Facebook shareholders urged to rebel against Zuckerberg

Facebook shareholders have been urged to rebel against the company's "dysfunctional" governance structure by opposing its board compensation policy this week, ousting Mark Zuckerberg as chairman and withholding support for some directors.

Influential investor groups ISS and Glass Lewis have advised shareholders to support a resolution requiring an independent board chairman at its annual meeting on Wednesday (US time), a proposal that would effectively block Facebook's founder and chief executive from also holding the position.

ISS has said that shareholders should withhold their votes on re-electing Marc Andreessen and Peter Thiel, two high-profile Silicon Valley investors, due to their roles on its compensation committee.

The group said pay for top executives was based on "vague metrics" such as "making progress on the major social issues facing the internet and our company", and "build[ing] new experiences that meaningfully improve people's lives today".

It added that Mr Zuckerberg's $US20.5 milion ($31.3 million) in security costs, which are paid by Facebook, had not been properly explained, and included $US3 million of costs related to personal travel.

Glass Lewis, meanwhile, recommended that shareholders withhold support for Mr Andreessen, saying he is not independent of the company, as Facebook claims.

It said investors should also hold their support for board member Peggy Alford, the former chief financial officer of the Chan Zuckerberg initiative, the philanthropic venture of Mr Zuckerberg and Priscilla Chan, his wife.

Mr Zuckerberg has tightened his control of the board in recent months, with the departure of several directors who had reportedly challenged the company's actions, and the appointment of new members that the Facebook chief knew personally.

Facebook shareholders have no chance of successfully revolting against the company, due to a dual-track share structure that gives Mr Zuckerberg more than 50 per cent of shareholder voting power despite only having a 13 per cent economic stake in the company.

However, the shareholder groups have still urged rebellions on several matters, hoping a revolt would send a message to its management.

Facebook was ordered to increase the power of its board by setting up a "privacy committee" as part of a $US5 billion settlement with American regulators related to the Cambridge Analytica scandal.

ISS said this was a step in the right direction, but that it was unclear whether it would be effective given "the company's dysfunctional governance structure and prior lapses in boardroom oversight". It has given the company the worst possible governance score.

Mr Zuckerberg has pushed back against proposals to install an independent chairman at Facebook, saying it does not "make sense".

Despite Mr Zuckerberg's majority voting power, several shareholders have submitted proposals to push the company to change how it operates or to be more transparent.

They include scrapping Facebook's dual-class share structure, producing a report on the effect of its political advertising policies, and to review how its plan to introduce end-to-end encryption in its messaging apps could affect child sexual exploitation.

Facebook shares have soared in recent weeks as people turn to its services during the pandemic. Mr Zuckerberg surpassed Warren Buffett as the world's third-richest person last week, making him worth $US89.1 billion.

Telegraph, London