Facebook, Google and Tesla shareholders have something in common: They’re not happy with management.
In the past week, the three companies’ investors shot down shareholder proposals seeking more accountability from the companies and their leaders. All three companies’ founders own considerable stakes in each of the companies they founded — or have outsize influence — so shareholder proposals are usually an exercise in futility.
That may not be unique in the business world. But these companies in particular are facing tremendous pressure amid a backlash against tech companies, including rumblings that Silicon Valley has become too powerful.
Facebook’s dual-class stock structure means CEO Mark Zuckerberg holds nearly 60 percent of voting rights to the world’s largest social network. Ditto Alphabet, where Google co-founders Larry Page and Sergey Brin hold 56 percent of voting power. At Tesla, CEO Elon Musk owns about 20 percent of the company but is its largest individual shareholder — and has an almost religious following.
A proposal to appoint an independent chairman of the board at Tesla besides Musk lost handily at the company’s annual meeting Tuesday. It managed to get 16.6 million votes in agreement but there were 86 million votes opposed, according to Tesla’s filing with the Securities and Exchange Commission. Another proposal, which opposed the re-election of three board members including Musk’s brother Kimbal Musk, also was voted down.
Tesla has struggled with production problems for its latest vehicle, the Model 3. It is also dealing with safety issues with its driver-assist Autopilot technology, plus it is being investigated by the National Labor Relations Board for accusations of union-busting.
Meanwhile, several shareholder proposals failed at Alphabet’s shareholder meeting Wednesday, including one supported by Google employees: tying executive pay to the company meeting its diversity goals.
Irene Knapp, a Google engineer, spoke at the meeting and painted a picture of raging culture wars at the tech giant.
“Diversity and inclusion activities by individual contributors and managers alike — including mentorship, outreach, and community building — have been met with a disorganized array of responses, including formal reprimand,” Knapp said.
The company’s diversity-related problems are many, and come from all sides. It is facing a lawsuit over gender and pay. And last year, Google fired James Damore, a conservative engineer who wrote a memo criticizing the company’s diversity initiatives and implied biological differences make women less suited to the tech world. Another shareholder proposal that was rejected Wednesday asked the company to appoint conservatives to its board.
As for Facebook — which has been rocked by privacy-related scandals and its role in the propagation of disinformation during the 2016 U.S. presidential election — a shareholder proposal to establish a risk-oversight committee failed last week. Also at the annual meeting, where Zuckerberg was urged not to turn Facebook into a “corporate dictatorship,” a proposal to create a content-governance report failed, too.
But Open Media and Information Companies Initiative, a nonprofit that works on socially responsible investing and shareholder engagement and which supported those two proposals, pointed out this week after Facebook released the final vote tallies that outside investors’ votes show clear discontent.
“Despite strong urging from the company to reject each and every one of these proposals, nearly half of independent shareholders supported two proposals for stronger governance and content management, demonstrating just how out of sync CEO Mark Zuckerberg and his team are with the average investor,” said Michael Connor, executive director of OpenMIC, in a statement. “Independent shareholders also overwhelmingly voted to change the dual class shareholding vote structure, and nearly one third did not support the re-election of Zuckerberg or COO Sheryl Sandberg to the company’s board.”
So what are outside investors to do when companies whose insiders control the voting rights reject their calls for greater oversight and transparency?
“Outside investors can — and will — keep up the pressure,” Connor said. “People tend to think that a company like Facebook can survive no matter what. The reality is that the history of the tech world is filled with the legacies of companies that once dominated but now no longer exist — companies like Yahoo, AOL, MySpace and others. Facebook would be well-advised to take note.”