A big pension fund and an activist investment firm Thursday said they had filed shareholder proposals pushing Facebook and Twitter to take more responsibility for managing content on their platforms, including mistreatment of women, fake news, election interference, violence, and hate speech—in other words, the same issues that have kept social-media giants in the crosshairs for the past year.
The resolutions were filed by New York State Common Retirement Fund, the nation’s third-largest public-pension fund, with assets of more than $200 billion, and Arjuna Capital, an activist-investment firm known for pressuring companies in tech, banking, and retail to pay men and women equally. The proposals accuse both companies of responding to concerns with inadequate disclosures and content policies that “seem reactive, not proactive.”
The resolutions are the latest sign that concerns about potential ill effects spawned by a handful of giant technology companies have moved from Washington to Wall Street. On Sunday, a pair of activist investors — the California State Teachers’ Retirement System (CalSTRS) and the hedge fund Jana Partners — targeted Apple with a public letter urging the company to address a growing body of research that smartphones can harm children’s mental and physical health. In a response, Apple promised new tools for parents, and said, “We take this responsibility very seriously and we are committed to meeting and exceeding our customers’ expectations, especially when it comes to protecting kids.”
Jana Partners’ role in the highly publicized letter took some by surprise because the hedge fund usually wages those kind of public campaigns to restructure companies, not crusade for social issues—a sign that financially focused investors believe concerns about smartphone addiction in children could affect Apple’s bottom line.
Unlike the letter, the shareholder resolutions filed Thursday come with a legal obligation for the companies to respond. They aim to force votes by the companies’ shareholders at their upcoming annual meetings. But the companies may ask the Securities and Exchange Commission to allow them to exclude the proposals, requests that the commission was more inclined to grant last year. Facebook and Twitter did not immediately respond to requests for comment.
Thursday’s resolutions are revised versions of shareholder proposals that Arjuna Capital filed in October, wiith Illinois State Treasurer. But the addition of the New York pension fund adds significant heft to their demands.
Michael Connor, executive director of Open Mic, a nonprofit group that uses shareholder engagement to increase accountability at media and tech companies, says past attempts to engage with Facebook have not been fruitful. Illinois’ treasurer, for example, could only get a 15-minute phone call. “They don’t seem to sense any real accountability to outside stakeholders. They will humor you, there will tell you that they respect your opinion, but they don’t take you seriously,” he said in an earlier interview with WIRED.
Connor dismissed Facebook CEO Mark Zuckerberg’s recent statements that the company is adding employees to review content, which may impact profits. “If they say we’re going to add another 3,000 employees, you have to ask yourself why 3,000 and not 4,000? We don’t know. We have no idea what the most influential social-media player in the world thinks is necessary to come up with a responsible product,” Connor says.
In Thursday’s proposals, shareholders are asking Facebook and Twitter for reports assessing whether the company’s own terms of service agreements have been effectively enforced and information about the risk to the company’s finances, operations, and reputation posed by their policies and “content management controversies.”
On a conference call with reporters, Patrick Doherty, co-director of corporate governance for New York State Patrick DiNapoli, who is a trustee of the state pension fund, mentioned traveling to Russia a few years ago and talking to people about what life had been like under the communist regime. “After awhile, they just tuned out Pravda,” because a lot of it was misinformation or disinformation. “That’s our major concern that people are going to lose faith in these platforms in the long term.”
Activist shareholders have successfully lobbied for change on issues like climate change, but only after years of pushing the issue. It’s not clear if investors can exert influence over the super-platforms that dominate the stock market. That’s particularly true at Facebook, where Zuckerberg owns a controlling share of voting stock, giving him effective veto power over any shareholder resolution.
Pat Tomaino, director of socially responsible investing at Zevin Asset Management, says his firm and pension funds like CalSTRS have pressed tech companies on similar long-term concerns like bullying and the hostile environment for women and underrepresented minorities online. By getting involved before these issues hurt a company’s financial performance, investors can “help companies avoid punitive policy action but also make their products and platforms more robust and creative in the future,” he says.
But when it comes to the negative health impact of devices like smartphones, Kristen Strader, campaign coordinator for the nonprofit group Public Citizen, says there are limits to what industry can solve. Government intervention may be necessarily. “We should absolutely see the [Federal Trade Commission] stepping in and addressing the advertising on social media and the [Federal Communications Commission] addressing some of the issues on data collection,” she says. “The problem is bigger than people are on their phones because they want to be on their phones.”