Facebook Inc (NASDAQ:FB) Chief Executive Mark Zuckerberg isn’t planning on leaving the social network or stepping away from the helm anytime soon, but as they say, all good things must come to an end. Eventually he’s likely to retire, if he doesn’t leave before then for some reason. And if or when he does leave, he won’t be able to keep control of the company he founded if shareholders approve a proposal set forth by the board of directors for the annual meeting.
Facebook’s (FB) board prepares for the future
A filing with the Securities and Exchange Commission reveals the proposal, which calls for Zuckerberg’s Class B shares, which carry the voting power of ten Class A shares, to be converted into Class A shares if he steps down from the CEO post. As CNET notes, it would mean that the Facebook Inc (NASDAQ:FB) founder’s current 14.8% economic stake in the company would remain, while his 53.8% voting power is reduced to that of a regular shareholder with a 14.8% stake.
The regulatory filing states that the new terms would ensure that the social network would not still be controlled by its founder if or when it is no longer led by him. The proposal is up for a vote at the annual shareholder meeting, which is set for June 20. The filing also makes it clear that they are making it a priority to keep Zuckerberg onboard for as long as possible and that the proposal “is an appropriate way to make it more likely that Mr. Zuckerberg will remain in a leadership role.”
In order for the shares to be converted, he would have to either resign as CEO or be fired for cause. The board feels that it would be very difficult to find a new CEO if Zuckerberg were to retain control over the company he founded even after leaving. This would create a significant conflict of interest as well if he remained the controlling shareholder of Facebook Inc (NASDAQ:FB) and left to join a competitor. Additionally, the proposal would keep Zuckerberg’s family from retaining control of the social network after his death.
Facebook (FB) plans to create new share class
This isn’t the first stock structure-related change the social network’s board has proposed recently. Earlier this year, the company proposed the creation of a new stock class called Class C shares, and it received a heap of complaints following that proposal. The point of the new class is to enable Zuckerberg to retain control of the company he founded even as he continues to donate large quantities of Facebook Inc (NASDAQ:FB) shares to charity.
The Class C shares do not carry any voting rights, and if shareholders approve the proposal, Class A and Class B shareholders would each receive two Class C shares. The proposal will also be up for a vote at the annual meeting later this month.
Class A shares of Facebook Inc (NASDAQ:FB) edged lower by as much as 0.61% to $118.20 during regular trading hours on Friday.