Facebook shareholders have come up with a proposal to remove CEO Mark Zuckerberg from the board of Directors.
The proposal claims that an independent chairperson would be more capable of supervising the executives of the company and, therefore, improve corporate governance by setting accountable pro-shareholder agendas.
The shareholders who belong to SumOfUs, the consumer watchdog, have come up with the notion of bringing about a change within Facebook's internal administrative structure.
Reason Behind The Proposal
The proposal submitted by shareholders of SumOfUs cited that unfair power distribution was bestowed on Zuckerberg by approving the new capital structure of the company in 2016. Participants, in a shareholder meeting held in June 2016, were asked to cast votes for a proposal issuing Class C shares in a bid to keep Zuckerberg in control of the company for long term.
The proposal is currently battling charges of litigation after one shareholder alleged that it was an unfair agreement.
The plan to keep the Facebook CEO involved in the company to help him in his long term visions came after Zuckerberg and his wife Priscilla Chan decided to donate 99 percent of the family-owned shares to various group to promote child equality.
What DoesThe Proposal Suggests?
According to the proposal, the shareholder value may improve if an independent chairperson takes charge of the board. The proposal also states that the independent chairperson would be able to strike the perfect balance between the CEO and the board members and at the same time support strong leadership.
This news comes at a time when Facebook is dealing with several criticisms regarding its role in promoting misleading news, hate speech, censorship and also being inconsistent in applying the standard guidelines and policies pertaining to content.
SumOfUs' main concern is that Zuckerberg will eventually take the company along a path that he believes is right and in turn jeopardize the company. This will directly affect the shareholder value.
Can The Proposal Get Approval?
"There could be a 99 percent vote in favor of it and the board would not be under legal obligation to implement it," says Lisa Lindsley, the capital market advisor of SumOfUs.
However, she also said that capable board members often recognize the fact that it would be foolhardy to disregard the opinions of shareholders, whose welfare they represent in the board. Lindsley added that SumOfUs is looking forward to getting the proposal approved in the upcoming annual investor meeting and also states that it could be a difficult task to achieve.
Apparently, Zuckerberg is one of the major shareholders and can dismiss the proposal easily with the support of other allied investors, who believe having the founder in charge would be beneficial to the company.
Photo: Ian Kennedy | Flickr
