Chicago Business Litigation Lawyer Blog
In one of our previous blog posts, we looked into what Facebook was doing with the data of millions of users and profiting from it. The CEO of Facebook, Mark Zuckerburg, was subject to scrutiny in his testimony and angered both users and shareholders. Since the Cambridge Analytica scandal, Facebook has also been accused of meddling in the elections by having a Mercer backed political data firm collect information as well.
Zuckerberg later confessed that he made mistakes and that did not know how to handle a large company. This has led to the undermining of public confidence in him, including that of the shareholders. So now a possibility of removal from a chairman position and being replaced as an independent executive is talk that is being touted. A dual structure system of shares allows for the usurpation of power. Too much power in his hands is now deemed unacceptable. Activists are also calling for his removal. The Investment company has gone so far as to file a proposal to oust him. The main changes that are most likely include the creation of a role division between a chairman and CEO. That leads to a greater check on the power that he holds which is more than 60 percent of a voting share. A dual role weakens management of the board and is what currently is in place. This is one of the reasons cited as being a contributing factor in the mishandling of the Facebook controversies.
Separating a chair and a CEO also reduces conflict. Shareholders are unable to check the founder’s power because he owns 60 percent of the company and occupies the two highest positions. As it stands, Facebook stock is of two types and the ones that Zuckerberg owns have 10 times a greater voting power. “When you open yourself up to more opinions, more independent voices, you’re more likely to make better decisions. It’s more likely that someone with independent governance would have spoken up about some of these things,” Illinois State Treasurer Michael Frerichs, who has $35 million invested in Facebook, told Business Insider. Continue reading ›