CalSTRS Statement on the Governance Structure at Facebook
WEST SACRAMENTO, CA – Since its inception, Facebook has created a new way for the world to communicate. What started in a college dorm room, Mark Zuckerberg turned into a great enterprise that revolutionized social networking.
While we acknowledge that Facebook’s proposed structure is not unique for emerging private companies that go public, we encourage the company to strengthen its corporate governance and increase the diversity of its board, as outlined in a February 7, 2012 letter from CalSTRS.
Examples of best practices the company could phase in as it matures in the public markets include:
- Increase the diversity of the all-male board to be more reflective of the company’s user demographics.
- Equalize the voting power of shares to be representative of investors’ economic interests.
- Separate the roles of chief executive officer and chair of the board of directors.
“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,” said CalSTRS Chief Executive Officer Jack Ehnes. “This type of governance structure is definitely not conducive to ‘friending’ new shareholders.”
“CalSTRS has been advocating for governance best practices for over 20 years as an engine for long-term value creation and we want to make certain that companies like Facebook are structured to represent the interests of all shareholders,” added CalSTRS Director of Corporate Governance Anne Sheehan. “As the company accesses the capital markets, we want to ensure it moves toward the best governance possible.”
CalSTRS, along with CalPERS, has pioneered a strategy for diversity on corporate boards that incorporates the use of the Diverse Director DataSource, or 3D. It is a resource corporate leaders, such as those at Facebook, can use to find qualified and diverse board candidates.
CalSTRS currently owns an interest in Facebook through two private equity funds and stands to acquire shares of the publicly traded stock once the IPO is rolled out.
The fact that California’s educators will own a piece of this vibrant company is exciting. CalSTRS has always fought for good corporate governance to sustain long-term returns, which members depend on to secure their financial future in a challenging market.
The California State Teachers’ Retirement System, with a portfolio valued at $144.8 billion as of December 31, 2011, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits. CalSTRS serves California’s 856,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.