Facebook must do some 'deep soul searching' about Mark Zuckerberg's power after a huge shareholder revolt

Some 68% of independent Facebook investors voted to oust Mark Zuckerberg last month, cementing a vocal campaign for the firm to appoint an independent chairman.
The tiny activist investor behind the vote, Jonas Kron, said it should be the catalyst for a period of "deep soul searching for the Facebook board."
He called on new board members — Jeff Zients, the CEO of investment firm Cranemere, and former American Express CEO Kenneth Chenault — to take particular note of investor unrest.
Investors have every intention of capitalizing on their momentum, and plan on continuing to press the issue with Facebook directors.
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Facebook's shareholder revolt should provoke a period of "deep soul searching" for the company.

That's according to the tiny activist investor who has led the charge in the war on billionaire Mark Zuckerberg's enormous power over Facebook, the company he founded in 2004.

At Facebook's annual shareholder meeting last month, Trillium Asset Management put forward a proposal to oust Zuckerberg as chairman and replace him with an independent executive. Trillium controls Facebook shares worth around $9 million.

The proposal was backed by 68% of independent investors (up from 51% who voted in favor of an almost identical proposal in 2017), but ultimately defeated because of Zuckerberg's stranglehold on voting power.

There was also lower than usual support for lead independent director Susan Desmond-Hellmann, according to Trillium. She was reelected by 67% of outside investors, compared with 76% last year.

Jonas Kron, Trillium's senior vice president, told Business Insider the votes "provided a clear articulation of the deep concern among mainstream investors," which should provoke a period of "deep soul searching for the Facebook board."

He called on new board members — Jeff Zients, the CEO of investment firm Cranemere, and former American Express CEO Kenneth Chenault — to take particular note of investor unrest.

"These are highly respected, well qualified, accomplished individuals. They are in a position to look at the votes and speak up as advocates for independent shareholders," Kron said.

Facebook has been quiet on the issue over the past two weeks, and did not respond to Business Insider's request for comment.

Earlier this week, a spokesman referred us to the firm's proxy statement, in which it said that hiring a chairman above Zuckerberg could create more problems than it solves.

"We do not believe that requiring the Chair to be independent will provide appreciably better direction and performance, and instead could cause inefficiency in board and management function and relations," Facebook said in the filing.

Meanwhile, in private correspondence with agitated shareholders, Facebook has pointed to governance changes made last year, when it beefed up the power of its audit committee, which is now chaired by Zients, giving it the power review the firm's services, privacy, and cybersecurity.

Kron said investors have every intention of capitalizing on their momentum, and plan on continuing to press the issue. New York City Comptroller Scott Stringer, who controls about $785 million worth of Facebook stock, went public this week with a call for Facebook to order an independent review of its governance structure, while it's likely there will be another proposal to oust Zuckerberg at next year's shareholder meeting.

"We're not hitting the breaks on this," Kron said. "Concentration of power is so misguided. It doesn't matter who the person is, it inevitably leads to bad decisions."

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