Amazon and Facebook facing shareholder rebellion probably wish they’d gone virtual

Facebook’s annual meeting will be held on 31 May at the Hotel Nia in Menlo Park, California. Amazon’s on 30 May at Fremont Studios in Seattle. Given the inevitable rumpus at both meetings – over not just shareholder resolutions but general dissatisfaction with the two companies’ wielding of immense commercial power – this year might have been one to go for a virtual-only meeting. Perhaps neither, when planning, thought it was going to be this bad. Or maybe they are just feeling confident. After all, Facebook CEO Mark Zuckerberg controls almost 60% of the voting power, and Amazon’s Jeff Bezos 16.3%.
So what is going on? There are campaigns to separate CEO and chair positions at both Facebook and Amazon, though only Amazon is facing a shareholder resolution on the issue. There is also a board diversity resolution at Amazon, which has split ISS and Glass Lewis: ISS urges support for the resolution, Glass Lewis says company policy makes it unnecessary. Amazon’s board is 100% white and 70% male.
Given Zuckerberg’s control, the presence of six, basically no-hoper shareholder resolutions on the proxy is a testament to the belief in outsider shareholder democracy. These resolutions are: a change in the share structure to one vote per share; the introduction of a risk oversight committee; elimination of supermajority voting requirements; publication of a content management governance report and of a gender pay gap report; and another report on offshore tax policies. The one share-one vote resolution has inspired a great deal of vocal support, including an op-ed in the FT in early May from Aeisha Mastagni, a CalSTRS portfolio manager. “Why does Mr Zuckerberg need the entrenchment factor of a dual-class structure? Is it because he does not want governance to evolve with the rest of his company? If so, this American dream is now akin to a dictatorship,” said Mastagni. “It is time to end the dual-class.” New York City Comptroller Scott Stringer has also weighed in.He sent a letter in late March calling for Zuckerberg’s CEO/Chair role to be split and for three new independent directors, along with a committee along the lines of the shareholder proposals, as well as an incentive clawback policy. Time for proxy access, one would think; but what hope without the one share-one vote resolution passing? CalSTRS Chief Investment Officer Chris Ailman publicly terminated his Facebook account via a tweet.
Finally, earlier this month, Domini announced that it was divesting from Facebook. “Facebook’s problems, we believe,” it said in a press release, “are founded on a lack of sufficient attention to consumer privacy and data security, compounded by inadequate governance to ensure independent and effective oversight of decision-making….” The fund endorsed Stringer’s call for governance reform in a letter to Zuckerberg, as well as a range of other “first steps” to restore trust.
There are fewer resolutions at Amazon, but they are arguably more significant and more likely to pass. The two attracting the most attention are the resolution on board diversity that has again split ISS and Glass Lewis, and the resolution to separate Bezos’ Chair/CEO role. The third resolution calls on the company to stop counting abstain votes as against votes; it’s extraordinary that this is legal anywhere, let alone in Delaware.
The board – clearly concerned about support for the board diversity resolution – filed a special proxy to persuade shareholders that it already had implemented the resolution’s request. The board already considers: “diversity of experience and perspectives, including diversity with respect to race, gender, geography, and areas of expertise… and has any search firm that it engages include, women and minority candidates in the pool….” This resolution, too, has attracted Stringer’s support, who tweeted: “The company’s employees are frustrated & so are we. We’re fighting for board diversity.”