At Facebook’s annual meeting, Mark Zuckerberg stuck to his talking points — and ignored some of shareholders’ biggest concerns (FB)

May 31, 2018 at 02:42PM
via Business Insider

WASHINGTON, DC - APRIL 11: Facebook co-founder, Chairman and CEO Mark Zuckerberg smiles at the conclusion of his testimony before the House Energy and Commerce Committee in the Rayburn House Office Building on Capitol Hill April 11, 2018 in Washington, DC. This is the second day of testimony before Congress by Zuckerberg, 33, after it was reported that 87 million Facebook users had their personal information harvested by Cambridge Analytica, a British political consulting firm linked to the Trump campaign. (Photo by Chip Somodevilla/Getty Images)Chip Somodevilla/Getty Images

  • At Facebook's annual meeting, company officials faced criticism from investors and a slew of shareholder proposals urging reforms.
  • Addressing concerns about the abuse of Facebook's service, CEO Mark Zuckerberg and his team repeated talking points they've previously made to the press or in Congress.
  • Zuckerberg and company ignored pointed concerns about the company's governance, a longstanding thorn in the side of many investors.

A month after Facebook CEO Mark Zuckerberg faced critical questions from members of Congress, he and his team faced another skeptical audience on Thursday, this time in the form of the company's shareholders at its annual meeting.

Shareholders peppered Zuckerberg and his fellow executives and board members with questions about their ability and commitment to identify and delete fake accounts and abusive posts, the lack of diversity among Facebook's executive ranks, and the alleged censorship of conservative voices on its social-networking service.

They also pushed the company to make reforms to its corporate governance, set up a board committee to assess and monitor risks to its business, and issue reports on how it polices content on its site and on the differences between what it pays male and female workers.

One shareholder even interrupted the proceedings early on, wanting to discuss the directors whom the company had nominated for to serve for another year. She reportedly was removed from the meeting.

"We're at a vital impasse for our company," said Christine Jantz, the chief investment officer at NorthStar Asset Management, who spoke up in favor of a proposal that would have given more voting power in the company to regular shareholders at the expense of Zuckerberg. "We are faced right now with a situation for which Facebook clearly does not have the expertise to manage."

Zuckerberg stuck to his talking points

In response to the criticisms, Zuckerberg and his colleagues ignored the concerns about the company's governance and calls for more transparency about its hiring practices. Zuckerberg spent much of his time, instead, going over many of the recent changes Facebook has made and previously announced that attempt to block fake accounts, the spread of propaganda through its site, and posts that violate its rules. But he offered little new, essentially just repeating talking points he's made in press appearances and in his congressional hearings.

"When I think about where are now as company, the big theme that we're focused on is making sure we take a broader view of our responsibility," Zuckerberg said. He continued: "Over the last several years we didn't do enough to be proactive in looking at how people could abuse these tools."

Despite the criticism — and the fact that several of the shareholder proposals were supported by influential proxy advisor Institutional Shareholder Services — there was little risk that anything dramatic would happen at the meeting, beyond the occasional interruption. Zuckerberg controls nearly 60% of the voting power at Facebook, meaning he is able to decide nearly any issue up for a vote essentially by himself. So it was no surprise that Facebook's entire slate of directors was elected and all of the shareholder sponsored proposals were voted down.

Facebook did not immediately release the vote totals, but company officials said they would be published by next week.

Facebook has been reeling from a series of scandals

The shareholder meeting follows a string of scandals at the social-networking company. During the presidential election in 2016, Russian-linked groups reportedly hijacked the site to spread propaganda in an attempt to influence the election. The site has also reportedly been used to spread hate messages and perpetuate the persecution of the Rohingya minority in Myanmar. More recently, Facebook has been caught up in the Cambridge Analytica fiasco, in which the personal data of up to 87 million users was improperly leaked to the Trump-linked data analysis firm.

Chris Wylie London talk Cambridge AnalyticaGetty ImagesZuckerberg acknowledged that the company hadn't focused enough in the past on such issues, but said it was doing so now. Facebook is removing hundreds of millions of fake accounts, now has 20,000 employees reviewing content on its site, and is using artificial intelligence tools to proactively identify posts and people who violate its rules. It is also being more transparent about what it's doing to police content and making it easier for users to see and control the data they have on the site, he said.

Such steps "are going to have a very positive effect on making our service better," he said.

But Facebook isn't going to solely focus on trying to thwart abuse of its service. It's also going to continue to build new features that encourage users to connect with each other, he said.

"We feel a responsibility to keep building the next generation of new experiences to help connect people in meaningful ways," he said.

Zuckerberg's control of Facebook has many investors riled

But many shareholders hoped the company would focus or at least be open to discussing other issues. Facebook's voting structure is a particular bugaboo with many investors. The company has a dual-class stock structure that gives certain insiders with Class B shares — most notably, Zuckerberg — 10 votes per share.

Two years ago, Zuckerberg attempted to create a third class of stock that would have allowed him to maintain control of the company even as he sold off his stake. Facebook abandoned the effort only after shareholders filed suit to try to block it.

One of the shareholder proposals would have urged the company to eliminate the super-voting power accorded to Zuckerberg and other holders of Class B stock. Another proposal would have urged the company to eliminate a bylaw that would required a two-thirds majority to pass certain proposals. That bylaw isn't in effect now, but would be triggered if the voting power of Class B shares ever fell below a majority of the company, thus helping to cement Zuckerberg's power.

Facebook had urged shareholders to vote against the proposals in its proxy statement, but officials declined to address the matter at the meeting.

Another shareholder proposal urged the company to be more transparent about its so-called gender pay gap. Other companies have started to release more details about the difference between what they pay male and female workers. The United Kingdom now requires this disclosure of companies based there, and Facebook's UK branch has released data in accord with that law. But Facebook has declined thus far to release hard data on its gender pay practices.

"Our company is best served by a proactive approach to address this structural bias," said Natasha Lamb, a managing partner at Arjuna Capital.

Facebook official didn't address the pay gap issue, but in a response to a statement from the Rev. Jesse Jackson, Sheryl Sandberg, the company's chief operating officer, did say that Facebook is committed to having more diversity in its ranks. She also announced that when hiring new board members in the future, the company would use the "diverse slate approach," which involves considering at least one candidate from an underrepresented group. Facebook has previously committed to using the diverse slate approach in hiring in other areas of the company.

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