Facebook 2020 annual meeting is 5/27/2020 at 10AM Pacific virtually by entering the eligible shareholder’s 16-digit control number found on the proxy card. To enhance long-term value: Vote AGAINST Andreessen, Thiel, Zuckerberg, Auditor, Director Compensation. Vote FOR all shareholder proposals, especially Change in Shareholder Voting. See list of all virtual-only meetings maintained by ISS. Vote by 5/26 if not attending meeting.
Facebook, Inc. develops products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and in-home devices worldwide. Reading through almost 100 pages of the proxy takes too much time for most people. Your vote could be crucial. Below, how I voted and why.
If you have read these posts related to my portfolio and proxy proposals for the last 24 years and trust my judgment, skip the 11 minute read. See how I voted in my ballot. Voting will take you only a minute or two. Every vote counts.
I voted with the Board’s recommendations 32% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.
Facebook 2020: ISS Ratings
From the Yahoo Finance profile: Facebook, Inc.’s ISS Governance QualityScore as of December 5, 2019 is 10. The pillar scores are Audit: 5; Board: 9; Shareholder Rights: 10; Compensation: 10.
Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. We need to pay close attention to everything.
Facebook 2020 Proxy Voting Guide: Board Proposals
1. Facebook 2020 Directors
Egan-Jones Proxy Services recommends Against Marc L. Andreessen, Peter A. Thiel, Mark Zuckerberg. All three directors have served for 10 years or more, so should no longer be considered independent nor should they serve on compensation, audit or nominating committees. Mr. Zuckerberg should not be considered independent, since he holds both the CEO and chair positions. Additionally, Facebook needs improvement in the area of cybersecurity. E-J guidelines lay that at the feet of the Board Chairman, Mr. Zuckerberg.
Vote: AGAINST Marc L. Andreessen, Peter A. Thiel, Mark Zuckerberg.
2. Ratification of Independent Auditor
I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. Ernst & Young LLP has served more than seven years. No other issues appear significant.
3. Approval of Director Compensation
Facebook proposes to pay its directors $490,000 each in cash and equity in 2020. According to their own data, that puts their directors at the 95% level.
Egan-Jones Proxy Services recommend For and writes:
We believe that approval of the director compensation policy will help the Company to attract, retain and motivate its non-employee directors.
Facebook’s proxy includes the following note:
In the event the Director Compensation Policy is approved by the stockholders, the Director Compensation Policy will be effective as of January 1, 2020. Accordingly, all non-employee directors will receive compensation under the Director Compensation Policy for their period of service in 2020 (retroactive to January 1, 2020), and the non-employee directors who were appointed to the board of directors on or after January 1, 2020 will receive the one-time initial $1,000,000 equity grant following stockholder approval of the Director Compensation Policy.
Sorry, I just cannot bring myself to vote pay this high for such part-time work.
Facebook 2020 Shareholder Proposals
4. Change in Shareholder Voting
Shareholders request the Board recapitalize all outstanding stock to have one vote per share. We recommend that this be done through a phase-out process.
Going to a vote for the seventh time since the company went public, the proposal brought by NorthStar Asset Management, of Boston and co-filed by the New York State Comptroller Thomas P. DiNapoli, Trustee of the New York State Common Retirement Fund, seeks a recapitalization plan that would eliminate the company’s dual class structure. NorthStar has led this proposal filing since 2015, noting that outsider class A support has consistently grown in recent years. NorthStar estimates that the proposal received favorable support from 83% of class A shareholders at the 2019 annual meeting.
NorthStar has filed a voluntary exempt solicitation with the SEC to urge shareholder support. Find it on the SEC’s website at the following link: NorthStar’s Facebook exempt solicitation. E-J also recommends For.
Vote: FOR — This is your most important vote at Facebook.
5, Independent Board Chair
Shareholders request the Board of Directors adopt as policy, and amend the bylaws as necessary, to require henceforth that the Chair of the Board of Directors, whenever possible, be an independent member of the Board. This independence policy shall apply prospectively so as not to violate any contractual obligations.
Egan-Jones recommends For: “We believe that there is an inherent potential conflict in having an Inside director serve as the Chairman of the board. Consequently, we prefer that companies separate the roles of the Chairman and CEO and that the Chairman be independent to further ensure board independence and accountability.”
This is plain good governance.
6. Majority Vote for the Election of Directors
This proposal comes from me (James McRitchie). It is something of a test of the Board and/or Zuckerberg’s willingness to even hear the voice of shareholders. Since it simply requests that directors be elected by a majority of votes, and Zuckerberg controls a majority of the votes, it should be an easy proposal to implement. They have failed the test for many years.
Egan-Jones recommends For, writing: Contrary to plurality voting, a simple majority standard will give the shareholders a meaningful way of electing directors by limiting the power of shareholders to elect poorly performing directors.
7. Report on Political Advertising
Shareholders request the Board of Directors report on the controversy surrounding political advertising and posts on Facebook. It should assess the operational, reputational, and social license implications of the company policies, as well as the board’s assessment of the concerns regarding the potential impact of those policies on democracy, public discourse, and civil and human rights.
Egan-Jones recommends For, writing:
Given the reputational risks that the Company face, we believe that improved transparency and accountability adds to a company’s long-term sustainability to its stakeholders. We believe that the preparation of the report will allow the Company to evaluate its activities related to political advertising, and at the same time assess the operational, reputational, and social implications of such to the Company itself.
8. Require Independent Director Nominee with Human and/or Civil Rights Experience
9. Report on Civil and Human Rights Risk Assessment
Shareholders urge the Board to oversee preparation of a report on Board-level oversight of civil and human rights risks. Again, Egan-Jones recommends For: “The adoption of a more comprehensive human rights policy, coupled with implementation, enforcement, independent monitoring, and transparent, comprehensive reporting will assure shareholders of the Company’s global leadership.”
10. Report on Online Child Sexual Exploitation
11. Report on Median Gender/Racial Pay Gap
Shareholders request Facebook report on the company’s global median gender/racial pay gap, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent. The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy and legal compliance information. E-J: “approval of the proposal is necessary and warranted in the Company. Pay disparities by gender in companies, in our view, could bring operational risks and reputational damage that is detrimental to shareholder value.”
Facebook 2020 CorpGov Recommendations
Proxy Insight has nor reported any votes as of when I last checked but may have updated by the time I post this. Looking up a few funds announcing votes in advance:
NYC Pensions voted FOR Killefer, Travis, shareholder proposals 5 through 10. They voted Against/Withhold for all other items. CalSTRS voted FOR Houston, Killefer, Kimmitt, shareholder proposals 5 through 10. They voted Against/Withhold for all other items. Calvert voted For all items, except Andreessen, Thiel, Zuckerberg, and Non-Employee Director Compensation Policy.
- Directors: AGAINST Marc L. Andreessen, Peter A. Thiel, Mark Zuckerberg.
- Auditor: AGAINST
- Approval of Director Compensation: AGAINST
- Recapitalization Plan for all Stock to Have One-vote per Share: FOR
- Independent Board Chair: FOR
- Majority Vote for the Election of Directors: FOR
- Report on Political Advertising: FOR
- Independent Director Nominee with Human and/or Civil Rights Experience: FOR
- Report on Civil and Human Rights Risk Assessment: FOR
- Report on Online Child Sexual Exploitation: FOR
- Report on Median Gender/Racial Pay Gap: FOR
Facebook 2021: Mark Your Calendar
You may present proposals for action at a future meeting or submit nominations for election of directors only if you comply with the requirements of the rules established by the SEC and our amended and restated bylaws, as applicable.In order for a stockholder proposal to be considered for inclusion in our proxy statement and form of proxy relating to our annual meeting of stockholders to be held in 2021, the proposal must be received by us at our principal executive offices no later than December 11, 2020.
Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” chosen by aspiration. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.
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