Leading Proxy Advisors Recommend Facebook Adopt Independent Board Chair and Vote Against Mark Zuckerberg, as Investors and Civil Rights Groups Sign Letter Asking Facebook’s Largest Shareholders to ‘Vote No’ on Zuckerberg
Facing pressure from investors, proxy advisors, and civil rights groups, Facebook’s current governance structure will be under intense scrutiny at the annual meeting on May 30:
Late last week, two highly-influential proxy advisors — ISS and Glass Lewis — recommended investors vote in support of a resolution which calls on the Company to separate the roles of Board Chair and CEO, two positions currently held by Mr. Zuckerberg.
ISS also recommended investors withhold support from Mark Zuckerberg as a member of the board. Today, two dozen investors and civil rights groups have published a letter asking Facebook’s largest shareholders to do just that — to “Vote No” against Zuckerberg.
The proxy advisors, ISS and Glass Lewis, suggested in similar reports that separating the roles would improve corporate governance at Facebook, eliminating the conflict of interest that can occur when a CEO is responsible for self-oversight. In addition to serving as Board Chair and CEO, Mr. Zuckerberg is the company’s largest shareholder, controlling 58% of its voting stock.
The ISS report said: “The Cambridge Analytica data privacy incident and subsequent controversies have...exposed risk oversight lapses and signiﬁcant weaknesses in the company's social media platform, including inadequate controls needed to protect user data, and content integrity to prevent abuse, deception and social harm. The ensuing negative publicity has greatly tarnished Facebook's reputation and the subsequent controversies have put shareholder value at risk. These circumstances suggest that shareholders would beneﬁt from the most robust form of independent board oversight, in the form of an independent board chair.”
ISS and Glass Lewis provide guidance to shareholders, usually large institutional investors, regarding votes on key governance and sustainability resolutions. The shareholder resolution calling for an independent board chair was filed by Trillium Asset Management, a leading sustainable investment firm.
"Wall Street and Main Street investors are deeply concerned about Zuckerberg’s concentration of power,” said Jonas D. Kron, Senior Vice President at Trillium Asset Management, LLC. “Zuckerberg ignores this message from his investors at his peril, and to be clear, at our peril too. For the good of users around the world, investors, employees, and Facebook leadership now is the time for Zuckerberg to relinquish his chairmanship and to support real accountability.”
ISS also recommended that shareholders withhold their votes for Mr. Zuckerberg’s membership on the Facebook board, echoing the calls of two dozen civil rights groups and investors who today published a letter to Facebook’s top investors urging them to do the same.
The reports from the proxy advisors come amid mounting pressure for change at the top levels of Facebook. In today’s open letter to Facebook’s largest institutional shareholders, investors and leading civil society organizations are seeking support for a “Vote No” campaign that would withhold votes from Mr. Zuckerberg as a member of Facebook’s board. “As Facebook’s largest institutional investors, your vote ‘no’ on Mark Zuckerberg will send a clear message that it is past time for new governance,” says the letter.
The letter notes, among other problems, that Facebook now faces investigations and litigation from U.S. states attorneys general and the Federal Trade Commission over privacy violations, with an anticipated “record-setting” fine of up to $5 billion. This may include penalties for Mark Zuckerberg’s personal mishandling of user data. Multiple Senators have urged regulators to hold Mr. Zuckerberg “personally at fault and liable” for ongoing violations, including via “significant and material penalties” to both Mr. Zuckerberg and the Company, according to media reports.
Facebook’s annual meeting is scheduled to be held May 30th in Menlo Park, California.