A move by a watchdog group and a small group of shareholders to oust Facebook CEO Mark Zuckerberg from his post as chairman would be an uphill battle that would be unlikely to succeed and could hurt the company, analysts said.
It would completely destabilize Facebook,” said Patrick Moorhead, an analyst with Moor Insights & Strategy. “Zuckerberg still makes most of the key decisions and without him it would be a major risk… I don’t see a single piece of upside in removing Zuckerberg from the board.”
It’s also unclear whether Zuckerberg could even be removed as chairman, since any shareholder vote would be advisory only.
The proposal, which was sent to Facebook on Feb. 3, was signed by 1,500 Facebook shareholders, according to SumOfUs. They are asking the board to adopt a policy and amend the company’s bylaws to require the chairman to be an independent member of the board.
“Facebook CEO Mark Zuckerberg has also been Facebook’s board chair since 2012,” the proposal notes. “We believe the combination of these two roles in a single person weakens a corporation’s governance, which can harm shareholder value.”
A spokesperson for SumOfUs told Computerworld that any shareholder resolution would only be advisory.
“There could be a 99% vote in favor of it and the board would not be under legal obligation to implement it,” the spokesperson said. “However, most competent board members realize that it is unwise to ignore the voice of the shareholders whose interests they are charged with representing.”
Facebook did not respond to a request for comment.
While the proposal may have been floated, it’s unclear if it will hold any sway on Zuckerberg and his position on the company’s board.
“I really doubt that this move could, or will, work,” said Dan Olds, an analyst with OrionX. “Zuckerberg owns nearly 30% of the company stock and probably has unexercised options that could allow him to own even more. The next biggest stockholder has about 10%.”
Olds also noted that there are different classes of voting stock in the company. Class A shares have one vote per share, while Class B shares carry 10 votes per share.
“Zuckerberg owns a lot of B shares — enough to control any shareholder vote,” Olds said. “I don’t see any way that Zuckerberg could possibly be removed from the board given how much stock he owns. There just isn’t any route to removing him when he controls the majority of the votes.”
Rob Enderle, an analyst with the Enderle Group, agreed, saying that the only way Zuckerberg would be ousted from his seat is if he willingly stepped down.
“Unless [Zuckerberg] is charged with some form of illegal action, he becomes demonstrably infirm, or dies, there is no process to forcefully remove him from board control given he has the majority of shares,” he added. “They have a valid concern and a common request for those that want to see good corporate governance, but there is no indication that those requesting this have the power to compel the outcome they want.”
For Olds, he’s surprised this issue has even been raised.
“It’s hard to argue with success, and Facebook has been nothing but successful in the last several years,” he said. “I don’t see how removing Zuckerberg from the board would do anything good for the company… From outward appearances, they all seem to be happy living in the kingdom of Zuck. However, it appears that this might not be the case.”
This story, “Facebook shareholders would have uphill climb ousting Zuckerberg from board” was originally published by Computerworld.