STUMP » Articles » Divestment Follies: Going After Facebook.... Again » 18 October 2018, 16:32

Where Stu & MP spout off about everything.

Divestment Follies: Going After Facebook.... Again  

by

18 October 2018, 16:32

Hey, let’s look at these dumbasses!

At Facebook, public funds join push to remove Zuckerberg as chairman

Four major U.S. public funds that hold shares in Facebook Inc on Wednesday proposed removing Chief Executive Officer Mark Zuckerberg as chairman following several high-profile scandals and said they hoped to gain backing from larger asset managers.

State treasurers from Illinois, Rhode Island and Pennsylvania, and New York City Comptroller Scott Stringer, co-filed the proposal. They oversee money including pension funds and joined activist and original filer Trillium Asset Management.

A similar shareholder proposal seeking an independent chair was defeated in 2017 at Facebook, where Zuckerberg’s majority control makes outsider resolutions effectively symbolic.

Seriously, guys.

Zuckerberg will leave when he feels like it.

It cites controversies that have hurt the reputation of the world’s largest social media network, including the unauthorized sharing of user information, the proliferation of fake news, and foreign meddling in U.S. elections.

Illinois State Treasurer Michael Frerichs said in an interview that, while an independent chair might not have prevented all the issues, “there might have been fewer of these problems and less of a drop in share price” at the company.

Oh, Frerichs. Remember what he did last year?

Mike Frerichs is the Illinois State Treasurer, and he seems to have forgotten what his job is.

State treasurer has a Facebook obsession:

“llinois State Treasurer Mike Frerichs is pressuring Facebook to own up to its role in allowing Russia to meddle in the 2016 U.S. Presidential election.

“As treasurer, Frerichs oversees state investments that include a stake in Facebook. He began fighting in April to get the social-media company to put an end to bogus news reports.”

……
So Frerichs, I humbly propose that you stop worrying about one stock in your $13 billion of funds you’re supposed to be managing, and actually look at how those funds are being managed. That’s your actual job.

Now, Facebook stock hasn’t done well over the past year, while the market has generally been up, year-over-year.

WHAT IS FACEBOOK GOOD FOR?

But I don’t think RUSSIA! is necessarily the problem. Giving advertisers bullshit stats on video views may be more problematic.

I don’t go to facebook primarily for news items. I go to news sites for that. I even dip into twitter, because they’re good for news searches. I go to facebook for stuff like this:

I’ve actually bought stuff via facebook ads, because I have taught facebook the sort of stuff I am very happy to buy. I bought clothes at MM LaFleur through a facebook ad. I bought a Turing Tumble for my son, ostensibly (really for me.) I’ve backed numerous kickstarters I’ve seen through facebook, too, like this fancy measuring cup:

(I’m still waiting for it.)

There are aspects of facebook that don’t work for me, but “muting” people who spam with too many political posts or their MLM scheme works pretty well, and I’m happy with my groups. Check out this one on Russian activist Yuri Dmitriev — if you want some real Russian content. Dmitriev has catalogued those who died in a particular gulag, mostly political prisoners during Stalin’s era. Here’s one on Vladimir Bukovksy, a dissident who exposed the political abuse of psychiatry in the Soviet Union.

Anyway, I still get a lot of good use out of it, on different levels, and some of the facebook advertisers are making money off me. Win-win!

CORPORATE GOVERNANCE: IT’S TOUGH TO BUMP OFF THE MAJORITY STAKEHOLDER

So let’s see what some of these state fund fiduciaries have to say about the situation:

Mr. Stringer, the fiduciary for the five pension funds within the $195.8 billion New York City Retirement Systems, said in the group’s statement that due to Facebook’s “outsized role in our society and our economy … they have a social and financial responsibility to be transparent.”

“We need Facebook’s insular boardroom to make a serious commitment to addressing real risks — reputational, regulatory, and the risk to our democracy — that impact the company, its shareowners and, ultimately, the hard-earned pensions of thousands of New York City workers,” Mr. Stringer added.

The current governance structure “continues to put its investors at risk,” said Mr. Frerichs, who serves as Illinois’ chief investment officer, actively managing $28 billion. As Rhode Island’s general treasurer, Mr. Magaziner has pushed for more transparency and less risk in the state’s $8.4 billion pension fund. Mr. Torsella of the Pennsylvania Treasury oversees more than $100 billion in state funds.

Here is something I agree with Frerichs on — there is an issue with corporate governance at facebook, but they’re not going to be able to fix it when the problem is the majority shareholder can thwart all other shareholders.

And they can’t get around it.

FIDUCIARIES: LOOK TO YOUR OWN STRATEGIES AND GOVERNANCE

So, I am turning it back on these fiduciaries: given that you knew that facebook is owned primarily by a single person, the chair and the CEO of the company, not to mention founder… was it a good exercise of your fiduciary duty to invest in such a company to begin with?

Because you’re not going to be able to get Zuckerberg out of that chair unless he wants to… or he dies.

What it would take to pry Zuckerberg from that role is beyond the power of these state fund fiduciaries, who should be making investment decisions that protects the funds they are fiduciaries for.

Maybe y’all should have done due diligence before buying the stock.

Given the knowledge that the state funds could not fix this glaring corporate governance problem, perhaps they should not have bought the stock to begin with, or at least not until there wasn’t one person who controlled everything in reality.

Maybe they should check their portfolios to see if they have other stocks like that, because they will not be able to do anything effectively as shareholders if they want to enforce good governance practices on the companies they invest in.

Or maybe they should only invest in bonds of such companies (if creditworthy enough), but facebook has no long-term debt currently.

So I say the public fund fiduciaries – whether of pension funds or of state moneys for other things (like Frerichs) – should reconsider their investment policy in light of this reality. They can actually do something about changing that.

They’re not going to change facebook — at least, not as very minority shareholders.


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