Over the past few months, Facebook founder and CEO Mark Zuckerberg has faced a lot of hostility, both from users and legislators around the world. As we’ve seen, he’s pretty effortlessly batted away the efforts of the latter constituency and lived to tell the tale.
But late last week he faced his toughest post-data scandal showdown to date - his own shareholders, who’ve watched the company they’ve invested in being dragged down by global condemnation around its management and operating model. A million miles from the vacuous interrogators of Washington and Brussels, the people Zuckerberg had to stand in front of this time were mad as hell and in no mood to take prisoners.
Take this as indicative of the tone:
George Washington was encouraged to continue as President for life, but stepped down for the good of the country. Mr. Zuckerberg, take a page from history - emulate George Washington, not Vladimir Putin.
Given the nature of the Facebook share holdings there was no chance of Zuckerberg being ousted as CEO - and as he’s already declared that he’s confident he’s the best person to steer the ship back to calmer water, he’s not about to throw himself on his sword.
As Christine Jantz from NorthStar Asset Management of Boston observed of a motion to create a risk oversight board within Facebook:
Even if every single outside shareholder votes in favor of that proposal, it will still fail if Mr. Zuckerberg votes against it.
But that didn’t mean that angry investors weren’t going to give him a drubbing. Some were too enthusiastic. One woman who interrupted the initial proceedings found herself forcibly removed from the room! But there were plenty of others ready to take her place, not least Jantz, who declared:
As shareholders we do not like reading news that states Facebook believes that the data of up to 87 million people was improperly shared with a political consultancy Cambridge Analytica. So if privacy is a human right as stated by Microsoft CEO, we contend that Facebook's poor stewardship of customer data is tantamount to a human rights violation.
Will Lana, representing shareholders Trillium Asset Management and Park Foundation, accused Facebook of passing the buck on risk oversight by putting under the remit of the firms’ audit committee:
It is not necessary or helpful to read off a list of controversies facing Facebook. We all know what that list looks like. We've identified at least 15 distinct controversies. Suffice to say the list is long and the list is serious. Accordingly, the risks that the company and its shareholders face are profound and real.
It is evident to us that Facebook's piggybacking of risk oversight onto the audit committee, no matter how well utilized, is not up to the task. The purpose of the audit committee is to focus on financial reporting processes, not on big picture risk oversight...we must ask ourselves if the audit committee does have the time and resources to oversee these issues, why is the list of controversies confronting Facebook so long and so serious? The proof of the current structure’s inadequacy is on display in the daily headline.
On behalf of Arjuna Capital, Natasha Lamb cited political subterfuge, Fake News, hate speech and sexual harassment as major risks to Facebook’s brand and value. She also picked up on the firm’s own failings around diversity:
In Arjuna Capital’s recent gender pay disclosure score card, Facebook earned a failing grade across nine metrics. The median income for women working full time in the United States is 80% of that earned by men, a gap that is not expected to close for 40-years. Of note, the gap for African-American and Latino women is wider at 60% and 55%, respectively. Gender and intersecting ratio pay in equity represents a structural barrier to diverse leadership.
Facebook says they pay men and women fairly on this basis. But unlike peers, they do so in the absence of quantitative backing. And while U.S. peers have taken a good first step towards disclosure, the ‘equal pay for equal work’ number alone fails to address how discrimination affects differences in opportunity, i.e., it does not reflects the bias in the jobs women hold.
But although the questioning was tougher, the responses from Zuckerberg were essentially the same as he gave to Congress and the European Commission, complete with the by-now slickly rehearsed mea culpa declarations and promises of a new approach for Facebook:
I want us to be a company that first takes ownership of issues and deals with our staff before going out and asking other people to take responsibility for their part..I think that as we move towards the end of the year and into next year, we’ll have really made a lot of progress on solving and really just moving forward on a lot of the issues that have been flagged, and that's our commitment and what we’re going to focus on doing.
It was always going to be more of an academic exercise than anything else, but Zuckerberg did at least get a face-on taste of the level of anger among his external shareholders. Nothing much was going to change over the course of the meeting and the responses from the CEO when he spoke were already familiar. He’s made promises of change to legislators, regulators and now to shareholders, as well as to users. Time for some action now. Zuck wants to stay on as the guy-in-charge. Be careful what you wish for!