Paul Hodgson: How insiders’ ‘supervotes’ distort the picture at dual class share companies

An analysis of the vote results at Facebook and others

“Facebook Shareholders Reject Bid to Split CEO, Chairman Roles” reads a typical headline.

But which shareholders rejected the bid? Even though the answer may appear in the body of the article, the headline is simply misleading. Excluding the supervotes of CEO Mark Zuckerberg and other insiders, a majority of publicly held shares supported the shareholder proposal to take the chairmanship away from Zuckerberg.

What the headline should have read was “Zuckerberg Rejects Bid to Split CEO, Chairman Roles”.

In an analysis of the vote results at Facebook, as well as Amazon, Comcast, Google (Alphabet) and Ford, John Keenan, corporate governance analyst at labour union AFSCME, finds a whole range of public majority support, especially for one-share-one-vote resolutions.

If implemented, they would avoid the need to conduct such analyses in the first place and result in a proper reflection of shareholder views. And more accurate headlines.

In addition to public majority support for splitting the chairman/CEO roles, the majority also supported equal voting rights and majority voting for elections at Facebook. In addition, around a third of public shares were voted against Zuckerberg and other Facebook luminaries Sheryl Sandberg, Marc Andreessen and Susan Desmond-Hellman. Less than three-quarters of public shareholders supported the Say on Pay resolution and more than a third supported the resolution calling for a report on the gender pay gap.

At Google, a massive 92% and 93% of public shareholders supported equal voting and majority elections, while a majority supported the call for a report on sexual harassment.Almost half opposed Ann Mather’s re-election as director, while fellow directors Ram Shriram, John Doerr and John Hennessy all received significant opposing votes and only two-thirds supported the amended Google stock plan.

At Comcast, where the supershares have 15 votes each, compared to 10 each at Facebook and Google, the vote for an independent chairman received majority support from public shareholders, while only two-thirds supported Say on Pay and almost a third voted for a report that would disclose lobbying payments.

While insiders do not benefit from supervoting shares at Amazon, they do represent a sizeable bloc. For example, without them, near majorities would have gone to shareholder resolutions calling for the right to call a special meeting, a report on employment policies, and on climate change policies – the employee resolution. And more than a third supported reports on gender pay, on facial recognition technologies, on the management of food waste and on addressing hate speech in products sold on its site.

At Ford, which is, like Amazon, heavily influenced by a large bloc of insider shares but also by an insider held Class B stock with almost 37 votes per share, again a large majority of public shareholders – almost four-fifths – supported a resolution calling for one-share-one-vote. More than 40% supported the political spending resolution and almost two-fifths the lobbying disclosure resolution.

Clearly without insiders’ anti-democratic influence, the headlines for shareholder resolution stories at these companies would be very different.