While we have Mark Zuckerberg to thank for the social media website that provides constant contact with family members and friends, Facebook is in need of changes at the top.
It was clear after the Cambridge Analytica data breach scandal last year that something must be done, and investors haven’t forgotten.
In Facebook’s shareholder meeting last month, 68% of independent investors voted for a provision that would separate the board chairman and CEO roles, according to an analysis by Open MIC, an organization that works toward greater corporate accountability at media and technologies companies. The independent shareholders favored putting an independent board chairman in place, leaving Zuckerberg with the CEO title.
Additionally, according to Open MIC – or Open Media and Information Companies Initiative – 83% of independent shareholders voted to do away with a dual-class share structure that considerably favors Zuckerberg and other executives at Facebook.
Because of Zuckerberg’s alliances and his 58% control of the vote, predictably, the shareholder proposals got shot down.
Beyond the Cambridge Analytica breach that exposed the private information of 87 million users, shareholders also took issue with Facebook’s role, whether direct or not, in Russia’s influence on 2016 presidential U.S. elections, the proliferation of fake news, social media addiction issues and the ability for advertisers to discriminate by race when promoting marketing messages.
“We believe this lack of independent board chair and oversight has contributed to Facebook missing, or mishandling, a number of severe controversies, increasing risk exposure and costs to shareholders,” the proposal reads, noting in 2018’s annual shareholders meeting, 51% of independent shareholders favored separating the chairman and CEO jobs.
The Facebook board, also predictably, recommended shareholders vote against the provision prior to the vote, saying, “We do not believe that requiring the chair to be independent will provide appreciably better direction and performance, and instead could cause inefficiency in board and management function and relations.”
For their part, shareholders are worried about their investments, and they have the right to help direct policy at Facebook – especially when a majority speaks up.
They have cause for concern.
Following the release of the Cambridge Analytica breach in early 2018, Facebook still was able to hit a stock high of $218.62 on July 25 that year. However, that level hasn’t been achieved again; the stock hasn’t even crossed the $200 mark since. And while 2018 net income was up 39% for the company, 2019 started with a first-quarter profit drop of 51% to $2.4 billion.
Facebook also is facing a new round of government investigations over alleged antitrust violations. The House Judiciary Committee is probing the social media giant over allegations it uses its “extraordinary power over commerce, communication and information online” to gain an unfair competitive advantage, according to USA Today reporting.
“Unwarranted, concentrated economic power in the hands of a few is dangerous to democracy – especially when digital platforms control content,” House Speaker Nancy Pelosi, D-California, tweeted on June 3. “The era of self-regulation is over.”
The writing is on the wall here, and the paint’s beginning to drip.
At the least, Zuckerberg and team should consider leadership or share structure alternatives, rather than simply shutting down the investors who have supported the company.
It must be difficult for any company founder to relinquish power – even if it’s partial control.
But the investors have spoken. It’s time for a change at Facebook.
Springfield Business Journal Web Editor Geoff Pickle can be reached at firstname.lastname@example.org.
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