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Governance

Shareholders push for independent Facebook board chair

Finance officials in Illinois, Rhode Island, Pennsylvania and New York City co-filed a shareholder proposal Wednesday asking Facebook's board of directors to make the chairman an independent position.

Facebook declined to comment on the proposal, which will be put to a vote at the company's annual shareholder meeting in May 2019.

A similar shareholder proposal presented at the company's June 1, 2017, shareholder meeting was voted down. Facebook said in a proxy filing on that meeting that the current, lead independent director role "ensures effective representation of the interests of all stockholders. We do not believe that requiring the chairman to be independent will provide appreciably better direction and performance, and instead could cause uncertainty, confusion, and inefficiency in board and management function and relations."

The new proposal, filed by Trillium Asset Management in June and co-filed Wednesday by Illinois Treasurer Michael W. Frerichs, Rhode Island Treasurer Seth Magaziner, Pennsylvania Treasurer Joe Torsella and New York City Comptroller Scott M. Stringer, comes "after years of shareholder engagement," they said, noting that last year's proposal received the support of 51% of the votes cast when excluding the shares of 13 executives and board members.

The proposal highlights that Google, Microsoft, Apple, Oracle and Twitter have separate CEO and chairman roles, and as of April 2018, 59% of the S&P 1500 companies had separated the roles.

The co-filers said their proposal focuses on "Facebook missing, or mishandling, a number of severe controversies," including Russian meddling in U.S. elections, sharing personal data of 87 million users with Cambridge Analytica, data sharing with device manufacturers, allowing the proliferation of fake news, and allowing advertisers to exclude ethnic affinities.

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.