At Facebook, public funds join push to remove Zuckerberg
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[October 18, 2018]
By Arjun Panchadar and Ross Kerber
(Reuters) - Four major U.S. public funds
that hold shares in Facebook Inc on Wednesday proposed removing Chief
Executive Officer Mark Zuckerberg as chairman following several
high-profile scandals and said they hoped to gain backing from larger
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 seeking an independent chair was defeated
in 2017 at Facebook, where 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 way 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," Magaziner said in a
A Facebook spokeswoman declined to comment.
At least three of the four public funds supported the 2017 resolution as
well. The current proposal, meant for Facebook's annual shareholder
meeting in May 2019, asks the board to create an independent board chair
to improve oversight, a common practice at other companies.
It cites controversies that have hurt the reputation of the world's
largest social media network, including the unauthorized sharing of user
information, the proliferation of fake news, and foreign meddling in
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 company.
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 closed 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.
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Facebook's founder and CEO Mark Zuckerberg speaks at the Viva Tech
start-up and technology summit in Paris, France, May 24, 2018.
REUTERS/Charles Platiau/File Photo
The 2017 resolution received the support of a slim majority of outside
investors, according to the public fund leaders' calculations. Magaziner and
Frerichs said they planned to talk with larger Facebook investors in coming
months to seek 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
American Funds representatives did not reply to requests for comment on
Wednesday. Spokespeople for Fidelity and Vanguard declined to 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
Zuckerberg has about 60 percent voting rights, according to a company filing in
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 held 38,737 shares and the Illinois Treasury owned
190,712 shares as of August. Rhode Island funds hold 168,230 Facebook shares, a
(Reporting by Arjun Panchadar and Munsif Vengattil in Bengaluru and Ross Kerber;
Editing by Sriraj Kalluvila and Rosalba O'Brien)
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