As trustee of the New York Common Retirement Fund, state Comptroller Thomas P. DiNapoli has good reason to be worried over how others perceive Facebook.
The fund holds more than $1 billion in Facebook shares. Mr. DiNapoli has raised valid questions over actions that the social media giant has taken over the past few years. He released the following statement April 10 in response to testimony that Mark Zuckerberg, co-founder and chief executive officer of Facebook, gave before the U.S. Senate’s Commerce and Judiciary committees:
“Facebook needs to demonstrate to its customers and its investors that it is taking steps to uphold its terms of service. It needs to show that it has the ability to protect users’ privacy and prevent the proliferation of sexual harassment, hate speech and fake news from its platform. The company has already suffered a drop in value and severe reputational damage and failure to address these concerns will only further jeopardize the company’s reputation and financial well-being. Mr. Zuckerberg and Facebook’s board have an opportunity to show that the company is working to prevent violations of its content and terms of service.”
Mr. DiNapoli wrote a letter to Mr. Zuckerberg last month declaring that he would vote against the nominees for Facebook’s board of directors next year unless the company made some substantial changes, according to a June 26 story published by the Associated Press. The state comptroller could have considerable sway at the annual investors meeting, the article reported.
In April, senators put Mr. Zuckerberg on the spot regarding data privacy issues as well as numerous posts made on Facebook by Russian operatives designed to spread disinformation about the 2016 presidential election. Concerns over problems that Facebook has confronted are mounting.
“In March, Facebook admitted it left hundreds of millions of user passwords readable by its employees for years after a security researcher exposed the lapse. Late last year, Facebook faced another round of allegations that the company violated users’ privacy on a much larger scale than previously disclosed,” according to a story published June 26 by WLNY-TV, a CBS affiliate in Riverhead. “The social media giant was accused of releasing private information to other tech companies, like Amazon and Netflix. A New York Times report details how Facebook allegedly gave some of its partners a wide range of access to data from its 2.5 billion users for years and never told anyone.”
The AP story said that Mr. Zuckerberg has served as chairman of Facebook’s board since 2012. Mr. DiNapoli reportedly wants the board to name “an independent chairman who has no material interest in the company.”
Mr. DiNapoli is right to use his influence as trustee of the New York Common Retirement Fund in this manner. The fund has made a significant investment in Facebook, and ongoing problems with the company will likely decrease the value of its shares. The comptroller has an obligation to ensure the portfolio performs well for the benefit of the state’s retirees.
For a major investor to push firms in a particular direction is a smart move. During a meeting two years ago with members of the Watertown Daily Times editorial board, Mr. DiNapoli addressed this strategy.
He responded to a question about how environmental activists wanted him to divest state funds from fossil fuel companies. He said that withdrawing as an investor will diminish his influence. Why should firms listen to people with no skin in the game?
Mr. DiNapoli is wise to seek changes for the better at Facebook. If the social media icon wants to maintain the trust of its users, advertisers and investors, it should heed his advice.