From my experience, having majority shareholders don't lead to "deviant behavior" any more than companies with no majority shareholder. In fact, one could argue that many of the ugly collective action problems facing the world today stem from organizations in which nobody has the power to veto unethical policies.
I think the problem here is that Zuck can veto. I think it's that Zuck is unethical.
Arguably, they are the ones most affected with the most to lose. A salaried employee with no stock options likely depends more on their continued paycheck and the continued success of the company than any large shareholder or even the class of employees who hold stock.
Their vote should count MORE than the board.
The media, of course, isn't owned by workers, and so rampant character assassination is par for the course for anybody who moots ideas like this ("czech spy", "arch brexiteer", "anti-semite", "terrorist sympathizer", etc.).
I understand why this isn't practicable. Those who have large investments have a large incentive to educate themselves on how the market works and how corporate governance will impact overall success for the company.
Sometimes hard and unpopular decisions are necessary in order to keep the company profitable.
I do, however, see real value in having input from a sector that's focused more on long term success than short term profits.
The question is, how well can you sell it and whether the conditions are otherwise acceptable.
Your landlord, most of the time (i.e. when they're not repairing or maintaining their properties), is not trading money for time; they are charging you for access to materials which, moment to moment, costs them nothing.
Patent trolls make money without trading away their time -- you work to pay for access to an idea, which costs them nothing to maintain.
One could go on and on with examples of widespread rent-seeking fields of work and industry; but in general, no, it isn't literally everyone who trades time for money.
You can take financial resources of the public or you can have veto power. If you have both, you’re not a “Public Company” anymore and your stocks should be immediately delisted from public markets.
Given the fact that what happens appears to be us going after tech firms under current law, I wouldn't hold out much hope for needed changes in the legal environment. For some reason, (money), people just don't want to do that.
I mean, did people not read the prospectus? What, exactly, did they think "dual class" meant? These people should consider divesting, because I'm not certain that they studied their investment target closely enough to wargame out different possible outcomes prior to throwing money at FB.
This vote was proposed by Trillium Asset Management, an activist investment group. They hold $7M of Facebook stock, and the group they lead to bring the ouster vote appear to control around $3B. These are people who knew what they were investing in, and decided to bring this vote to put pressure on Facebook, not in a deluded hope that it would pass. What's more, a bunch of the outside investors seem to want more leverage without wanting Zuckerberg out - there's a 15-point gap between "voted for a new chair" and "voted to end dual class stock".
More broadly, this is just a round of the kind of corporate advertising via news that PG called the 'submarine' (http://www.paulgraham.com/submarine.html). Trillium called a vote that couldn't pass, and was on hand to provide a pithy closing quote to Business Insider's reporter. BoingBoing is running the story with a narrative of fighting the evil tech billionaires, never mind that Doctorow normally hates the idea of companies "disciplined by shareholder choices". Meanwhile, Trillium's website posted the story "Trillium's Ongoing Pressure on Facebook Governance in the News" - this is a conscious and apparently quite effective effort to create a "Zuckerberg ignores his shareholders" narrative.
My point is that the prospectus "...is a conscious and apparently quite effective effort to create a 'Zuckerberg ignores his shareholders' narrative..."
It's quite literally, publicly stated company policy in this regard.
Everyone who bought in knew, or should have known, that Zuckerberg had the power to ignore their votes. But in principle, that could have been limited to fending off raiders, mergers, or other harmful initiatives. By repeatedly demanding an executive chair to provide oversight, Trillium stresses the idea that Zuckerberg is using his majority vote to defend irresponsible leadership.
Will anything actually come of it? Probably not, but if FTC or SEC pressure amounts to something real it might position them better to gain influence over the company.
About the only thing this fuss does is manipulate Facebook's share price.
Of course, everyone wants a bigger piece of the pie, so they can try to bring even more political pressure on Zuck.
That said, these voters should try to change the SEC guidelines, no use hating the player, change the game.
This administration seems to want to go after tech. If you’re a large Facebook investor, encourage them. You’re going to lose some value, but less than if you leave Mark in charge.
We're not Jedi.
If we want things to change, we have to change the actual laws. Expecting lawyers to find some violation under current law is fanciful in the extreme.
There's always the option of putting your money where your mouth is. If you're saying a dual class structure is bad, and not in the interest of shareholders or companies? I mean, well, you should be willing to put your money behind that assertion. It should be to your benefit because the implication is that not investing in companies with dual class structures should be more profitable over time.
I agree with others. It was well known that Facebook was exclusively controlled by zuck when it went public, and that wouldn’t change. I think the only recourse is to lobby the sec to prevent it from happening in future IPOs.
the worth of shares in the hands of the investors is highly dependent on Zuckerberg being at the helm & maintaining Facebook on the course.
If they ousted Zuckerberg, or curtailed his power to make decisions, the shares' worth would enter a slow, but inevitably terminal, decline.
Side note, I disagree with, and condemn Facebook's certain practices. The above post is only to indicate the company as a whole is a highly efficient money making machine.
S&P refuses to add companies with dual-class stock to the S&P 500 or other benchmarks they control (Facebook was grandfathered in).
But I try to invest my 401(k) according to what I understand of academic research, and they never mention the importance of avoiding dual-class stock ( https://web.stanford.edu/~wfsharpe/art/active/active.htm ). I understand that some people have personal crusades about this or other questions of corporate governance; but those are their crusades, not mine, and they aren’t responsible for my financial well-being.
And that what matters in this case. The knew what they're buying, it was a huge debate about it in the media too. All was legal and was disclosed. Personally I would not buy stock in a company structured this way, but if I did, I would not have a right to complain.
It is the expectation of action missing.
It is a public company in label only. This is a psuedo-public company as long as a single individual owns/controls the company.
I haven’t seen this be true any more than public companies where stocks are directly equal to voting rights. Why would it be any different?
I’d say that for all practical purposes he controls it (but not owns).
Good thing too. Facebook wouldn’t be the same without Zuck.
He just has more than 50% voting rights, which should never have been allowed, and should be one of the things that SEC should look at if/when any kind of antitrust probe is done. It leads to deviant behavior by public companies.
Edit:
Some people below are looking at it below from a purely investor standpoint.
I'm not an investor in FB and own no stocks.
I'm looking at the behavior of FB which IMHO is purely due to Zuck, him being unethical (as someone else has also called out below) and the fact that he has unchecked power in how he is running FB. Like in a Government, the Board is supposed to provide the checks and balances in a public company. Unfortunately, due to the voting structure the Board of FB is 100% impotent.