AP NEWS

Technology:

May 8, 2019

By Cat Zakrzewski

The Washington Post

Activists angry with Facebook are taking their complaints to the next level: Shareholders.

Civil rights group Color of Change and Majority Action, a group focused on corporate accountability, are launching a new campaign to persuade shareholders to oust chief executive Mark Zuckerberg from the board of directors.

They’re urging them to limit Zuckerberg’s “sweeping” control of the company in the wake of “insufficient response” to a series of crises -- ranging privacy incidents to the rampant spread of disinformation by Russians ahead of the 2016 election. Ahead of a Facebook investor meeting scheduled for later this month, the groups want to bring awareness to the broad power Zuckerberg wields as both the company’s chairman and chief executive -- who also holds majority voting rights within the company.

Turning to shareholders is a prominent example of a relatively new way activists are trying to influence the direction of Silicon Valley giants -- especially in the absence of regulatory action from Washington.

It’s a tactic picking up steam in tech hubs. Earlier this year, Amazon employees used their company-issued stock to pressure executives into lessen its contribution to climate change. Later this month, Amazon shareholders will have the chance to vote on whether the company should ban facial recognition technology.

This latest effort to boot Zuckerberg through a shareholder vote is likely “dead on arrival” as a matter of corporate law, according to Lawrence Cunningham, a professor at The George Washington University Law School. Zuckerberg himself exerts enough voting power to render most shareholder efforts to limit his power toothless.

But activists say the high odds against the shareholder effort are exactly why reforms at Facebook are needed.

“With the governance structure at Facebook, no reforms can get through, and that’s precisely the point,” said Brandi Collins-Dexter, senior campaign director at Color Of Change, which calls itself a racial justice organization. “There are no checks and balances at the highest rungs of the company. In fact, when one person has unilateral power over all reforms, that undermines the meaningful and lasting change that Black people need.” (Color of Change is among the groups critical of Facebook’s response to Russians seeking to dampen African-American political participation.)

If the advocacy groups can convince enough independent shareholders to withhold support from Zuckerberg at the upcoming meeting, they may be able to undermine public confidence in his leadership. The effort could turn up the heat on Zuckerberg to cede some of his power.

Cunningham noted as a company that relies on the trust of billions of consumers, Facebook is very susceptible to this form of public pressure. “Corporate officials answer primarily to majority shareholder vote, but publicly important ones like Facebook need to win the hearts of most Americans as well,” he said.

And this isn’t the first time Zuckerberg has run into obstacles with shareholders. Last fall, four major public funds proposed removing Zuckerberg as board chairman. At last year’s annual investor meeting, ordinary investors launched what the Financial Times called a “significant rebellion.” More than a quarter of these shareholders voted against re-electing Zuckerberg and Facebook chief operating officer Sheryl Sandberg, and 60% of those ordinary shareholders supported proposals that would move the company to a “one vote per share” model that would limit the weight that Zuckerberg and other company insiders’ votes currently have.

It’s not just activists looking into the top rungs of Facebook. The Federal Trade Commission is also closely scrutinizing Zuckerberg and has weighed whether to pursue greater oversight of his leadership in the wake of the Cambridge Analytica scandal.

Color of Change has a history of success in forcing Facebook to make changes. It has been an ardent critic of discrimination on Facebook since 2015, and it called for the social network to conduct a civil rights audit on its platform. The company agreed to do an audit, but advocacy groups say the update on the audit it released last year fell short and a broader shakeup at the company is needed.

“We’re encouraged by Facebook’s recent changes that have come as a direct result of pressure from Color Of Change and other civil rights groups because it shows the power of advocacy as a means to shift corporate power,” Color Of Change President Rashad Robinson said in a statement.

“Nevertheless lasting change to address the misinformation, discrimination, violent movements and data breaches that put users, especially Black users, at risk cannot be subject to the whims of a single person. Our 1.5 million members, in partnership with Majority Action, are taking our campaign to Facebook’s institutional investors because shareholder value is threatened by the company’s failure to make fixing civil rights violations an operational priority.”