Activist hedge fund Trillium Asset Management ($2.5 billion) is encouraging Facebook shareholders to vote in favor of a recent proposal calling for the creation of a risk oversight board to govern the social media giant after its poor handling of recent controversies.
In a Tuesday letter to fellow owners, Trillium cited the “sheer volume, magnitude, and frequency” of controversies as the main reason for Facebook to “institutionalize stronger risk oversight mechanisms,” calling the company’s current method of solving issues an insufficient “whack-a-mole approach.”
In addition to the lack of necessary focus Facebook’s governance policies may have, Trillium said the social media entity can learn from Microsoft’s past dealings with public and government issues and adopt a similar structure to Microsoft’s four governance committees, implemented sometime after co-founder Bill Gates’ 1998 Congressional testimony, which bears some similarities to CEO Mark Zuckerberg’s case.
Facebook’s most recent cause for alarm was the March reveal of unauthorized pillaging of personal information by political data firm Cambridge Analytica. Facebook has also been the target of scrutiny over its actions regarding Russia’s alleged meddling in the 2016 US presidential election as well as proliferating the spread of “fake news,” censorship in China, and various other claims addressed in Trillium’s letter.
Last week, Zuckerberg testified before Congress about the Cambridge data raid and other growing concerns regarding the social media platform, answering more than 500 questions.
In response to the risk oversight criticisms, Facebook said in a proxy statement that its current approach to risk oversight “ensures that we identify, evaluate, and address our unique risks while providing a “big picture” perspective through regular engagement with key members of management and appropriate delegation to our current board committees.”
However, the general public and investors might not be buying what the social media titan is selling as far as oversight goes as a survey by independent research firm the Ponemon Institute reveals that Facebook’s user trust has dropped 66% since the data scandal. Reuters reports that the company has lost roughly $47 billion in market value since the scandal.
Although the hedge fund admitted in its SEC filing that the creation of the board is not the be-all-end-all solution to the problem, it called the move an “important piece of a slate of governance reforms” which includes making changes to the company’s dual-class structure and splitting the roles between chairman of the board and CEO.
With $2.5 billion worth of assets under management, Trillium owns about 73,000 shares of Facebook.
Tags: Facebook, FANG, Governance, Trillium