• Facebook investors were in open revolt against the company's governance structure at its annual shareholder meeting on Thursday.
  • They said CEO Mark Zuckerberg risks running the firm like a "corporate dictatorship" and one investor was thrown out of the room for shouting.
  • Three major shareholders recently highlighted concerns over Facebook's dual-class share structure, which gives Zuckerberg a lot of personal power.
  • Zuckerberg ignored the concerns and focused on the work Facebook is doing to overcome data and fake news scandals.

Tensions over Facebook's governance structured boiled over at the firm's annual shareholder meeting, where investors were in open revolt at CEO Mark Zuckerberg's "dictatorship"-like power.

The governance issue has been bubbling away for weeks, with some investors seizing on the Cambridge Analytica data fiasco as an opportunity to call for change. These feelings intensified at the meeting at Menlo Park on Thursday.

Business Insider's Troy Wolverton kept an eye on proceedings, and according to widespread reports, Zuckerberg was challenged several times over his control of the company.

One investor was thrown out of the room for shouting that "shareholder democracy is lacking at Facebook."

Another investor, named as James McCritchie, said Facebook risked becoming a "corporate dictatorship" without change. "Mr Zuckerberg, take a page from history: Emulate George Washington, not Vladimir Putin," he reportedly said.

Central to investor concerns is Facebook's dual-class shareholding. Facebook's Class A shares trade under the FB ticker on public markets and come with one vote for each share. Class B shares are available only to insiders and have 10 votes for each share.

Facebook CEO Mark Zuckerberg owns lots of class B stock, enough to afford him 60% of the total voting power. He is also Facebook's chairman. In other words, if he wants something to happen at Facebook, it happens.

The most recent intervention came from the California State Teachers' Retirement System (CalSTRS), which owned $650.4 million (£489 million) of Facebook stock as of December 2017.

"Why does Mr Zuckerberg need the entrenchment factor of a dual-class structure? Is it because he does not want governance to evolve with the rest of his company? If so, this American dream is now akin to a dictatorship," said CalSTRS executive Aeisha Mastagni.

Despite the anger, Zuckerberg was never really in any danger

Wolverton reported that Zuckerberg and his colleagues ignored the concerns about the company's governance.

Zuckerberg spent much of his time instead talking about previously-announced changes Facebook has made that attempt to block fake accounts, halt the spread of propaganda through its site, and clamp down on posts that violate its rules.

Despite the criticism -- and the fact that several of the shareholder proposals were supported by influential proxy advisor Institutional Shareholder Services-- there was little risk that anything dramatic would happen at the meeting, beyond the occasional interruption.

Zuckerberg has enough voting power to decide nearly any issue essentially by himself. So it was no surprise that Facebook's entire slate of directors was elected and all of the shareholder-sponsored proposals were voted down.

This post originally appeared on Business Insider

Published on: Jun 1, 2018