PRESSURE RISES AS FACEBOOK PLUNGES

Investors target Zuckerberg’s dual roles

LONDON• MarkZuc ker berg was facing pressure to abandon his dual role as chairman and chief executive of Facebook after US$120 billion was wiped from the value of the group in the single biggest one-day loss of value for any company in U.S. market history.

The Silicon Valley giant, which for years has served as a reliable cash cow for shareholders, warned of slowing growth, rising costs and missed revenue targets, sending shares in the company plunging when U.S. markets opened Thursday.

Zuckerberg’s failure to inspire confidence on a call with investors prompted Facebook’s share price to fall by nearly 20 per cent, which wiped nearly US$16 billion off the social network’s founder’s personal fortune. The plunge however left Facebook’s share price back at a level last seen in May, underlining how fast technology stocks have been rising this year on Wall Street.

The shareholder revolt was led by Boston-based Trillium Asset Management, which holds US$1 million of stock. The activist investor issued a call for Zuckerberg to end his dual role at the company, which has been rocked by a string of scandals over privacy and a failure to police fake news, extremist and violent content.

Trillium senior vice president Jonas Kron said, “We want Facebook to be sustainable and we think in order to do that they need to change their governance. He controls 60 per cent of the vote so it’s ultimately his decision.”

A proposal sent to Facebook’s board by Trillium said, “We believe this lack of independent board chairman and oversight has contributed to Facebook missing, or mishandling, a number of severe controversies, increasing risk exposure and costs to shareholders.”

Dislodging Zuckerberg from an executive role would be difficult because his dualshare ownership gives him control of more than 60 per cent of the voting rights of the US$500-billion company. Trillium is also a relatively small shareholder.

Nevertheless, industry experts have bemoaned the firm’s self-inflicted wounds and mishandling of controversies in recent months and other shareholders have expressed similar views. Nordea’s Sasja Beslik, who earlier this year halted his fund’s investment in Facebook, said, “It’s one of the things that Facebook could do to improve perception within the investment community.”

Last year a similar package of measures was proposed to investors. It won 51 per cent of votes from shareholders who were not Facebook executives or board members. In an interview this month, a U.S. tech journalist joked with Zuckerberg that only he could fire himself. Trillium’s proposal will be voted on in May 2019. Investors are starting to fear that Facebook is reaching its limits in terms of growth in its most valuable markets. Former Facebook product manager Antonio Garcia Martinez said the company had “hit a growth wall”.

While the company has been shaken by a data scandal, the real concern for investors appears to be Facebook’s slowdown in its most important markets, which have become saturated.

Analyst Colin Sebastian said “these are ‘self-inflicted’ issues to a large degree.”