- Facebook investor, the New York City Comptroller Scott Stringer, has called for an independent investigation into the company’s governance structure.
- The demand opens up a new front in the war on Mark Zuckerberg’s power after independent shareholders voted overwhelmingly to oust him as chairman last week.
- In a letter to Facebook’s independent board member Susan Desmond-Hellmann, Stringer said it “has failed to adjust to the additional responsibilities that come with the company’s vastly expanded size.”
- Visit BusinessInsider.com for more stories.
An activist Facebook investor has opened up a new front on the war on Mark Zuckerberg, calling for an independent investigation into the company’s governance structure.
The demand was made by New York City Comptroller Scott Stringer, who controls around $US785 million of Facebook stock, and it follows independent shareholders voting overwhelmingly for change at Facebook.
At the social network’s annual shareholder meeting last week, 68% of outside investors voted for Zuckerberg to be ousted as chairman, while 83.2% demanded that Facebook’s dual-class share structure be abolished.
Despite the strength of feeling, the proposals were swatted away by Zuckerberg and Facebook management because of their overwhelming voting power. Class B shares, which are controlled by insiders, have 10 times the voting power of Class A stock.
The outcome, and Facebook’s reticence to change, has prompted Stringer into going public with his call for an independent investigation. He wrote to Facebook’s lead independent board member Susan Desmond-Hellmann on April 15 setting out his demands. Business Insider has seen a copy of that letter.
Within the seven-page missive, he called on Desmond-Hellmann to take “decisive action” and commission an investigation into how “governance arrangements have contributed to the development of Facebook’s corporate culture, inadequate responses to significant problems and failure to recognise increased responsibilities to stakeholders.”
Stringer said this must be done by someone who is independent of the board amid concerns that even external board members, like Desmond-Hellmann, “lack the objectivity necessary to assess governance arrangements,” because they “owe their seats” to Zuckerberg. His suggestion was an “outside expert,” potentially with links to the Securities and Exchange Commission.
Stringer and other outside shareholders have looked on in horror as a string of scandals have swept through Facebook. Stringer listed many in his letter, including election interference, hate speech, and the giant Cambridge Analytica data breach last year.
“Facebook tinkers around the margins… but has not yet, at least publicly, considered more far-reaching changes,” he wrote. “Facebook has failed to adjust to the additional responsibilities that come with the company’s vastly expanded size and reach.”
In a statement sent to Business Insider, Stringer added:
“Mark Zuckerberg’s outsized role at Facebook must end. The company is depending entirely on one person, who is accountable to no one, to run the day-to-day and conduct oversight of the company’s ever-expanding operation, which demonstrates a lack of basic business sense and keeps the company in a constant state of turmoil. Facebook’s insular boardroom must be cracked open because the company has no accountability to its users, its investors, or our democracy.”
Business Insider has contacted Facebook for comment.
The company has responded to Stringer’s letter, but Business Insider understands that it has said little to suggest that it will acquiesce to his demand. Instead, it is understood the company pointed to governance changes made last year, when it beefed up the power of its audit committee, which is chaired by the former White House chief of staff Erskine Bowles.
The New York City Comptroller hopes that other investors will join his call for an independent investigation, while work is already underway to propose another shareholder vote on an independent chairman.
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