SUPPORTING STATEMENT: The Company maintains a dual class structure for its common stock. Its Class B common stock has ten votes per share while its Class A common stock has one vote per share.
Currently, voting results are disclosed by the Company without any distinction by share class. We believe it is important for those results to be disclosed separately by share class to determine whether the concerns of each type of shareholder are aligned.
Due to the company’s dual class share structure, a small minority of shareholders control a majority of the voting rights. As the Company notes in its 10-K, “the dual class structure of our common stock and a voting agreement between certain stockholders have the effect of concentrating voting control with our CEO and certain other holders of our Class B common stock; this will limit or preclude your ability to influence corporate matters.”1 The Company’s CEO, Mark Zuckerberg, currently owns nearly 100% of the outstanding Class B stock, which grants him 61% of the overall voting power.2
Given that Class B stockholders can disproportionately impact voting decisions that do not reflect the desires of the majority of shareholders, it would benefit these shareholders to clearly see when this has occurred.
It is clear in recent years that holders of both types of shares may not have the same concerns on significant corporate governance and risk oversight matters put to a vote before shareholders. Recent proposals covering topics such as the establishment of an independent board chair,3 the phase-out of the Company’s dual class stock structure,4 and the publication of an independent human rights impact assessment,5 are all estimated to have received majority support among the Company’s independent shareholders. Nonetheless, none of them were approved due to the Company’s dual class structure.
The disaggregation of voting results by share class would enable Class A shareholders to better monitor how responsive the Company is to issues that a majority of shareholders raise. This enhanced understanding could result in greater minority shareholder loyalty and thereby build the type of consensus and mutual trust that can prove useful when companies experience periods of below-market performance or significant market blowbacks.
The disaggregation of voting results is also a non-onerous practice that the Company could adopt without undue burden, as evidenced by multiple US companies already having adopted this disclosure as a governance best-practice.