In the past few years, calls to oust Mark Zuckerberg as chairman at Facebook’s (NASDAQ:FB) annual shareholder meetings have become a ritual.
Besides insisting on the separation of the CEO and chairman’s position, independent shareholders have demanded the abolishment of the dual-class share structure. Facebook’s Class A shares that ordinary investors hold currently amount to 2.41 billion.
Meanwhile, Zuckerberg controls 88.1% of Class B shares. Each Class B share has 10 votes while Class A shares only possess one vote. Despite not being as many, Class B shares have a combined voting power of nearly 4 billion. Insiders can thus overrule ordinary investors every time even if the latter vote as a bloc.
The governance reform proposals were made to enhance shareholder value. So far they have been rejected. Despite the immense power he wields already, Zuckerberg is not taking any chances and has recently taken measures to ensure that the status quo remains.
Earlier this week, Facebook appointed Dropbox (NASDAQ:DBX) co-founder and CEO Drew Houston to its board. On various occasions, Houston has described Zuckerberg as a “close friend.” The Facebook CEO also mentored Houston. Given the choice of acting in the interests of independent shareholders or his buddy, it’s obvious whose interests will be sacrificed.
This isn’t the first piece of evidence that Zuckerberg is keen on building a firewall around him by only appointing loyalists. Last year, Facebook named Peggy Alford to its board. She formerly served the former chief financial officer of the philanthropic organization Zuckerberg and his wife founded – the Chan Zuckerberg Initiative.
Other directors at Facebook such as Peter Thiel, Sheryl Sandberg and Marc Andreessen are also seen as Zuck loyalists if their actions and support of Zuckerberg are anything to go by.
At the same time, independent-minded directors have left as loyalists have joined. Netflix founder and CEO Reed Hastings was no yes-man, and he left the board in 2019 .
Other actions that Zuckerberg has taken to ensure there’s no threat to his reign at Facebook are more subtle. Last October Facebook’s lead independent director of four years Dr. Susan Desmond-Hellmann resigned from the board to focus on her duties as the CEO of the Bill and Melinda Gates Foundation. Since then, the position has remained vacant.
The role of the lead independent director is critical, especially as pertains to pushing shareholder interests.
Notably, just last year, independent shareholders led by New York City Comptroller Scott Stringer urged Desmond-Hellmann to investigate whether
governance arrangements have contributed to the development of Facebook’s corporate culture, inadequate responses to significant problems and failure to recognize increased responsibilities to stakeholders.
In response, Facebook stated that its audit committee had been beefed up. It’s likely the lead independent director’s seat will only be filled after an amenable candidate has been found. This is likely to put more power in Zuckerberg’s hands as consolidation continues.