Major US Funds Propose Zuckerberg's Removal as Facebook Chairman

Four major US public funds that own shares in Facebook Inc on Wednesday proposed removing chief executive officer Mark Zuckerberg as chairman after several high profile scandals and said that they hope to gain backing from bigger asset managers.

State treasurers from Illinois, Rhode Island and Pennsylvania, and New York City Comptroller Scott Stringer, co-filed the proposal. They oversee money including pension funds and joined activist and original filer Trillium Asset Management.

A similar shareholder proposal searching for an independent chair was defeated in 2017 at Facebook, win which Zuckerberg’s majority control makes outsider resolutions effectively symbolic.

Rhode Island State Treasurer Seth Magaziner said that the latest proposal was still worth filing as a method of drawing attention to Facebook’s problems and how to solve them.

“This will allow us to force a conversation at the annual meeting, and from now until then in the court of public opinion,” said Magaziner during telephone interview.

A Facebook spokeswoman declined to comment.

At least three of the four public funds supported the 2017 resolution as well. The present proposal, which was meant for Facebook’s annual shareholder meeting in May 2019, asks the board to create an independent board chair to improve oversight, a normal practice at other companies.

It cites controversies that have damaged the reputation of the world’s largest social media network, including the unauthorized sharing of user information, the proliferation of fake news, and foreign interference in US elections.

Illinois State Treasurer Michael Frerichs said in an interview that, while an independent chair might not have prevented all the issues, “there might have been fewer of these problems and less of a drop in share price” at the business.

Shares of Facebook have had a rocky year, under pressure from revelations about the privacy and operational issues as well as concerns over slowing revenue growth. They finished Wednesday at $159.42, 10 percent lower than at the start of the year and well off a closing high of $217.50 reached on July 25.

The 2017 resolution obtained the support of a slim majority of outside investors, according to public fund leaders’ calculations. Magaziner and Frerichs said they planned to talk with larger Facebook investors in the coming months to ask for their support.

Among funds that are Facebook’s largest investors, the Vanguard Total Stock Market Index Fund and Fidelity Contrafund voted against the 2017 proposal, securities filings show, while the American Funds Growth Fund of America supported it.

American Funds representatives did not respond to requests for comments. Meanwhile, spokespeople for Fidelity and Vanguard declined to issue any comment. Contrafund manager Will Danoff was supportive of Facebook’s response to problems in an investor note in August.

In opposing the 2017 proposal, Facebook said an independent chair could “cause uncertainty, confusion, and inefficiency in board and management function and relations.”

Zuckerberg has about 60 percent voting rights, based on a company filing in April.

The New York City Pension Funds owned about 4.5 million Facebook shares as of July 31, while Trillium held 53,000 shares.

The Pennsylvania Treasury owned 38,737 shares while the Illinois Treasury owned 190,712 shares as of August. Rhode Island funds hold 168,230 Facebook shares, according to a spokesman.

FSMSmart Review