Facebook Proposes Zuckerberg Succession Plan

Shareholders will vote on a proposal to ensure Facebook "will not remain a founder-controlled company after we cease to be a founder-led company."
Katie Kuehner-HebertJune 6, 2016

Facebook’s board is planning for the succession of Mark Zuckerberg by proposing to strip him of his control of the company in the event that he steps down from management or is fired.

In a regulatory filing, Facebook said it would ask shareholders at its annual general meeting on June 20 to vote on a proposal that would “ensure that we will not remain a founder-controlled company after we cease to be a founder-led company.”

Under the contingency plan, Zuckerberg would retain his 14.8% economic stake in Facebook but his Class B shares would be converted into Class A shares, reducing his 53.8% voting power. As of June 2, he owned about 4 million Class A shares and about 419 million Class B shares.

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“Attracting a qualified chief executive officer to succeed Mr. Zuckerberg would be significantly more difficult if Mr. Zuckerberg, our founder and (in that event) former chief executive officer, continued to retain majority voting control of us in such a circumstance,” the filing said.

It added that “the quality of a chief executive officer who would step into the role under these circumstances is likely to be significantly lower than it would be if we were no longer controlled by Mr. Zuckerberg, which could result in the potential loss of significant value for us and our shares of Class A common stock.”

While the proposal “might appear harsh,” it is not a “coup,” according to CNET.

“Facebook’s board members are caretakers of the company and need to plan for how they would handle any events that might throw the company off course,” CNET said. “Part of that means ensuring any future CEO of Facebook wouldn’t have limited management powers if an absent Zuckerberg were to keep a controlling stake in the business.”

The board stressed that it continued to fully support Zuckerberg in his current position.

“[We] believe the reclassification [of shares] is an appropriate way to make it more likely that Mr. Zuckerberg will remain in a leadership role, and thus in a position to influence our direction for many years,” the board said in the filing.

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