By David Meyer
October 18, 2018

Trillium Asset Management has been trying for a while to get Facebook to split the roles of CEO and board chairman—roles that are of course both held by Mark Zuckerberg. Now, the activist investor, which has an $11 million stake in Facebook, has a bunch more investors on board.

Trillium announced Wednesday that its shareholder proposal for the move, lead-filed back in June, was now being co-filed by Illinois State Treasurer Michael Frerichs, Rhode Island State Treasurer Seth Magaziner, Pennsylvania Treasurer Joe Torsella, and New York City Comptroller Scott Stringer.

The shareholders’ point is that Facebook is currently incredibly scandal-prone—think Cambridge Analytica, Russian election-meddling, discriminatory ads, Facebook’s role in Myanmar ethnic cleansing, and its mega-breaches—and Zuckerberg really should have to answer to someone independent.

“Facebook’s governance structure continues to put its investors at risk. Now is the time for change,” said Frerichs. “We need to see more accountability of Mark Zuckerberg to the Board of Directors to restore investor confidence and protect shareholder value.”

The problem is, Facebook’s share structure makes this sort of action all but meaningless. The company has Class A shares, which trade on the market and come with one vote apiece, and Class B shares, which are held by Zuckerberg and other insiders and—although they comprise only 18% of the total shares—come with 10 votes each. Zuckerberg therefore holds around 60% of Facebook’s voting power.

This is not a particularly unusual structure, also being deployed at companies such as Google, although Google doesn’t combine its CEO and chairperson roles. (Many big tech companies—from Microsoft to Oracle, Apple and Twitter—avoid combining the CEO and board chairperson roles.)

From the point of view of companies that dampen the power of outsider investors in this way, the tactic allows them to follow through on long-term plans without having pesky activist investors trying to force them this way or that, on a short-term basis.

A sort-of analogy for the Facebook situation could, until recently, be found at Tesla (tsla). Elon Musk does not have a stake in Tesla as large as Zuckerberg’s in Facebook, nor does he have Zuck-style voting rights, but Tesla has supermajority rights in its bylaws that make it extremely difficult for outsiders to force key changes.

The only reason Musk is now just CEO, and not still CEO plus chairman, is that the Securities and Exchange Commission (SEC) forced him to abandon the latter role as part of the settlement over his tweet that falsely claimed Tesla had secured funding for a go-private plan.

Investors loved that settlement, sending Tesla’s share price up by 15%—and with good reason, as the mercurial Musk finally has to answer to someone other than himself.

Trillium and its allies will put their proposal to a vote at Facebook’s annual shareholder meeting in May. They note that a similar proposal last year got 51% of the vote of shareholders excluding Facebook’s executives and board members.

But as things stand, no matter how much outsider investors want Zuckerberg to lose his iron grip on Facebook and its future, they don’t stand a chance of getting their way.

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