【2004 Archives】

Nope. Not even close. Not gonna happen. Dream on. Mark Zuckerberg004 Archivesunder no threat from Facebook shareholders.

But you might have been under some impression if you'd seen headlines in the last few days hinting at such a thing.

"Mark Zuckerberg is under attack from Facebook shareholders who want him to step down as chairman of the board of directors of Facebook."

That's the story that has been circulating in the last few days. It stems from a notice sent to various media publications that an organization had collected a group of Facebook shareholders calling for change at Facebook. The story was picked up by a variety of media outlets including the Chicago Tribune, Yahoo News (via IB Times) VentureBeat, Silicon Valley Business Journaland a smattering of others.

It gained some steam, even trending for some on Facebook.

Here's the problem: Zuckerberg and Facebook are under absolutely no pressure from this action. The movement amounts to a strongly worded letter from some people who want Facebook to do well. Zuckerberg has no obligation to do anything.

"When you were buying this stock, you knew you were basically ceding all control to Mark Zuckerberg," said Robert Salomon, associate professor of management and operations at New York University's Stern school of business. "And if you didn't like that, you shouldn't have bought the shares."

The shareholder group was organized by SumOfUs, a nonprofit that "exists to put corporations back in their place," according to its website.

The problem is that SumOfUs and its group of 1,500 Facebook shareholders have no power here.

Yes, shareholders can cause change at some companies. In recent decades, investors have made a strategy out of buying up chunks of companies then pushing for change among its leadership. Owning a piece of a company has classically meant having an equivalent say in that company's operation.

Facebook — and many of its newer tech brethren — don't work like that. Facebook has two kinds of shares. One type of share counts as 10 votes; the other counts as 1 vote. Zuckerberg controls around 57 percent of the voting power, meaning he doesn't have to listen to a few piddling shareholders or conceivably even his board of directors.

Even Spiegel and Snapchat are doing the same thing ahead of its IPO. Google also has this "dual class" structure.

If that seems unfair, you're not alone. The move to give Zuckerberg control of the vast majority of Facebook's voting power — which used to be what shareholders typically enjoyed — is the subject of a lawsuit.

A spokesperson for Facebook declined to comment about the letter, but noted that the company would respond to it in a filing ahead of its shareholder meeting later this year — as it does for all shareholder proposals.

As for what shareholders can actually do? Well, they have the option of not being Facebook shareholders anymore.

"Their only option really is to vote with their feet and sell and walk away," Salomon said.

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