
Powerless investors vote overwhelmingly to oust Mark Zuckerberg as chairman - SirLJ
https://www.businessinsider.com/facebook-investors-vote-to-fire-mark-zuckerberg-as-chairman-2019-6
======
vikramkr
It's his company and his vote, and investors knew what they were buying and
that they were investing in zuck more than they were investing in the company.
Zuck voting this down is entirely within his rights and justified. There is no
obligation to give up power just because others demand it

~~~
yumraj
It's not _his_ company. It's a public company in which he does _not_ own more
than 50% of stocks.

He just has more than 50% voting rights, which should never have been allowed,
and should be one of the things that SEC should look at if/when any kind of
antitrust probe is done. It leads to deviant behavior by _public_ companies.

 _Edit:_

Some people below are looking at it below from a purely investor standpoint.

I'm not an investor in FB and own no stocks.

I'm looking at the behavior of FB which IMHO is purely due to Zuck, him being
_unethical_ (as someone else has also called out below) and the fact that he
has _unchecked_ power in how he is running FB. Like in a Government, the Board
is supposed to provide the checks and balances in a public company.
Unfortunately, due to the voting structure the Board of FB is 100% impotent.

~~~
wbl
Dual share classes have existed for a long time. If people dont like the share
structure they can not invest.

~~~
bilbo0s
This is what I don't understand?

I mean, did people _not_ read the prospectus? What, exactly, did they think
"dual class" meant? These people should consider divesting, because I'm not
certain that they studied their investment target closely enough to wargame
out different possible outcomes prior to throwing money at FB.

~~~
Bartweiss
You're right that this was obvious, but I think the people actually guiding
this vote _did_ read the prospectus. It's just random armchair commentators
who are outraged that this outcome is unfair.

This vote was proposed by Trillium Asset Management, an activist investment
group. They hold $7M of Facebook stock, and the group they lead to bring the
ouster vote appear to control around $3B. These are people who knew what they
were investing in, and decided to bring this vote to put pressure on Facebook,
not in a deluded hope that it would pass. What's more, a bunch of the outside
investors seem to want more leverage _without_ wanting Zuckerberg out -
there's a 15-point gap between "voted for a new chair" and "voted to end dual
class stock".

More broadly, this is just a round of the kind of corporate advertising via
news that PG called the 'submarine'
([http://www.paulgraham.com/submarine.html](http://www.paulgraham.com/submarine.html)).
Trillium called a vote that couldn't pass, and was on hand to provide a pithy
closing quote to _Business Insider 's_ reporter. BoingBoing is running the
story with a narrative of fighting the evil tech billionaires, never mind that
Doctorow normally hates the idea of companies "disciplined by shareholder
choices". Meanwhile, Trillium's website posted the story " _Trillium 's
Ongoing Pressure on Facebook Governance in the News_" \- this is a conscious
and apparently quite effective effort to create a "Zuckerberg ignores his
shareholders" narrative.

~~~
bilbo0s
> _this is a conscious and apparently quite effective effort to create a
> "Zuckerberg ignores his shareholders" narrative..._

My point is that the prospectus "...is a conscious and apparently quite
effective effort to create a 'Zuckerberg ignores his shareholders'
narrative..."

It's quite literally, publicly stated company policy in this regard.

~~~
Bartweiss
I guess the distinction I'm drawing is between _can_ ignore and _does_ ignore.

Everyone who bought in knew, or should have known, that Zuckerberg had the
power to ignore their votes. But in principle, that could have been limited to
fending off raiders, mergers, or other harmful initiatives. By repeatedly
demanding an executive chair to provide oversight, Trillium stresses the idea
that Zuckerberg is using his majority vote to defend irresponsible leadership.

Will anything actually come of it? Probably not, but if FTC or SEC pressure
amounts to something real it might position them better to gain influence over
the company.

~~~
AstralStorm
Why should SEC or FTC pressure anybody? If Facebook fails sure to
irresponsible leadership, so be it. Someone will buy it off. The shareholders
accept that risk and can always divest...

About the only thing this fuss does is manipulate Facebook's share price.

Of course, everyone wants a bigger piece of the pie, so they can try to bring
even more political pressure on Zuck.

------
toyg
You may or may not like his products, but Zuck has proven over and over that
he learnt from the mistakes of previous techpreneurs. Jobs failed to grasp how
public companies work, and was ousted; Zuck made sure this could never, ever
happen to him.

Shareholders have nothing to complain about, the structure was known when they
bought in. If they are not happy, they can sell to people who trust the man
more.

~~~
benj111
"Shareholders have nothing to complain about"

I'm not aware of any global trackers that avoid dual class shares like this,
and I can't very well sell the Facebook bit (I guess I own some somewhere).

I'm from the UK where elections are generally First past the post. In theory I
can vote for whoever I want, in practice there are 2 parties who have a chance
of winning so half the time I end up voting to keep the other one out. Its a
democratic election, but I didn't really have a _choice_.

That's 2 counter examples to your reasoning.

It's like unfair contract terms. Ideally there would be no such thing, a
contract is entered into freely by 2 parties, _nothing_ should be unfair. In
practise you need that protection.

~~~
i_am_proteus
> I can't very well sell the Facebook bit

If you don't know any, you can short it.

~~~
benj111
I'm still an owner though?

Yes my financial exposure would be zero, but I would still be an owner.

I'm also (probably) an owner of facebook, despite having absolutely no say how
it is run, as would be traditional as an owner.

Philosophical discussion aside, it isn't just Facebook that does this, so
there would quite a few different stocks to track, which kind of undermines
the 'stick it in a tracker' idea.

~~~
titanomachy
If you short a company, you are less than an owner. You're an anti-owner. You
owe Facebook stock.

~~~
benj111
If you own facebook shares in a tracker _and_ short Facebook, you are neutral,
from a share price exposure point of view. I am still the beneficial owner of
the shares within the tracker though, it is still hypothetically possible for
me to go to a shareholder meeting and vote with that stock. So although I
don't have any financial stake in Facebook, I do have some benefits of
ownership.

------
tasubotadas
I dunno. They are on this boat by their own will.

If only there would be a way to ditch a company like this their problems could
be solved. A place where you could sell your stake in the company (preferably
on a global scale) and buy a stake in a company which doesn't suffer from such
issues. Something like a marketplace but for stocks.

¯\\_(ツ)_/¯

~~~
TAForObvReasons
Their presence in the S&P 500 ensures that countless people are unaware they
are even on the boat, by din of their retirement exposure

~~~
coryfklein
People that own FB stock by way of a general retirement fund probably aren't
exercising their right to vote on the chairman.

------
htkibar
Whole system was designed so that Facebook did not need to prioritise short
term goals such as stock prices over long term ambitions, no matter how good
or bad those ambitions might be.

System works, apparently.

------
strikelaserclaw
FB need Zuck now more than ever, otherwise it will become a middling company
run by an unimaginative middling corporate "CEO". FB is a potential goldmine,
they have not even made a fraction of the money they are capable of making.
Monetizing instagram, monetizing watsapp, making watsapp the default way to
send money, effectively becoming involved in banking, they could literally
copy wechat and become print money because of the strong network effects fb
has.

~~~
save_ferris
Profits over privacy, over people, over the security of elections. He’s
repeatedly failed to address scandal after scandal of his company.

Scariest of all is that people like you don’t even seem to care. It’s totally
OK to violate privacy, permit foreign actors to undermine elections, as long
you make a ton of money.

~~~
repolfx
He hasn't addressed these scandals because there's nothing to address - the
"scandals" are entirely artificial, whipped up by the same frenzied political
climate that convinced half of America Trump is a Russian spy.

Let's look at Cambridge Analytica?

• Not proven anything they did actually affected anything. The assumption it
did relies on a lot of controversial beliefs about human nature.

• Data was obtained through a middleman who violated his own agreements with
Facebook - an academic who has mysteriously not been held to account for this
behaviour. Somehow it's all Facebook's fault.

• They restricted data access to apps anyway. Not much more they can do beyond
terminate all API access to Facebook data, which would just get them in
trouble of a different kind.

There's nothing more Facebook can do here. Zuck's biggest mistake was not to
go in all guns blazing in defence of the company and adopt a head-hanging _mea
culpa_ type attitude, which allowed his political enemies to frame it as a
scandal when it simply wasn't.

Likewise, "election interference". It's all nonsense. A few hundred thousand
spent on ads for both parties by Russians? A whole lot of innuendo and lies
from the press? Indeed the entire assumption that Russians = Russia = the
Kremlin is absurd to begin with. Zuck should have very forcefully and
bombastically slapped down this kind of talk. He failed to face down the anti-
Trump mob and now the mob failed again to get Trump impeached, they're coming
for him instead.

~~~
lambdadmitry
Of course the CA scandal is real, of only slightly misframed. You can't
accidentally leak data that you don't store and you're unlikely to provide API
access to data you really consider private. Did they manage to expose peoples'
raw passwords? Nope, because they consider it "sensitive" data, unlike
basically everything else. Had they treat social graph as private as
passwords, the CA story would never happen.

------
SuperGent
The man owns the company, or at least 60% of the vote, and can do what he
likes with it. If you don't like it get out or stay out of investing in
Facebook, especially if you think that he will bring down the share price.

~~~
strathmeyer
"Sure, but we'd also like to know what the adults think."

------
Nasrudith
I think this highlights one of the oddities of the current shareholding
investment system and how oddly "broken" it is on several levels. Wall Street
has become infamous for being a horde of locusts seeking short term growth for
one.

Most smaller investors wish for long term growth while being spooked by bad
short term and charmed by short term growth. Most don't engage in voting and
may not even have control of their vote but their broker.

Perhaps some of it is from fundamentally wrong assumptions about division of
management and incentives. Especially given multiple ownership is possible the
assumption shareholders care about the long term health doesn't actually hold.
Voting system may be influenced by older school thinking that it was more like
a country or smaller scale venture.

It is entirely possible for a large vote holder to push for short term
policies and get out on top - and it wouldn't even be misconduct let alone
something enforceable.

I wonder what a better system could look like - and how better would be
defineable for that matter. With another layer in "how could it be
introduced?". Since if it is just a matter of starting your own and proving it
works better that hard task is ironically easy compared to say changing FTC
rules.

~~~
granshaw
Check out the Long Term Stock Exchange

~~~
chumali
The LTSE wants to give startups all the benefits of being public whilst
encouraging long-termism through tenured voting and other gimmicks.

It seems that Zuckerberg has already achieved this however by retaining voting
rights. That hasn't stopped investors from pouring money in to FB.

Why would any founder then decide to list on LTSE rather then just implement a
dual class structure? Perhaps if market conditions were to change, but right
now there appears to be no shortage of investor cash looking for a home.

------
tschellenbach
Pretty sure the stock will spike in the short term and then go on an endless
decline to 0 if they actually manage to kick him out. Most social companies
stumble and fall, Zuck has proven to be insanely talented at seeing the future
trends. Think about their push to be mobile first, the acquisition of
instagram, whatsapp, social login, shift of engagement to groups and chat etc.
They clearly missed the changes in people's perception about privacy over the
last few years, but if the past is any guidance they will probably overcome
that hurdle as well.

------
nknealk
There are a ton of comments suggesting the non-binding vote will not change
behavior. I want to throw some light on the opposite side:

Zuk has a strong incentive to listen to his shareholders even if he doesn't
have to. If he ignores them, shareholders are likely to sell their shares
driving the price down. This (1) reduces Zuk's overall wealth since much of it
is locked up in Facebook equity, (2) reduces the total compensation of many
Facebook employees who receive options or RSUs thereby making retention
harder, (3) makes recruiting engineering talent harder because few people want
to join a sinking ship, and (4) reduces the ability of the company to raise
capital in public markets (unlikely a significant consequence for Facebook as
they throw off a lot of operating cashflow)

So yes, Zuk voted to not fire himself. That doesn't mean he can ignore his
shareholders without consequence.

------
geggam
What is interesting to me is how shareholders seem to kill corporations when
they are allowed to vote the direction of the company.

Direct Democracy ?

~~~
burtonator
One dollar ? one vote?

------
crazygringo
I'm curious why it's even legal to sell shares that don't have equal voting
power. I mean, equal ownership via shares is pretty much the concept of a
public corporation.

Since public corporations are entirely a legal entity (nothing "natural" about
them), and so heavily regulated in so many ways to protect investors...

...what is the rationale the US has for even allowing the concept of shares
that have less/more votes? It changes the ideas of shares as ownership to more
of a kind of financial gambling.

And creates problems like this one, where a majority of ownership thinks a CEO
is performly badly but can't do anything about.

I know investors bought shares voluntarily and knew this in advance... but I
still don't understand why it's even a choice investors are allowed to be
given. How are unequal voting shares good for society in any way at all? It
just seems to allow corporations to get the benefits of raising cash publicly
without the public accountability that should come with it.

------
JackFr
It always annoys me when people liken the stock market to gambling. I
understand how buying a stock, in one sense, may feel like placing a bet. But
in reality it's ownership of an ongoing commercial enterprise and as an owner,
the right to choose and guide management is one of the things that makes it
more than simply a bet.

But Facebook stock? Literally a bet on Zuck.

------
lowdose
People achieving enormous success on the top level can become detached from
our reality. The chief executive of Goldman Sachs Lloyd C. Blankfein said in
an interview (2009) with The Times of London: “We're very important, doing
God's work.”

What is the chance Zuck is living in a simular bubble?

~~~
Bakary
He seems to compare himself to Augustus [0] and to be honest, who could blame
him?

[0] [https://www.newyorker.com/magazine/2018/09/17/can-mark-
zucke...](https://www.newyorker.com/magazine/2018/09/17/can-mark-zuckerberg-
fix-facebook-before-it-breaks-democracy)

------
apo
Yet they fail to put their money where their votes are by simply selling
Facebook shares.

Regardless of what happens with Zuckerberg, Facebook's best days are behind
it. The notion that a change in leadership can right this sinking ship makes
no sense.

~~~
michaelt

      Yet they fail to put their money
      where their votes are by simply
      selling Facebook shares.
    

Wouldn't that imply that no shareholder resolution should ever pass? And
boards shouldn't be accountable to anyone?

~~~
buckminster
It would just mean that nobody would invest in the small number of companies
designed to have an unaccountable board.

------
anigbrowl
Strange to see the writers describe the revolt as being bloody given that the
only bleeding is by the investors banging their heads against a brick wall.
Everyone knew about this share structure when they bought into FB, essentially
choosing to be passengers on Zuckerberg's yacht. Well, they can always sell
their shares if they want off. I'm no fan of Zuckerberg, but investors put
greed ahead of good sense.

------
travisoneill1
People who bought non-voting shares would like their assets converted to
something that has more value? I am shocked!

------
heymijo
Flip this perspective.

Zuckerberg has iron-clad control of FB.

He could unilaterally decide that quarterly profits, hell, any profits, do not
matter and there is nothing anyone could do.

Keep that in mind when it's discussed that FB can't really do anything about
the problems it has spawned because it is part of the financial system and
governed by Wall Street.

No, it is governed by Mark Zuckerberg and he can do whatever he wants. Every
last dark pattern and shady thing they are pushing for with engagement,
ultimately, he and he alone is is responsible for and condones.

Every other CEO on the planet has the "but the quarterly earnings" boogeyman
to fall back on as a scapegoat for their malfeasance. Zuckerberg, due to his
shrewd engineering of stock classes, does not and we should do well to
remember that.

~~~
malloreon
>Every last dark pattern and shady thing they are pushing for with engagement,
ultimately, he and he alone is is responsible for and condones.

This is absolutely 100% FALSE. Every single person who works on those dark and
shady patterns are responsible for their actions. They choose to work for evil
every single day because the money is more important to them.

Why do we give tech employees a moral and ethical pass for the terrible things
they do just because they work for a company?

These engineers don't work with blinders on, they know that every line they
commit is ultimately in service of getting more people addicted, and more
clicks on facebook ads.

Someone above them may tell them to write that code, but they choose to write
each line when they could be working somewhere else. Last I heard, facebook
hires supposedly intelligent people, I daresay they'd be able to to get a job
elsewhere.

They choose not to.

~~~
5trokerac3
The last thing I am is a FB apologist, but your statement belies a lack of
understanding of how large tech organizations work.

The development process at a company the size of FB is so fragmented that the
number of people who actually have a full view of the sum ethics of the
platform generally reside at the Director level or higher.

Does the engineer who maintains the code for tagging photos with facial
recognition know anything about what happens to that data after? Does the
person who works on content filtering algorithms know what language rules
another person is going to put into them? Does the person working on
optimizing databases know who's been given carte blanche access to that data
via APIs?

To use an extreme comparison, there's a reason the entire German army wasn't
hung at Nuremberg.

~~~
y4mi
so, the developers get executed if they refuse to work for facebook and quit?

thats the actual reason why soldiers were spared in Nürnberg: because a lot of
the army didn't actually have a choice. It was death or collaboration for
them.

~~~
hindsightRegret
There are people who quit, but there's always another engineer willing to
complete the work they wouldn't. That's the unfortunate reality.

~~~
zepto
That maybe true, but it is still no reason for someone who is ethical not to
quit. Everyone who has a sense of ethics should quit. Then the company will
have staff who are in alignment with its goals.

------
SteveJS
68% of ‘independent investors’. Would the vote have been less than 50% under
an ordinary structure as well? I can’t tell if Zuckerburg would still have
been fine under ‘normal’ circumstances.

------
Triverklorezam
Facebook is definitely being mismanaged and has very poor leadership. It shows
all over Facebook's business decisions and that it emanates from the top down.

------
salawat
So, at what point does Zuckerberg become drive the company into such levels of
toxicity that every investor does what they should have done in the first
place, and pulls out?

If "the Market" truly solves everything, after all, it should be possible to
leave Facebook high and dry with no public funding left because Zuckerberg has
made his business and himself a veritable pariah.

It probably won't happen though. He's basically set himself up as the subject
of a permanent condition of Stockholm Syndrome with regard to any investors.

With a majority vote built in for him, any concession to the public is
essentially a "let them eat cake" sort of deal.

~~~
georgyo
Ironically, investors pulling out might be good for Zuckerberg.

If a business is highly profitable but the investors don't see it that way,
then it may make sense for him to take the company private again.

This happened with Dell about 6 years ago. Michael Dell believed Dell was
worth much more, but the market disagreed. He was able to buy back all the
shares and take it private again.

~~~
vonmoltke
The big impediment to Facebook doing the same thing is that it uses huge RSU
grants as a carrot to attract talent. Go private, and suddenly they need to
make up for the 40%+ drop from somewhere.

------
ddingus
They can always sell.

~~~
OJFord
Some clearly have been, or have wanted to; hence the downward pressure on the
stock price.

Not owning stock isn't the same as wanting different governance though - an
investor might like the fundamentals, and think it could go further, but not
under its current x.

------
FailMore
I think MZ does think long term, is taking privacy seriously moving forward
and is good for the company. (I was, but am currently not, an investor in FB)

------
DenisM
If you think that majority voting rights give Zuck absolute power, think back
to Travis Kalanick - he had all the voting rights in the world, and yet he had
to leave.

There's more than one way to put pressure on the CEO, it's just a question of
which people want to throw their weight behind the cause.

------
rdlecler1
If people want to vote they can sell their shares. I never understood this.

------
malloreon
Is it too much to ask that this vote of no confidence inspires any facebook
employees to re-evaluate their life choices and decide to work somewhere else?
Maybe somewhere that does good?

I think it's too much to ask, but I hope that it isn't.

------
Glyptodon
I don't understand why a company where one shareholder controls the company
and has over 50% ownership can be considered anything other than privately
owned.

------
tasssko
They could sell their shares. Money talks.

------
takanori
Who would they replace him with?

------
PaulHoule
And you know, a good board is worth it's weight in gold...

~~~
castis
I wish I was worth my weight in gold. With the current price at about
$42,500/kg, and assuming the 8 people on FBs board are an average of 75 kg...

75 _8_ 42500 = 25 M. Sounds good to me.

