He just has more than 50% voting rights, which should never have been allowed, and should be one of the things that SEC should look at if/when any kind of antitrust probe is done. It leads to deviant behavior by public companies.
Edit:
Some people below are looking at it below from a purely investor standpoint.
I'm not an investor in FB and own no stocks.
I'm looking at the behavior of FB which IMHO is purely due to Zuck, him being unethical (as someone else has also called out below) and the fact that he has unchecked power in how he is running FB. Like in a Government, the Board is supposed to provide the checks and balances in a public company. Unfortunately, due to the voting structure the Board of FB is 100% impotent.
This administration seems to want to go after tech. If you’re a large Facebook investor, encourage them. You’re going to lose some value, but less than if you leave Mark in charge.
We're not Jedi.
If we want things to change, we have to change the actual laws. Expecting lawyers to find some violation under current law is fanciful in the extreme.
There's always the option of putting your money where your mouth is. If you're saying a dual class structure is bad, and not in the interest of shareholders or companies? I mean, well, you should be willing to put your money behind that assertion. It should be to your benefit because the implication is that not investing in companies with dual class structures should be more profitable over time.
That said, these voters should try to change the SEC guidelines, no use hating the player, change the game.
I mean, did people not read the prospectus? What, exactly, did they think "dual class" meant? These people should consider divesting, because I'm not certain that they studied their investment target closely enough to wargame out different possible outcomes prior to throwing money at FB.
This vote was proposed by Trillium Asset Management, an activist investment group. They hold $7M of Facebook stock, and the group they lead to bring the ouster vote appear to control around $3B. These are people who knew what they were investing in, and decided to bring this vote to put pressure on Facebook, not in a deluded hope that it would pass. What's more, a bunch of the outside investors seem to want more leverage without wanting Zuckerberg out - there's a 15-point gap between "voted for a new chair" and "voted to end dual class stock".
More broadly, this is just a round of the kind of corporate advertising via news that PG called the 'submarine' (http://www.paulgraham.com/submarine.html). Trillium called a vote that couldn't pass, and was on hand to provide a pithy closing quote to Business Insider's reporter. BoingBoing is running the story with a narrative of fighting the evil tech billionaires, never mind that Doctorow normally hates the idea of companies "disciplined by shareholder choices". Meanwhile, Trillium's website posted the story "Trillium's Ongoing Pressure on Facebook Governance in the News" - this is a conscious and apparently quite effective effort to create a "Zuckerberg ignores his shareholders" narrative.
My point is that the prospectus "...is a conscious and apparently quite effective effort to create a 'Zuckerberg ignores his shareholders' narrative..."
It's quite literally, publicly stated company policy in this regard.
Everyone who bought in knew, or should have known, that Zuckerberg had the power to ignore their votes. But in principle, that could have been limited to fending off raiders, mergers, or other harmful initiatives. By repeatedly demanding an executive chair to provide oversight, Trillium stresses the idea that Zuckerberg is using his majority vote to defend irresponsible leadership.
Will anything actually come of it? Probably not, but if FTC or SEC pressure amounts to something real it might position them better to gain influence over the company.
About the only thing this fuss does is manipulate Facebook's share price.
Of course, everyone wants a bigger piece of the pie, so they can try to bring even more political pressure on Zuck.
From my experience, having majority shareholders don't lead to "deviant behavior" any more than companies with no majority shareholder. In fact, one could argue that many of the ugly collective action problems facing the world today stem from organizations in which nobody has the power to veto unethical policies.
I think the problem here is that Zuck can veto. I think it's that Zuck is unethical.
You can take financial resources of the public or you can have veto power. If you have both, you’re not a “Public Company” anymore and your stocks should be immediately delisted from public markets.
Given the fact that what happens appears to be us going after tech firms under current law, I wouldn't hold out much hope for needed changes in the legal environment. For some reason, (money), people just don't want to do that.
Arguably, they are the ones most affected with the most to lose. A salaried employee with no stock options likely depends more on their continued paycheck and the continued success of the company than any large shareholder or even the class of employees who hold stock.
Their vote should count MORE than the board.
I understand why this isn't practicable. Those who have large investments have a large incentive to educate themselves on how the market works and how corporate governance will impact overall success for the company.
Sometimes hard and unpopular decisions are necessary in order to keep the company profitable.
I do, however, see real value in having input from a sector that's focused more on long term success than short term profits.
The question is, how well can you sell it and whether the conditions are otherwise acceptable.
Your landlord, most of the time (i.e. when they're not repairing or maintaining their properties), is not trading money for time; they are charging you for access to materials which, moment to moment, costs them nothing.
Patent trolls make money without trading away their time -- you work to pay for access to an idea, which costs them nothing to maintain.
One could go on and on with examples of widespread rent-seeking fields of work and industry; but in general, no, it isn't literally everyone who trades time for money.
The media, of course, isn't owned by workers, and so rampant character assassination is par for the course for anybody who moots ideas like this ("czech spy", "arch brexiteer", "anti-semite", "terrorist sympathizer", etc.).
I agree with others. It was well known that Facebook was exclusively controlled by zuck when it went public, and that wouldn’t change. I think the only recourse is to lobby the sec to prevent it from happening in future IPOs.
And that what matters in this case. The knew what they're buying, it was a huge debate about it in the media too. All was legal and was disclosed. Personally I would not buy stock in a company structured this way, but if I did, I would not have a right to complain.
It is the expectation of action missing.
the worth of shares in the hands of the investors is highly dependent on Zuckerberg being at the helm & maintaining Facebook on the course.
If they ousted Zuckerberg, or curtailed his power to make decisions, the shares' worth would enter a slow, but inevitably terminal, decline.
Side note, I disagree with, and condemn Facebook's certain practices. The above post is only to indicate the company as a whole is a highly efficient money making machine.
I’d say that for all practical purposes he controls it (but not owns).
Good thing too. Facebook wouldn’t be the same without Zuck.
S&P refuses to add companies with dual-class stock to the S&P 500 or other benchmarks they control (Facebook was grandfathered in).
But I try to invest my 401(k) according to what I understand of academic research, and they never mention the importance of avoiding dual-class stock ( https://web.stanford.edu/~wfsharpe/art/active/active.htm ). I understand that some people have personal crusades about this or other questions of corporate governance; but those are their crusades, not mine, and they aren’t responsible for my financial well-being.
I haven’t seen this be true any more than public companies where stocks are directly equal to voting rights. Why would it be any different?
It is a public company in label only. This is a psuedo-public company as long as a single individual owns/controls the company.
What if Zuckerberg declares a new mandate for Facebook; something legal but manifestly harmful to the company. Say he decides, "let's shut down ALL advertising and sell ALL of our work computers for a penny and make everyone take turns doing their job on a single PDP-8 located in Siberia." Is there any recourse for all the investors/stockholders other than scrambling to sell ASAP?
Or put another way, is Zuckerberg legally allowed to run the company into the ground if he felt like it?
It depends on how he runs the company into the ground, and his state of mind while doing it.
A CEO has a fiduciary duty to the shareholders - The CEO is supposed to act in a way he believes benefits the shareholders.
They also have duties of Care -
They must evaluate business decisions and agreements after taking into consideration information and input from shareholders/board/experts/employees etc
Loyalty -
They must act in the interests of the company and it's shareholders, putting this above decisions about their personal finances or outcome
and Disclosure -
They must inform the board and shareholders about challenges facing the company, or issues the company is having.
----------
That said... There's serious protection for the CEO in the "Business judgement rule" which says that as long as the CEO Fulfilled the above duties and acted openly and honestly - He's protected from any liability if the company loses money based on decisions he makes.
So if Zuckerberg stated: "I will kill Facebook by intentionally making terrible decisions" then no - he's not allowed to do that at all, and will likely face many shareholder lawsuits.
To the shareholders or to the majority of the shareholders? If the latter, he can literally do whatever he wants (as he's the majority shareholder).
Kalanick also had a voting supermajority. Granted, Uber was unprofitable while Facebook is anything but.
But if the fines and investigations and antitrust actions steam along, and shareholder lawsuits pile up, Zuckerberg’s position of strength could change.
TL; DR This was a showboat vote. Not only did it have zero chance of passing, it’s also not binding. But few leaders survive a consistently-antagonistic independent minority.
No, but it would be a very good idea. Facebook insiders repeatedly have stressed that Zuck isn't a very good CEO, and that he really is much more fit for a CPO type role. That he apparently refuses to listen only reinforces the validity of this feedback in my mind.
Lots of securities laws, particularly those relating to corporate governance, rely on private enforcement. The lack of SEC action in no way clears Zuckerberg.
its called fiduciary responsibility
Similar to how people speculate that Brexit was only voted in because nobody thought the vote would pass- it was a protest vote.
To take your example, only people that oppose the result of the Brexit vote suggest that voters didn't really mean what they voted; it's just a way to apply favourable spin to an unfavourable outcome.
But that doesn’t matter after the vote.
The fascinating thing about Brexit was that the “people’s will” that was interpreted into the vote shifted its shape gradually over the months and years into whatever seemed to it the agenda that moment.
Democracy is fundamentally about consensus, and the longer a decision affects the future, the more consensus there should be.
In the Brexit process the most consens everybody could get was what 54%? And that 54% was gained on fraud and turned out to be split into fundamentally opposed directions.
There was never consensus in Brexit.
I agree that the "people's will" talk is quite silly. Democratic support is notoriously fickle and claiming to represent a single coherent national will is disingenuous; but so is trying to reinterpret a vote after the fact.
On matters such as these it is important not to let personal opinion cloud our perception. The brexit vote had a single question on the ballot and resulted in a clear majority (over a million vote difference). Both with this and the Facebook vote, we must be cautious before ascribing ulterior motives to voters.
I didn't imply consensus was strictly necessary for a decision. But if you have a legally non-binding vote, isn't it's purpose to show which option has the favour of the people rather than beeing interpreted as a legally binding majority. The bigger the majority and the higher the voter turnout the more you can speak of a consensus.
If you vote on something that might change the course of a whole nation over the next decades, a small lead with no real or realistic plan should not be basis for any decision. If you had a 51.9% vs 48.1% result when asking for the color of a bikeshed you wouldn't even call it a clear result then. You probably would argue on and vote again in order to avoid social conflicts. Especially when it turns out that one side used illegal methods in the runup to the bikeshed elections and all the people who use bikes are out on a bike tour for the last weeks weren't allowed to vote.
This is a silly example, but it explains precisely the mess the UK got itself into since the 2016 referendum. The majority was in fact so thin that demographic change alone (old people dying and young people becoming old enough to vote) would have swayed it in January of 2019¹. However if I were thrown into the debate without prior knowledge I would have asumed a majority of at least 75% for Leave based on the words of the prime minister alone.
> Democratic support is notoriously fickle and claiming to represent a single coherent national will is disingenuous; but so is trying to reinterpret a vote after the fact.
The basis of any democracy is a informed vote. The Brexit referendum can easily discribed as a misinformed vote: think about Cambridge Analytica², Russian Interference with the election³, the unlawful campaigning on the Leave side⁴ and the right out lies like the 350 million pounds that UK has to pay to the EU every week – a lie by the way, that forces Boris Johnson to court right now⁵.
English is not my first language, I have no ties to the UK and don't live there. I have no skin in the game and IMO they should be able to leave the EU if they please. But as someone who cares about democratic and humanist values, I also hate to see how undemocratic the whole process was. Essentially rich guys who own the tabloid media spreading lies about the EU for decades⁶ and then as soon as the vote is done they think loud about abolishing human rights⁷.
So in the beginning everybody voted for 350 million pounds on the side of a bus, and now they claim everybody voted for No-Deal all along. Ah and the money for the NHS... well it seems like they have just forgot they ever promised that.
The problem here was that there was no real majority for anything – they said "Leave means Leave" when in fact it meant at least 3 mutually exclusive things depending on which one you asked.
Imagine a cocktail party on a yacht. For some reason all passengers decide to vote whether they want to end the whole party. The leaving side has a majority because someone claimed you can stay on the yacht and be out of the yacht at the same time. But the ones that voted to leave are split in thre major plans:
1. those who want to go on land for a smoke and occasionally go back onto the yacht
2. those who want to go to a harbor and cancel the yacht trip
3. those who want to set the yacht on fire and crash it into an iceberg after throwing out the safety wests (but secretly keeping some for themselves).
Of course you can say they all essentially want to leave the yacht, but there is no consensus between the three and no way on earth to make them all happen at once, because they are incompatible with each other. This is how I perceived the Brexit leave side: there was never any coherent plan and literally nobody voted on the same idea. That is why claiming there was a plan and claiming it was clear to everybody all along is a lie and boils down to
> trying to reinterpret a vote after the fact
If this was a clear vote, UK would have been out a while ago. But it wasn't and acting as if it was will only divide the nation further.
¹: https://www.independent.co.uk/voices/final-say-remain-leave-...
²: https://en.wikipedia.org/wiki/Cambridge_Analytica#United_Kin...
³: https://en.wikipedia.org/wiki/Russian_interference_in_the_20...
⁴: https://en.wikipedia.org/wiki/Unlawful_campaigning_in_the_20...
⁵: https://www.theguardian.com/politics/2019/may/29/boris-johns...
⁶: https://www.nytimes.com/2017/05/02/world/europe/london-tablo...
⁷: https://www.independent.co.uk/news/uk/politics/theresa-may-h...
Also consider that people on all sides of large democratic votes have complex motives. It is just as likely that people who voted remain wished to "send a message", or were "tricked" by PR, or "didn't understand" the implications.
This is my point about trying to reinterpret the meaning of a vote after the fact; it is always tainted with the bias of the person doing the interpretation.
There were some very minor aspects where I could follow, but let’s not fool ourselves here: most people rationalized their feelings here. And the feeling was that the EU is somehow at fault for all things that went wrong within that austerity ridden nation and that only if they get rid of all that outside influence, the UK will become great again.
This is totally a position you can hold, and I can understand how one gets there — but it is not a rational one. In the 70s the UK were the poor man of Europe — Thatcher had a reason for wanting to join and the nation profited immensly in economic terms.
One could discuss whether some nostalgic values of britishness got lost (like every nation’s identity morphed into something else due to globalization), and how leaving the EU could be a start of the hermetic journey of restoring that identity. I don’t believe it can come back — if that is one’s reason to vote Leave, I understand it — but again one cannot claim it is rational. National Identites change constantly, and in a globalized world ever faster so. Befoming isolationist like North Korea could be some sort of solution, but the cost is a little bit high.
On the topic of the referendum my argument was:
- it wasn’t legally binding so it wasn’t meant to be taken as a winner-takes-it-all-vote
- because the public opinion on the issue was nearly halfway split, this meant there could be no extreme solution without splitting the nation socially
- therefore uttering extreme plans on both sides, as well as misrepresentations of some imaginary unified will of the people were simply unforgivable
- the result is a lack of consensus, that splits the nation
And this lack of consensus isn’t there because the one side misinterpreted the vote in the one and the other side into the other direction. This lack of consensus is there simply because there is no real consensus in the public and in the referendum result.
When 5 people in a pub want to leave while 5 other people want to stay, there is not a steong consensus about the further actions in this pub. 6 versus 4 would be much stronger already.
For Brexit, maybe. It was at least a mass vote with an uncertain outcome. But this was a vote which was literally guaranteed to fail - the one thing which can't explain it is the 'normal' pattern where people vote for a result to get that result. It's like watching Congress pass a bill that the President has promised to veto, knowing they can't override the veto. It has to be tactical voting, simply because it can't be anything else.
More concretely, there were two votes happening today - to oust Zuckerberg as chairman, and to end dual class stock. It was common knowledge that both were doomed, so all we can do is see what they suggested. 68% of outside investors supported the ouster, so we see a 17 point rise in the show of no-confidence from the same vote last year. Meanwhile 83% supported ending dual class stock, suggesting a 15-point spread of investors arguing they want more of a say, but are showing confidence in Zuckerberg's chairmanship. Questioning whether those 68% actually want Zuckerberg gone seems entirely fair, because taking the vote at face value would imply they're acting like King Canute, and didn't even understand what they were investing in.
I think the better headline here might have been "percentage of outside investors voting against Zuckerberg rises 17 points". You're exactly right - it's a show of no confidence, but hardly a guarantee that these voters actually want him removed.
The metric to apply here is a moral one, and that's the one where Zuckerberg both fails to justify himself and fails to rise to minimum expectations of duty and obligation. It's also the metric that most people are applying in this situation.