On May 29, almost 60% of non-insider Meta Platforms Inc. (META) shareholders voted to give the board’s Lead Independent Director the additional power to add items to the company’s board meeting agendas even if the CEO, Mark Zuckerberg, objects.
However, under Meta’s dual-class share structure, the proposal did not pass because, well, Mark Zuckerberg objected.
The proposal may seem like a small and fairly obvious amendment to the board’s powers, but it would have been a significant reform – it would mean that even in a situation where one man is the CEO, board chair, and controlling shareholder in the company, the board could still exercise some independence in deciding what gets its attention.
Absent that simple, practical power, the board only gets to discuss what the CEO/chair decides it should discuss – a far cry from independent corporate governance.
That a majority of independent shareholders supported the shareholder resolution (filed by SHARE and the United Church of Canada Pension Plan) shows that even with a company that we know is controlled by one man, who holds outsized influence due to the company’s dual-class share structure, independent shareholders are still eager to see some checks and balances on management’s power.
Based on the vote results, we will continue discussions with Meta’s board to propose next steps.
Mitigating the downsides of concentrated control
Mark Zuckerberg’s dual-class shareholdings give him approximately 58% of Facebook’s voting shares while holding only 14% of the economic interest. His additional position as both CEO and board chair means there are few independent controls on management at the company.
While on the one hand that kind of control can allow a company’s management to operate without being vulnerable to some of the short-termism promoted by certain market actors, and can provide space for significant investments in research, experimentation and innovation with longer-term payoff cycles, it also leaves a company’s shareholders vulnerable to management whims and little recourse if at any future point management drifts, loses focus, or fails to deliver.
The current arrangement in which the Lead Independent Director and the CEO/chair agree on the board’s agenda is reportedly collegial and working for both. But the best governance structures are always those set up before a conflict makes them necessary, not in hindsight, after a crisis exposes the gaps in the current model.
SHARE’s work to support independent board oversight at Meta are an effort to counterbalance potential downsides even while the company’s dual-class share structure persists.
