Social networking giant Facebook (NASDAQ: FB) hosted its annual meeting today, which was also webcast on the company’s investor relations site this afternoon. Unless you’ve been living under a rock for the past year, you’re likely familiar with the growing number of scandals and controversies surrounding the company.
In response, activist investors have been calling on Facebook to take any of a broad range of actions, such as calling for CEO Mark Zuckerberg’s resignation, or splitting the CEO and chairman of the board roles, among others. (Yeah, that didn’t happen.) Investors also submitted six shareholder proposals that went up for vote today, some of which would have strengthened Facebook’s corporate governance. Facebook recommended against all shareholder proposals, and all failed.
What Zuck wants, Zuck gets
For starters, Facebook’s entire board of directors, which consists of eight members, were all re-elected. While CEO Mark Zuckerberg technically answers to the board, the board answers to His Zuckness due to his nearly 60% voting power. That gives Zuck absolute control over any matter that requires a majority vote, including the election of directors and shareholder proposals.
The shareholder proposals would have been good for public investors if passed, but there was virtually no way they could without Zuckerberg’s blessing. Seeing as how some of these proposals would have undermined his authority, it’s no surprise that he was against them. Here’s a recap of the three shareholder proposals that were directly related to corporate governance, which are also detailed in the proxy statement sent out last month.
- Change in stockholder voting: This proposal called for Facebook to recapitalize its outstanding stock so that all shares received one vote per share. Class B shareholders get 10 votes per share, so this proposal was essentially asking insiders to voluntarily relinquish their supervoting rights.
- Establishing a risk oversight committee: An investor advocated for Facebook to consider creating a new Risk Oversight Board Committee that could better assess risks, particularly those around data privacy.
- A simple majority vote: This one called for Facebook to eliminate any supermajority voting requirements in favor of a simple majority vote. This proposal was less consequential, since Facebook already uses simple majority voting requirements for pretty much everything. The only time when supermajority voting requirements come into play is if/when Class B shares represent less than a majority of total voting power, which is not currently the case.
The final tally will matter
Facebook did not yet disclose the final official tally results of each proposal, even as it was able to declare the outcomes. This information should be filed with the SEC shortly. Once it is, the figures will give some indication as to how much of Facebook’s public shareholder base may have voted in favor of the proposals intended to strengthen corporate governance.
While Facebook doesn’t really need to heed input from its investors due to their limited collective voting power, no company wants unrest within its investor base. The only recourse that Facebook investors have is to vote with their wallets instead, potentially selling shares if the company’s corporate governance practices are insufficient.
For now, the annual meeting was just another reminder that Zuckerberg retains an iron grip on the most powerful social media company ever created.
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