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Activists angry with Facebook are taking their complaints to the next level: Shareholders.
Civil rights group Color of Change and Majority Action, a group focused on corporate accountability, are launching a new campaign to persuade shareholders to oust chief executive Mark Zuckerberg from the board of directors.
They're urging them to limit Zuckerberg’s “sweeping” control of the company in the wake of “insufficient response” to a series of crises -- ranging privacy incidents to the rampant spread of disinformation by Russians ahead of the 2016 election. Ahead of a Facebook investor meeting scheduled for later this month, the groups want to bring awareness to the broad power Zuckerberg wields as both the company’s chairman and chief executive -- who also holds majority voting rights within the company.
Turning to shareholders is a prominent example of a relatively new way activists are trying to influence the direction of Silicon Valley giants -- especially in the absence of regulatory action from Washington.
It's a tactic picking up steam in tech hubs. Earlier this year, Amazon employees used their company-issued stock to pressure executives into lessen its contribution to climate change. Later this month, Amazon shareholders will have the chance to vote on whether the company should ban facial recognition technology. (Amazon founder and CEO Jeffrey P. Bezos also owns the Post.)
This latest effort to boot Zuckerberg through a shareholder vote is likely “dead on arrival” as a matter of corporate law, according to Lawrence Cunningham, a professor at The George Washington University Law School. Zuckerberg himself exerts enough voting power to render most shareholder efforts to limit his power toothless.
But activists say the high odds against the shareholder effort are exactly why reforms at Facebook are needed.
“With the governance structure at Facebook, no reforms can get through, and that’s precisely the point,” said Brandi Collins-Dexter, senior campaign director at Color Of Change, which calls itself a racial justice organization. “There are no checks and balances at the highest rungs of the company. In fact, when one person has unilateral power over all reforms, that undermines the meaningful and lasting change that Black people need.” (Color of Change is among the groups critical of Facebook's response to Russians seeking to dampen African American political participation.)
If the advocacy groups can convince enough independent shareholders to withhold support from Zuckerberg at the upcoming meeting, they may be able to undermine public confidence in his leadership. The effort could turn up the heat on Zuckerberg to cede some of his power.
Cunningham noted as a company that relies on the trust of billions of consumers, Facebook is very susceptible to this form of public pressure. “Corporate officials answer primarily to majority shareholder vote, but publicly important ones like Facebook need to win the hearts of most Americans as well,” he said.
And this isn't the first time Zuckerberg has run into obstacles with shareholders. Last fall, four major public funds proposed removing Zuckerberg as board chairman. At last year's annual investor meeting, ordinary investors launched what the Financial Times called a "significant rebellion." More than a quarter of these shareholders voted against re-electing Zuckerberg and Facebook chief operating officer Sheryl Sandberg, and 60 percent of those ordinary shareholders supported proposals that would move the company to a "one vote per share" model that would limit the weight that Zuckerberg and other company insiders' votes currently have.
It's not just activists looking into the top rungs of Facebook. The Federal Trade Commission is also closely scrutinizing Zuckerberg and has weighed whether to pursue greater oversight of his leadership in the wake of the Cambridge Analytica scandal.
Color of Change has a history of success in forcing Facebook to make changes. It has been an ardent critic of discrimination on Facebook since 2015, and it called for the social network to conduct a civil rights audit on its platform. The company agreed to do an audit, but advocacy groups say the update on the audit it released last year fell short and a broader shakeup at the company is needed.
“We’re encouraged by Facebook’s recent changes that have come as a direct result of pressure from Color Of Change and other civil rights groups because it shows the power of advocacy as a means to shift corporate power," Color Of Change President Rashad Robinson said in a statement.
"Nevertheless lasting change to address the misinformation, discrimination, violent movements and data breaches that put users, especially Black users, at risk cannot be subject to the whims of a single person. Our 1.5 million members, in partnership with Majority Action, are taking our campaign to Facebook’s institutional investors because shareholder value is threatened by the company’s failure to make fixing civil rights violations an operational priority.”
BITS: Political pressure is building on the Federal Trade Commission to punish Facebook with more than a "bargain" fine, my colleague Tony Romm reports. A pair of bipartisan senators want the agency to move more swiftly and consider targeting the company's executives as it probes the social network.
Sen. Richard Blumenthal (D-Conn.) and Sen. Josh Hawley (R-Mo.) said the agency needs to signal to technology giants that Washington is closely scrutinizing companies that violate consumers' privacy.
“This investigation has been long delayed in conclusion — raising the specter of a remedy that is too little too late,” the lawmakers wrote. “The public is rightly asking whether Facebook is too big to be held accountable. The FTC must set a resounding precedent that is heard by Facebook and any other tech company that disregards the law in a rapacious quest for growth.”
Beyond a fine, the lawmakers called for greater limits on Facebook's data collection, including requirements that would curtail the information it can use for advertising. They also demanded greater accountability for individual executives if the FTC determines “any Facebook executive knowingly broke the law" or its pledges to improve privacy practices.
These penalties would be in addition to the multi-billion fine that the company acknowledged it would likely pay in its most recent earnings report. The company's stock rose as it reported the penalty, causing some critics to question whether the fine has teeth, as we previously reported in a recent Technology 202.
"Even a fine in the billions is simply a write-down for the company, and large penalties have done little to deter large tech firms," the lawmakers said.
NIBBLES: Fake news isn't just a political problem. Companies are worried that disinformation could sink their stock price -- so they're hiring third-party companies to monitor social media, Claire Atkinson of NBC News reports.
"Whether it's faking a letter from a chief executive to alter a corporate strategy, or staging a car crash to imply a faulty vehicle, fake news that generates headlines can — and has — hurt a company’s bottom line, pushing the stock price down and setting off a public relations nightmare that is, in many cases, irreversible," Atkinson writes.
A crop of companies that can scan the web for instances of disinformation are emerging to help businesses fight back.
“Containing the spread of disinformation, especially for a brand or public figure under attack, is a race against time,” said Jean-Claude Goldenstein, founder of CREOpoint and developer of a business intelligence technology that aims to curb the fallout from fake news, told Atkinson.
“It takes preparation to put out specific fires in their tracks, way before they grow into wildfire and cause irreversible damage,” he added.
In one recent instance, a video of a Tesla "self-driving vehicle" slamming into a robot prototype went viral, with a number of outlets covering it. But the video turned out to be fake -- Tesla doesn't even have a fully self-driving model.
The video appeared to be a big publicity stunt by the Russian firm who created it. But Atkinson talked to experts who say the video's makers may have had another goal.
"Some experts in the disinformation field suspect the caper was not any kind of bot promotion but rather a deliberate attack on the American stock market by 'foreign actors' trying to undermine consumer acceptance and trust in self-driving cars and drive down stock prices in companies that develop them," Atkinson wrote.
BYTES: More than 100 employees at Riot Games walked out to protest the company's use of forced arbitration to handle lawsuits related to allegations of sexual harassment at the company, reports Vice's Matthew Gault and Nicole Clark. The "League of Legends" developers' walkout is the latest in a wave of tech workers' efforts to force companies to change policies from the inside through displays of activism.
After reports surfaced that Riot Games employees were planning yesterday's protest, the company announced in the future, employees could opt-out of forced arbitration for individual sexual harassment and sexual assault complaints. But existing lawsuits will still go through arbitration.
“As soon as current litigation is resolved, we will give all new Rioters the choice to opt-out of mandatory arbitration for individual sexual harassment and sexual assault claims,” Riot said in a statement published on its website. “At that time, we will also commit to have a firm answer around expanding the scope and extending this opt-out to all Rioters.”
However the employees said the change didn't go far enough and decided to carry on with their planned protest.
“We are asking Riot to fully end forced arbitration for past, current, and future Rioters, including contractors, and to withdraw its use in active litigation,” the organizers behind the walkout told Vice in an email. “We stand with the current plaintiffs, whose alleged abusers remain in leadership positions at Riot. Victims of harassment and discrimination should have the right to choose how to confront their abusers, whether that’s in private arbitration or a court of law.”
A wide range of technology companies are committing to overhaul their forced arbitration policies, especially in legal proceedings related to sexual misconduct. But critics say the devil is in the details when companies make these changes. You can read more about efforts to pressure lawmakers to act on forced arbitration in last week's Technology 202.
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