Facebook Defeats Activist Proposal Urging Review of 'Fake News'
Facebook founder Mark Zuckerberg

Shareholders -- including controlling investor and founder Mark Zuckerberg -- on Thursday voted down a number of investor proposals at Facebook  (FB)   including activist investor measure urging the social media giant to produce a report reviewing the public policy and business issues it faces around the phenomenon of "fake news." 

"Research has shown that fake news has affected elections in the U.K., France and the U.S.," said Natasha Lamb, a managing partner at Arjuna Capital, the fund issuing the proposal, at the company's annual meeting. "Fake news is not about spin or confirmation bias, it's about fabrication and when fabrication is disseminated so easily at scale, it represents a threat to our democracy."

Lamb said she wants Facebook to explain how many ads or content they are blocking, how much staff they have evaluating "fabricated content claims" and how much are they outsourcing to third parties such as Politifact or ABC.

The Arjuna measure, which was introduced with another fund, comes as Facebook has come under fire following the 2016 U.S. presidential and congressional elections over fake news stories trending on the social media platform. One high-profile example involved the fake news phenomenon that became known as "Pizzagate," a false conspiracy that trended on social media sites claiming that a Washington D.C. area pizzeria hid a child sex ring in its basement set up by Hillary Clinton and her former campaign chairman, John Podesta.

The proposal is nonbinding, so Facebook wouldn't have had to respond even if the shareholder vote was substantial. The specific tally won't be released until Friday or early next week.

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The proposal failed, partly because Zuckerberg controls the social media giant with over 53% of the vote and likely opposed the measure. Other controversial shareholder proposals also failed, including one that would have Facebook remove Zuckerberg from his board chairmanship position and another that would have implemented a one-share one vote ownership structure.

However, a significant vote of non-insider shareholders urging Facebook to follow through on the 'fake news' proposal's recommendation could be enough to embarrass the company into issuing a detailed study. Investors are eagerly awaiting the specific results so they can identify whether a majority of outside investors backed each of the shareholder proposals. 

 At the meeting a number of participants raised the issue of fake news, including civil rights leader and Baptist minister Jesse Jackson Jr.. Jackson said "the impact of fake news and hacking and lies is about to destroy us."

Zuckerberg, in his comments to the meeting, defended Facebook's actions in the response to the fake news phenomenon, calling it false news and adding that the social media giant will have more to say on the issue soon. "Making sure people have access to good information is something we care about," Zuckerberg added. "We have a special focus on reducing false news."

Zuckerberg noted that a large segment of folks who spread false news are spammers who are seeking to drive clicks towards their ads. "We are trying to destroy the economics of this," he said.

In addition, he noted that Facebook staffers will send content it believes is false to fact checkers. However, he didn't explain whether those were internal of external groups such as Politifact or ABC.

In addition, Zuckerberg appeared to suggest that Facebook was moving in the direction of improving the quality of news distributed on the social media giant's pages through artificial intelligence rather than factcheckers.

"There are tens of billions of messages and comments and pieces of content that are shared through our services every day," he said. "So long term the only way we will get to the quality level we all want is not by adding thousands or tens of thousands of more people to help review but by building Artificial intelligence and technical systems that can look at this stuff more proactively. We're starting work on it. The technology is not there yet." 

In addition, he said Facebook will be working on making sure that participants will receive a whole range of perspectives on a particular issue. "If you want to help people get a broader perspective to show a number of different perspectives," Zuckerberg said.

Lisa Lindsley, Capital Markets Advisor for SumOfUs, an investor and consumer advocacy group, presented a proposal seeking to have Facebook separate its chairman and CEO roles, which are currently both occupied by Zuckerberg. The measure failed but Lindsley is hoping that a large minority or majority of outside investors will have backed it. 

"Facebook has been dismissive and disrespectful of its shareholders," she said to TheStreet in an interview prior to the meeting. "It's been more like a fraternity for its founders, funded by investors in the stock market. For long term investors who want to see a company that's well managed it is important to have independent oversight.

At the meeting she said, "we don't believe you should be your own boss Mark Zuckerberg."

The measure's consideration comes after influential advisory firm Institutional Shareholder Services earlier this week issued a report backing the shareholder proposal. The advisory group said that it has identified a number of governance issues, which it used to back its assertion that "more independent board oversight in the form of an independent chair."

In addition, A Facebook official noted that it hasn't instituted a new controversial Class C non-voting capital class because of existing litigation. The earliest the measure would be approved is 2018, according to Facebook.

Editors' pick: Originally published June 1.

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