legg Mason.
There’s currently a lawsuit that the California State Teachers’ Retirement System (CalSTRS) recently joined that’s seeking to reform Facebook’s governance, allowing it to “protect Facebook’s profitability.”
“We believe that Facebook’s lack of an independent board Chair, along with inadequate board governance, has contributed to the mishandling of several ongoing controversies,” said Rhode Island General Treasurer Seth Magaziner. “Adopting an independent board chair structure will help diversify Facebook’s leadership and could help the company begin to re-build trust by incorporating additional accountability mechanisms into its governance structure.”