Major Institutional Investors Say Zuckerberg’s ‘Totalitarian Grip’ on Facebook Must End

A group of major institutional investors, assembled in a spate of shareholder activism, is calling for Facebook to appoint an independent board chair, a position currently held by Mark Zuckerberg, who also serves as CEO.

“There is no check-and-balance at Facebook without an independent board chair—and Mark Zuckerberg’s totalitarian grip as both CEO and Board Chair must end,” said New York City Comptroller Scott M. Stringer, one of the co-filers. “Facebook’s unrelenting turmoil shows why independence and accountability matter—and why power should not be consolidated around one person. Outside shareholders have sounded the alarm on the need for real oversight and governance reforms, and it’s time for Facebook to listen.”

The group is comprised in part by the New York State Comptroller’s Office, Illinois State Treasury, Rhode Island Treasury, Connecticut Treasury, Vanguard, BlackRock, MFS, AllianceBernstein, American Funds, BNY Mellon, Goldman Sachs, John Hancock, JPMorgan, Putnam, and State Street.

The group sought an independent board chairman in its 2019 shareholder proposal. It released evidence revealing mutual funds joined the supermajority (68%) of Facebook’s outside shareholders who voted against management’s opposition of an independent board chair.

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Zuckerberg’s ownership of about 60% of the company’s voting shares would leave him with full control of the business no matter what happens at its governance level.

Environmental, social, and governance (ESG)-conscious investors used to flock towards technology firms, given their relatively low greenhouse gas emissions, but focused power at the top has struck governance concerns such as this, said Robert Eccles, visiting professor of management practice at Oxford University’s Saïd Business School.

The group claimed that mounting evidence asserts having someone as chair and CEO is “deeply problematic.” It pointed to PwC’s 2019 annual director survey, in which 57% of directors who sit on a board with a unified chair/CEO reported it is difficult to voice dissent.

A number of investors voted to keep Facebook’s governance structure the way it is. Those investors included Morgan Stanley, T. Rowe Price, Fidelity Investments, Dimensional Funds, Neuberger Berman, Schwab, Invesco, and Legg Mason.

There’s currently a lawsuit that the California State Teachers’ Retirement System (CalSTRS) recently joined that’s seeking to reform Facebook’s governance, allowing it to “protect Facebook’s profitability.”

“We believe that Facebook’s lack of an independent board Chair, along with inadequate board governance, has contributed to the mishandling of several ongoing controversies,” said Rhode Island General Treasurer Seth Magaziner. “Adopting an independent board chair structure will help diversify Facebook’s leadership and could help the company begin to re-build trust by incorporating additional accountability mechanisms into its governance structure.”

Facebook to Pay $5.1 Billion to FTC, SEC over Privacy, Data Violations

Investment Beliefs: Governance Bedrock for Investment Committees

Tags: Facebook, Governance, New York, Scott M. Stringer, Shareholder Activism, Zuckerberg

Would a President Elizabeth Warren really spell the stock market’s doom? To hear some prominent Wall Streeters tell it, her left-leaning ways would send equities plummeting by double-digits.

Aside from the fact that we’ve heard such dire pronouncements before—in relation to Barack Obama and Donald Trump, for instance—Bernstein Research is skeptical. “Would Warren crush the equity market?” asked Philipp Carlsson-Szlezak, Bernstein’s chief US economist, and Paul Swartz, its macro strategist, in a research note. “Not so fast.”

Should the economy continue its present growth course, the notion that the Democratic senator from Massachusetts could single-handedly induce a bear market is a stretch, they reasoned. For political news to make the market falter, they argued, would constitute a “very high bar.”

Many of the American people simply don’t focus on a presidential contest for much of the election cycle, they pointed out—and the same goes for investors. “There is a powerful pattern of markets ignoring presidential contests for most of the year,” the Bernstein strategists wrote. They then start paying attention during the last six weeks of the race.

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The Bernstein researchers noted that there were only two examples of the market slumping in a presidential election year without a recession: in 1940, when the Nazis were overrunning Europe, and in 2000, as the air was going out of the dot-com boom. In those cases, the market was worried about the prospect of the US entering World War II and about the tech-fueled economy coming to an end.

“While Warren’s policy agenda is controversial,” they wrote, “we’re reluctant to equate it with such secular shocks—even if her policy proposals in such areas as health care, energy, and taxation represent obvious obstacles for investors.”

Warren’s proposals, like Medicare for All, elicit gloomy views from the likes of hedge fund manager Paul Tudor Jones and fellow hedger Leon Cooperman. Jones has said the S&P 500 would drop a bear-market-inducting 25% if Warren won. Cooperman agreed on the 25% dip. Their views are reminiscent of past such fears. Wall Street was similarly leery of Obama and Trump victories but proved to be dead wrong when stocks soared under both presidents. Indeed, the S&P 500 slid 5% right after Trump’s 2016 win, but then headed upward.