Having both CEO and Chairman jobs seen as a conflict of interest
At Facebook’s annual meeting, some shareholders called for Mark Zuckerberg to take off one of his leadership hats.
Zuckerberg is both CEO and Chairman of the social media giant’s board of directors, but some see that dual role as hampering board independence.
“There is a clear conflict of interest when a corporation’s board of directors, which is responsible for overseeing the CEO and representing shareholders, is chaired by that same CEO,” explained Lisa Lindsley, capital markets advisor for corporate accountability investor group SumOfUs, in a letter to shareholders. “An independent board chair is a necessary first step to put Facebook’s board on the path to effective representation of the interests of all shareholders.”
The measure failed to get a majority vote, but that may be bucking a trend.
Indeed, the splitting of the two top leadership positions is something that’s been on the rise for the past decade. More than 50% of the largest companies in the United States now separate the jobs, making it the first time the majority of Fortune 500 companies have done so, according to a study by Wills Towers Watson. (See Figure 1 below.)
But Facebook’s board doesn’t seem to be jumping on this trend.
In the company’s recent proxy statement, the board opposed the proposal saying:
“We believe that our current board structure is effective in supporting strong board leadership. Implementing the proposal is unnecessary because the leadership structure of our board of directors already provides for independent leadership and oversight of management. Forcing a division between our Chairman and our CEO could harm our performance and be detrimental to interests of our stockholders.”
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SumOfUs argues otherwise, pointing out that Facebook now has the highest governance risk rating given by the Institutional Shareholder Services (ISS), an institutional investors advisor.
The shareholder proposal states:
“We believe that independent board leadership would be particularly constructive at Facebook as our company faces increasing criticism regarding its perceived role in the promotion of misleading news; censorship, hate speech and alleged inconsistencies in the application of Facebook’s community standards guidelines and content policies.”