Bloomberg News

Pension Fund Tells Facebook to Diversify Board, Split Up Roles

February 09, 2012

Feb. 8 (Bloomberg) -- Facebook Inc. should diversify the makeup of its all-male board and separate the chairman position from chief executive officer role, the California State Teachers’ Retirement System said.

Calstrs, the second-largest U.S. public pension, also recommended adjusting the voting rights of Facebook stock so that shareholders’ economic interest matches their voting power, according to a statement today. The pension fund posted the remarks a day after sending a letter directly to CEO Mark Zuckerberg.

“We are disappointed that the Facebook board will not have any women members,” said Anne Sheehan, the pension’s director of corporate governance. “This is particularly glaring in view of the fact that Facebook is going public at a time when there is clear evidence that companies with diverse boards perform far better than the companies with more homogenous boards.”

Facebook has faced criticism over its insular board and concentration of voting power since filing for a $5 billion initial public offering last week. Zuckerberg, who co-founded the company, controls 56.9 percent of voting power. Facebook also says it meets the requirements of a “controlled company,” meaning it can skip the governance rules that apply to most businesses holding an IPO, such as the need for a compensation committee and a board made up mostly of independent directors.

Sarah Feinberg, a spokeswoman for Menlo Park, California- based Facebook, didn’t immediately respond to a request for comment after regular business hours.

Applying Pressure

Calstrs has a history of pushing for changes at companies. It lobbied last year to get corporations to disclose their political donations. In 2009, the pension sent a letter to 300 of its largest portfolio companies asking them to let shareholders have an advisory vote on executive compensation.

The $144.8 billion fund, based in West Sacramento, California, has invested in Facebook through two partnerships.

Facebook should “equalize the voting power of shares to be representative of investors’ economic interests,” Calstrs said.

“Given that this company embraces an innovative business culture and a diverse user base, nearly 60 percent female, it seems paradoxical that it should adopt such a centralized, old business governance structure,” Calstrs CEO Jack Ehnes said in the statement. “This type of governance structure is definitely not conducive to ‘friending’ new shareholders.”

--Editors: Michael Tighe, Frank Longid

To contact the reporters on this story: Ketaki Gokhale in Mumbai at; Douglas MacMillan in San Francisco at

To contact the editors responsible for this story: Michael Tighe at; Tom Giles at

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