For the last few years, Facebook has faced widespread scrutiny for its data handling practices and disregard for privacy. However, despite being plagued by scandals on a near constant basis, the social network has never been more profitable. As such, industry analysts presumed the company’s shareholders were unbothered by its controversial nature.
But a new filing with the Securities and Exchange Commission (SEC) suggests that’s not the case.
On April 12, the Silicon Valley giant notified the SEC it will be holding a shareholders conference on May 30. Furthermore, the corporation declared stakeholders will vote on two proposals which might shake up its management structure. Specifically, activist investors are looking to significantly reduce CEO, chairman, and co-founder Mark Zuckerberg’s influence on Facebook.
Challenges to Zuckerberg’s Leadership
Next month, the 34-year-old executive will face two significant challenges to his leadership. First, activist investors want to install an independent chairman of the board to replace Zuckerberg. Aggrieved stakeholders contend the billionaire has mishandled controversies like the Cambridge Analytica scandal. However, because of the leader’s controlling interest in the firm, it’s unlikely that he’ll be dethroned.
As Business Insider notes, Facebook has a dual-class capitalization structure. Accordingly, the Silicon Valley giant’s class A stock has one-tenth the voting power of its class B stock. Notably, Zuckerberg holds 75 percent of the organization’s class B shares, so the activist investors don’t have the capacity to force him out.
That’s where the activists’ second proposal comes in. A group of shareholders that own $3 billion worth of Facebook stock want to change the company’s capitalization structure. The dissatisfied investors want to enact a scheme that will equalize the voting power of class A and class B stock. Predictably, Zuckerberg is not in favor of the reorganization plan.
In Facebook’s SEC filing, the company argued the current makeup of its board of directors should remain as it is. The firm holds the position that installing a new chairperson would make its leadership less efficient. Moreover, the corporation, meaning Zuckerberg, believes maintaining its current capitalization structure is in its best interest.
Although politicians and the general public find fault with his leadership, Business Insider predicts the investor revolt will fail because Zuckerberg is too well insulated.
Does Facebook Need New Leadership?
It’s hard to say whether or not Facebook would be better off if Mark Zuckerberg’s influence was diminished or excised completely.
On the one hand, the New York native has made a litany of questionable decisions. His ambivalence toward user privacy, harmful content distribution, and potentially discriminatory advertising practices have seriously damaged the company’s public image. Plus, his inability to follow through on making much-needed reforms has obliterated his credibility.
On the other hand, it would be ridiculous to pretend Zuckerberg’s tenure as Facebook’s leader has been all bad. Under his stewardship, the firm has grown from being a small digital college social club to one of the world’s largest communication platforms. Moreover, he undeniably excels under pressure.
The same year that Facebook lost $119 billion in market value, it also beat earnings expectations and expanded its user base. Additionally, the controversial executive has led his company to greater financial success than rivals like Twitter and Snapchat.
If Facebook’s investors force Zuckerberg out, the tech giant might end up like Apple in 1985. Thirty-four years ago, Apple’s board removed Steve Jobs from power because they lost faith in his leadership. While the move made sense on paper, the corporation floundered without Jobs’ perfectionism and drive for innovation.
It’s not inconceivable that the world’s largest social network could experience a similar decline if it gave Zuckerberg the boot. Indeed, it’s hard to imagine another chief executive not cracking under a relentless stream of media, government, and public criticism.