Facebook (FB) shareholders will vote on several key topics at the company's June 1 annual meeting in Redwood City, Calif., including whether to nominate an independent chair to the board of directors to replace current chair Mark Zuckerberg, who also serves as CEO, according to a recent SEC filing.
Facebook's board has recommended that shareholders vote against all three proposals. Here are the details about each proposal as well as Facebook's argument against each of the requests brought by shareholders.
1. Spreading of fake news
Shareholders are proposing that Facebook issue a report that reviews the impact of the spread of "fake news" on its website. This proposal comes after the social media website has faced sharp criticism for not doing enough to stop the flow of fake news on its platform during the past U.S. presidential election.
According to Buzzfeed, false headlines were shared more often than the 20 best-performing mainstream news stories during the last three months of the election process. In addition, Pew Research found that about half of both Republicans and Democrats in the U.S. think the government has a "great deal of responsibility" in helping to stem the spread of fake news.
Since the election, Facebook said it is working on different strategies to stop the spreading of fake news on its website, such as making it easier for users to report fake articles or working with third-party fact-checking organizations. In addition, the company is one of the founding funders of the News Integrity Initiative, a project from the CUNY Graduate School of Journalism meant to help increase news literacy.
But the shareholders said the fake news problem is a complex one and that more needs to be done.
Facebook's opposing statement: Facebook's board of directors is recommending that shareholders vote against this proposal, claiming that the social media network prides itself on being an open platform. In addition, the company pointed out that it prohibits spammers and removes hate speech from its platform. Facebook also noted that it has been working to address the fake news issue by making it easier for users to report false stories and by using third-party fact checking organizations.
2. Gender pay equity
Shareholders are requesting that Facebook release a report by December 2017 on the company's policies and goals to reduce the gender pay gap, or the difference between how much men vs. women earn at the company.
In the U.S., the median income for women working full time is just 79% of that of their male counterparts, according to the proposal. This adds up to a difference of nearly a half million dollars over the course of a career. At this current rate, women won't reach equal pay until 2059.
In addition, the tech industry favors men for higher-level positions, with female representation declining as job titles advance. This is important because evidence shows that a more diverse leadership team leads to greater success, according to the proposal.
Facebook's opposing statement: Facebook's board of directors is recommending that shareholders vote against this proposal because it's already committed to diversity and publishes its global gender diversity and U.S. ethnic diversify workforce data annually, as seen here for 2016. Facebook also pointed out that it regularly performs analysis to ensure that men and women are earning the same amount for the same work at the company. A similar proposal was rejected by Facebook shareholders last year.
3. Independent chair
Facebook shareholders are asking the board of directors to require that the board chair is an independent director -- someone who does not hold an executive position at the company. If approved, this proposal would knock CEO Mark Zuckerberg out from his position as chair of the board, which he has held since 2012.
"We believe the combination of these two rules in a single person weakens a corporation's governance, which can harm shareholder value," the proposal claims.
The shareholders criticized Facebook's board for approving a new capital structure in 2016 to reduce the rights of Class A shareholders without requiring a majority vote of those shareholders. The proposal cites the following statement from Intel's former chair Andrew Grove: "The separation of the two jobs goes to the heart of the conception of a corporation. Is a company a sandbox for the CEO, or is the CEO an employee? If he's an employee, he needs a boss, and that boss is the board. The chairman runs the board. How can the CEO be his own boss?"
Facebook's opposing statement: Facebook recommends a vote against the request for an independent chair because the board already has oversight through Dr. Susan Desmond-Hellman, who serves as its lead independent director, or the liaison between the chairman (Zuckerberg) and the independent directors. "Our Lead Independent Director role ensures effective representation of the interests of all stockholders," the board claimed. In addition, five of the eight directors are independent, they pointed out.