Proxy Blog

Facebook, Inc.

May 10, 2019

The annual proxy for this social media company had the following proposals: 

  1. Proforma proposals on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Board proposal on frequency of executive compensation votes 
  3. Shareholder proposals on stockholder voting, independent chair, majority voting, diversity policy, content governance, gender pay, workforce diversity, and strategic alternatives 

Magni voted as follows: 

  1. For and against proforma proposals.
    -For and against directors – Ms. Sandberg is an employee of the company and not the CEO. She does not need to be on the board. She should be welcome in board meetings, though that decision should be left to the board. The remaining nominees are Mr. Zuckerberg and six independent directors. Mr. Zuckerberg as founder and CEO should be on the board. The six independent directors are qualified and acceptable. The board of this company has been very quiet given the challenges and scandals. Perhaps they are working behind the scenes. As such, Magni will support the directors this year. If the company does not make material changes over the course of the next year, Magni will vote against all directors.
    -For auditors – There appear to be no controversies with the financial statements of the company.
    -Against say-on-pay”  The proxy materials disclose shareholder engagement efforts, though compensation is not one of the topics. The peer list is published along with some highlevel criteria. The associated text states that the companies meet some of the criteria. High-level criteria applied inconsistently and opaquely is not good governance. 
  2. For board proposalAnnual votes on executive compensation are good governance. The company is not demonstrating good governance by recommending a vote every three years. This company needs to improve the governance of its named executive compensation program. Requiring annual disclosures will be good discipline for the company. 
  3. For and against shareholder proposals.
    -For stockholder voting  This proposal would eliminate voting preferences and move to each share getting one vote. Equal voting power across all shares is consistent with good shareholder relationships and part of good governance.
    -For independent chairman – The independence of a board of directors is part of good governance. Separation of the chairman and CEO roles is usually a good part of maintaining independence. Given the recent challenges and scandals at this company, separation is a particularly good idea.
    -For majority voting – The shareholder proposal would prevent directors from serving if they run uncontested and only receive a plurality instead of a majority of vote. Voting for directors is an important topic related to good governance. On other proxies, Magni has voted against this type of proposal as the voting arrangement would be unusual, and a company would be adopting a change with unknown potential consequences. That said, this company is different. The board of this company does not appear very engaged given the number of challenges and scandals. Magni is voting yes to encourage the directors to be more accountable to shareholders.
    -Against diversity policy – This proposal is not what it appears to be. The company does have diversity issues. At the same time, the company has made notable progress. This proposal has an underlying political element. The proposal would require the company to publish statistics on the political orientation in the company. It is not in the shareholders’ interest to make this company more political than it already is.
    -For content governance – Magni voted against last year’s proposal regarding content governance reporting as the proposal was vague and Magni wanted to give the company time to address recent issues. This year’s proposal is clear and actionable. The company has not disclosed significant changes to address content governance, and hence Magni assumes that the company has not made sufficient progress.
    -Against gender pay – Gender equity is an important issue. That said, there are two reasons for voting against the proposal. The first is the use of generic and inaccurate information in the shareholder’s supporting statement, along with the proposal requiring the company to report a misleading metric for gender equity. The second is the company’s prior and current efforts to address gender inclusion. The company has made good progress and should be encouraged to continue with its current efforts.
    -Against workforce diversity – Similar to the proposal on diversity policy (see above), there is a political element to this one, and Magni voted against this proposal for the same reasons.
    -Against strategic alternatives  This proposal is about requiring the company to retain an advisor to explore major changes to the company. The company has not reached the point where this makes sense. One of the topics in the supporting statement is eliminating voting preferences. The stockholder voting proposal (see above) already addresses that issue. Selling one or more business units doesn’t address the content governance issues. Further, the content governance issues are addressed in one of the proposals (see above)The board should focus on forcing the leadership to fix the issues in the company instead of pursuing strategic alternatives.