Zuckerberg stands strong against push to step down
Priya Wadhwa

Zuckerberg stands strong against push to step down

Angering or alienating shareholders?

Facebook has come under the scrutiny of the public eye and governments alike. Even co-founder Steven Hughes wrote about the unchecked enormous power of Zuckerberg, asking him to step down.

Recently, at the annual shareholders meeting, concern about Zuckerberg's way of working led to the Facebook chairman/CEO debate.

68% of outside shareholders voted for the chairmanship to be made into an independent role.

Additionally, 83% of outside investors voted to replace the current dual-class share structure with a “one share, one vote” system.

The reason Zuckerberg is able to overpower such motions is because he controls most of the voting rights in the dual-class structure. And this is exactly what shareholders what to change.

Facebook has a dual-class structure in place which means that individual and institutional shareholders have Class A stock where one share equals one vote; Zuckerberg, executive management and directors are Class B voters in which one share equals 10 votes. Zuckerberg himself owns 75% of Facebook’s Class B shares which gives him control of 58% of Facebook’s vote.

In spite of the disproportionate distribution of power, dual-class voting structures are common. They are put in place so the founders can push through with their visions for the company and lead it into the future.

On the flip side, they do enjoy more power which can go unchecked. However, Facebook cannot continue ignoring its shareholders' wishes of change. It will either anger the latter to drive change in stronger ways, or alienate them into pulling back their investments.