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Facebook CEO Mark Zuckerberg
Getty
The debate between the president and the Facebook president was clearly highlighted at the recent annual shareholders' meeting, during which 68% of external shareholders supported a proposal to make the position of chairman of the board independent after having expressed concern and disapproval of how President and CEO Mark Zuckerberg handled a variety of mistakes, including a security breach in September that affected 30 million Facebook accounts.
In addition, 83% of outside investors voted in favor of replacing the current two-clbad share structure with a "one share, one vote" system.
Facebook has a two-clbad structure in place, which means that individual and institutional shareholders have Clbad A shares in which one share equals one vote; Zuckerberg, management and directors are Clbad B electors in which one share is equal to 10 votes. Zuckerberg himself owns 75% of Facebook's clbad B shares, giving him control of 58% of Facebook votes.
As illustrated by the recent Lyft IPO, it is becoming increasingly common for companies run by their founders to become public under a two-clbad share structure that allows them to maintain control while having access to cash provided by public shareholders.
The reason given is often that the founders / CEOs of technology companies want superb voting rights to be able to invest longer in R & D innovation that takes time to "pay off", to create a competitive divide without the production pressure short-term returns for public shareholders.
The disadvantage of the two-clbad share system is that it disproportionately allocates voting power and limits the influence of public shareholders who have significant financial interests in the company while making it virtually impossible for them to participate. Express.
However, in recent years, institutional shareholders have become more active and have increased their influence through their growing internal corporate governance groups.
These internal governance groups have more and more influence when they exercise their power by voting by proxy. We witnessed this first breakthrough on the scene with a huge impact in 2017, when SSGA announced that it would vote "in abstention" against the boards of directors who have not made progress in recruiting women directors.
I think we're seeing the next big hotspot where institutional governance groups are going to be flexible and require more information about the composition of the board. & Nbsp; The Institutional Investors Council (CII), & nbsp; which represents managers $ 25 One trillion badets, & nbsp; recently sent a letter to the New York Stock Exchange to ask a company to automatically convert its stock structure into a one vote voting structure no more than 7 years after the date of introduction in stock exchange.
I think that more and more institutional governance groups will follow and demand that companies with a two-clbad share-sharing system implement self-extinguishing clauses that will come into effect seven years after the IPO date.
Facebook became public 7 years ago in 2012 and began to feel the decline of investors against the current structure. In addition to the shareholder dispute, Facebook is also facing regulatory issues as to whether they will be defined as a media company and will have to comply with the fact-finding standards of the media companies. The company's badysis was also subject to heightened scrutiny because of the vast Cambridge Analytica data breach scandal last year that prompted federal regulators to take a closer look at the laws of the day. confidentiality of the data and whether the social media giant was exploiting the data of its users.
Given the focus of the laser on Facebook, their response to "arming" their outside investors and eliminating any proposal presented will only anger shareholders and motivate them to intensify their attempts to change.
As a professional member of the board of directors who has served on more than 28 boards of directors and has seen these trends, I can say that proxy issues do not go away, they only get more intense when institutional shareholders are energetic.
Institutional shareholders generally control 70% to 80% of publicly traded shares. Ignoring these majority owners and arming them with force is not a strategy that will work in the long run.
In my opinion, the board of directors would be in a better position to address these issues, engage with institutional shareholders, and come up with an acceptable compromise, because they already have enough problems to deal with from a regulatory point of view. Having the shareholding and the regulatory base activated negatively, that is too many fronts.
I would recommend that they engage with their shareholders and reach an acceptable compromise, and then attempt to negotiate a settlement with the regulators so that they can again focus on the "activities of the company." # 39; business. "
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Facebook CEO Mark Zuckerberg
Getty
The debate between the president and the Facebook president was clearly highlighted at the recent annual shareholders' meeting, during which 68% of external shareholders supported a proposal to make the position of chairman of the board independent after having expressed concern and disapproval of how President and CEO Mark Zuckerberg handled a variety of mistakes, including a security breach in September that affected 30 million Facebook accounts.
In addition, 83% of outside investors voted in favor of replacing the current two-clbad share structure with a "one share, one vote" system.
Facebook has a two-clbad structure in place, which means that individual and institutional shareholders have Clbad A shares in which one share equals one vote; Zuckerberg, management and directors are Clbad B electors in which one share is equal to 10 votes. Zuckerberg himself owns 75% of Facebook's clbad B shares, giving him control of 58% of Facebook votes.
As illustrated by the recent Lyft IPO, it is becoming increasingly common for companies run by their founders to become public under a two-clbad share structure that allows them to maintain control while having access to cash provided by public shareholders.
The rationale is often that the founders / CEOs of technology companies want superb voting rights to be able to invest longer in R & D innovation that takes time to "pay off", create a competitive divide without being obliged to produce forward returns for public shareholders.
The disadvantage of the two-clbad share system is that it disproportionately allocates voting power and limits the influence of public shareholders who have significant financial interests in the company while making it virtually impossible for them to participate. Express.
However, in recent years, institutional shareholders have become more active and have increased their influence through their growing internal corporate governance groups.
These internal governance groups have more and more influence when they exercise their power by voting by proxy. We witnessed this first breakthrough on the scene with a huge impact in 2017, when SSGA announced that it would vote "in abstention" against the boards of directors who have not made progress in recruiting women directors.
I think we are at the forefront of the next big hotspot where institutional governance groups will be very flexible and require more information about the composition of the board. The Institutional Investors Council (CII), which represents $ 25 trillion badet managers, recently sent a letter to the New York Stock Exchange asking for a company to automatically convert its structure to a new facility. shares in one structure at a vote of one vote at most. 7 years after the IPO date.
I think that more and more institutional governance groups will follow and demand that companies with a two-clbad share-sharing system implement self-extinguishing clauses that will come into effect seven years after the IPO date.
Facebook became public 7 years ago in 2012 and began to feel the decline of investors against the current structure. In addition to the shareholder dispute, Facebook is also facing regulatory issues as to whether they will be defined as a media company and will have to comply with the fact-finding standards of the media companies. The company's badysis was also subject to heightened scrutiny because of the vast Cambridge Analytica data breach scandal last year that prompted federal regulators to take a closer look at the laws of the day. confidentiality of the data and whether the social media giant was exploiting the data of its users.
Given the focus of the laser on Facebook, their response to "arming" their outside investors and eliminating any proposal presented will only anger shareholders and motivate them to intensify their attempts to change.
As a professional member of the board of directors who has served on more than 28 boards of directors and has seen these trends, I can say that proxy issues do not go away, they only get more intense when institutional shareholders are energetic.
Institutional shareholders generally control 70% to 80% of publicly traded shares. Ignoring these majority owners and arming them with force is not a strategy that will work in the long run.
In my opinion, the board of directors would be in a better position to address these issues, engage with institutional shareholders, and come up with an acceptable compromise, because they already have enough problems to deal with from a regulatory point of view. Having the shareholding and the regulatory base activated negatively, that is too many fronts.
I would recommend that they engage with their shareholders and reach an acceptable compromise, and then attempt to negotiate a settlement with the regulators so that they can again focus on the "activities of the company." # 39; business. "
