Mark Zuckerberg is both the CEO and Chairman of the Board at Facebook and because of his 60 percent voting power, he is, for all intents and purposes, accountable only to himself. Corporate governance experts and the Council of Institutional Investors have argued for years that an independent chair is vastly superior because that person is free of conflicts created by a chair who can excessively influence the rest of the board and its agenda. An independent chair is better able to monitor the management of the company on behalf of its shareholders and we see the structure virtually everywhere. For example, the percentage of S&P 500 companies with a unified CEO/chairman is at a decadal low of 45.6 percent. Leading technology companies like Apple, Alphabet, Autodesk, Microsoft and Intel all have independent chairmen.
The need for an independent chair at Facebook is especially pressing. Communities around the world have never quite experienced anything comparable to Facebook and it’s WhatsApp and Instagram products. For the estimated 2 billion members of the Facebook “community,” its products have been both empowering and overwhelming—at their best helping to make connections that strengthen personal ties and communities, but at their worst they have painful, anti-social, and sometimes deadly results. Russian meddling in U.S. elections; the proliferation of fake news; propagation of violence in Myanmar, India and South Sudan; as well as contributing to depression and other mental health issues, including stress and addiction are a few well know examples of these social harms.
Then there are privacy and profiling questions such as allegations of allowing advertisers to exclude black, Hispanic and other “ethnic affinities” from seeing ads; sharing the personal data of 87 million users with Cambridge Analytica; and data sharing with device manufacturers. In short, while offering some genuinely useful services, Facebook’s products and behavior have far outstripped our ability to understand what they are doing and have challenged our ability to build guardrails against negative social impacts.
To address this multitude of challenges, there will need to be many solutions, but one of them is to have an independent board chair. Which is why Trillium and more than a dozen other investors—the New York State Comptroller; the treasurers of Illinois, Rhode Island, Connecticut, Oregon, and Pennsylvania; Zevin Asset Management; Azzad Asset Management; Dana Investment Advisors; The Sustainability Group; As You Sow Foundation; the Benedictine Sisters of Mount St. Scholastica; Benedictine Sisters, Sacred Heart Monastery; Congregation of Divine Providence - San Antonio, Texas; Grand Rapids Dominicans; Providence Trust’ and Sisters of the Holy Names of Jesus and Mary, US Ontario Province—have filed a shareholder proposal asking for an independent board chair.
The proposal discusses governance and social arguments that favor an independent board chair and concludes with an apology made by Mark Zuckerberg countless times, “We didn’t take a broad enough view of our responsibility.” We completely agree. This broader view is exactly what an independent board chair can provide and would benefit the company, its shareholders, its employees, its global community of users and democracy.
This is not a recommendation to buy or sell any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. The specific securities were selected on an objective basis and do not represent all of the securities purchased, sold or recommended for advisory clients.