A new proposal by a group of Facebook shareholders and a consumer watchdog group wants Mark Zuckerberg to relinquish some of his control over Facebook Inc (NASDAQ:FB) by giving up his position as chairman of the board.
According to the proposal which is led by SumOfUs, the future success of Facebook need a balance of power between the board and the CEO and operating without a Chairman the company could act without consequences against investors.
According to Lisa Lindsley, the capital markets adviser for the watchdog group, about 1,500 shareholders have signed the SumOfUs petition in regards to Facebook’s decisions and leadership out of which SumOfUs contacted 1300 shareholders to establish their interest in filling the shareholder proposal.
SumOfUs points to a decision by Facebook last year to roll out new, non-voting stock as one among many problematic moves occasioned by having a single Chairman and CEO. In the decision, every Facebook stockholder including Zuckerberg, will get two new shares of what is referred to as Class C stock for every existing share. This does not increase the value of investor’s holdings but just splits the stock such that one share becomes three shares. The move was to create a large bunch of new shares that Zuckerberg could sell off so as to fulfill his promise of laying off 99 percent of his Facebook shares to charity.
From the surface glimpse, the move appears to be fair to everyone but a close look reveals Zuckerberg as the main beneficiary. With over 900 million Class C shares dividend without reducing his voting rights, the move ensures Zuckerberg maintains lifetime control over Facebook.
According to Lindsley, Zuckerberg’s dual role as chairman and chief executive in a way contributes to a corporate culture where board members tend to rubber stamp his decisions. For Facebook shareholders, these proposals may be months away. The company will include the shareholder proposal in its filing ahead of the annual shareholder meeting later in the year.
It is not the first time SumOfUs the proposal to split the company’s management. In 2015 and 2016, the group initiated similar proposals at the agriculture conglomerate Monsanto. Nearly 20% of the shareholders supported the proposal.
