I always thought it was weird that it was possible for someone to be both an executive at a company and have a seat on the board. I know this is a common thing in the tech industry, it just seems weird to me. In theory the board exists to provide oversight of the executives on behalf of the shareholders, so having the CEO on the board is a natural conflict of interest.
It isn't really a conflict. The board exists to protect the shareholders' value in the business, and Mark Zuckerberg is the biggest shareholder (by far). It doesn't usually happen in other industries because it is rare for the biggest owner to be in operating control of the business.
I see nothing wrong with this. When people bought stock in startup IPO like FB, the core reason is the founder and his vision. There are too many examples in history where shortsighted investors have booted out founder to milk the company and through leftover to vultures. I would prefer founder to be protected from this ups and downs.
Here's bit of context:
Heavily influenced by Facebook’s first president, Sean Parker, they set up Facebook so Mr. Zuckerberg controlled not one, but two board seats. Mr. Parker had been ousted — twice — out of his own companies and was determined not to let the same happen to Facebook’s founder. When Mr. Parker left the company, he gave control of his seat to Mr. Zuckerberg, giving him control of three board seats out of five.
“That solidified Mark’s position as the sort of hereditary king of Facebook,” said Parker in The Facebook Effect by David Kirkpatrick. “I refer to Facebook as a family business. Mark and his heirs will control Facebook in perpetuity.”
Well yes, because he owns more than 50% of the voting stock. That’s how ownership works. This isn’t “Facebook has a rule that says the ceo is replaced by his child”, it’s a matter of “Facebook ceo owns more than 50% of voting stock, and is leaving it to his family”. Feudal is: irrespective of ownership, control is hereditary. (Monarchies generally don’t own more than 50% of the assets in a country)
The alternative would be to prohibit leaving assets to your family in your will.
And so it begins. The Facebook backlash finally reaches the shareholders. Grab some popcorn, the next few quarters are going to be decidedly interesting for anyone long on FB.
Clickbait title. From the WSJ article covering the same story:
The announcement has no practical effect on Mr. Zuckerberg and his position as both CEO and chairman because he has a lock on the bulk of Facebook’s supervoting shares, each of which gives him 10 times the votes of average shareholders. According to Facebook’s latest proxy, his share of the voting power among Facebook investors was 59.9%.
It means he has more than half of the voting power at Facebook and therefore the ability to swat away investor proposals. This makes the chances of Trillium's proposal becoming reality slim.
But how does that make the chance of the proposal becoming reality slim? It makes it impossible for Zuckerberg to be removed without his consent, right?
You’d be surprised at how Wall Street works sometimes. Not sure about this particular case, but what can happen is that the fund managers talk, and they stop buying (or even start selling) shares of the company. These funds may look small to you, but if they can drive a 5 or 10% drop, things spread like wildfire. Further, it’s likely that one of these fund managers have a strong relationship with another fund manager, and if the proposal is reasonable, then others may jump on the bandwagon.
Finally, consider how the situation changes if someone at BlackRock decides this would be helpful. All of a sudden, the conversation changes immensely due to the large number of shares they control.
Institutional shareholders own almost 3/4 of all shares. Ownership is not the same as control, but it’s a good proxy at this level [0].
He would have to be involved in illegal activity involving Facebook stock, and even then I believe all they could do is prevent him from being on the board - I’m not sure that they can force him to sell off his controlling position, but maybe I’m wrong?
