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Facebook board wants to keep control of the company in event of Zuckerberg’s departure

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The face of Facebook, Mark Zuckerberg is currenty the majority stake holder and decision maker of the social networking site’s fate. But, his yearning for absolute power might not last forever.

The board at Facebook Inc. has decided to introduce certain rules and curb the founder and CEO’s majority voting rights. In an SEC proxy filed by the board member of the company states that if Zuckerberg ever decides to step down and leave his management position at some point, he would no longer hold any majority voting rights in the decisions of the company.

The filing also specifies that Zuckerberg cannot pass over the reigns of the social media giant to his descendants, which means his daughter, Max Zuckerberg won’t be able to step into her father’s shoes in the event of his demise.

In such a situation , the board has proposed a rule where-in once Mark steps down from his leadership position, it will ask the shareholders to vote on a proposal that would convert his B Class shares into Class A shares, which are public shares and add it to the company’s stock holdings. It means that if Zuckerberg ever decides to leave(which may not be very soon), Facebook’s board is free to hire the best replacement CEO, not just the one that shares some DNA with the founder, as stated in the proxy filing.

The Facebook board also states that,

These new terms thus ensure that we will not remain a founder-controlled company after we cease to be a founder-led company.

This is a proposed move, which will be voted upon in Facebook’s annual general meeting on June 20. The new rule has been put forth so that the power of the chief management board aren’t limited and the company isn’t run by a dictator-like figure in the form of Zuckerberg, even after his departure.

As per current share holdings, Zuckerberg is allowed to hold Class B shares and exercise majority voting control even if he leaves the company. He currently ownes about 4 million Class A shares and about 419 million Class B shares, adding upto over 54 per cent of the total outstanding voting power.

This counter move by the management board is in (silent) retaliation of Zuckerberg’s plan to introduce a new class of non-voting Class C stock which will give him majority control of the company as well as support his philanthropic goals. This move has also seen retaliation from the share holders, who have filed a class action lawsuit against the founder of the social media giant.

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