It’s too late to submit a shareholder proposal for Facebook ’s June annual meeting, but you can expect a deluge of criticism following the revelation that Cambridge Analytica improperly shared data from millions of Facebook profiles—and some surprising support for two proposals that predate the current scandal and might have otherwise languished.

The first, from fund manager Trillium Asset Management, asks Facebook (ticker: FB) to establish a risk oversight committee at the board level. Facebook’s failure to protect user data shows the company “needs to build a system for meaningful oversight into its DNA, and avoid the constant, reactive, whack-a-mole approach we’ve seen,” says Jonas Kron, senior vice president at Trillium, which oversees $2.5 billion in sustainable investments.

The second, from the $209 billion New York State Common Retirement Fund, asks Facebook to review and report “the efficacy of its enforcement of its terms of service, related to content policies and assessing the risk posed by content management controversies,” such as election interference, hate speech, and sexual harassment. That should also cover the Cambridge Analytica issues. The New York fund, which is the third-largest public pension fund in the U.S., has 6.7 million Facebook shares worth more than $1 billion. It filed the proposal with Arjuna Capital, a big sustainable investing firm.

For Facebook, shareholder resolutions have been largely irrelevant: Mark Zuckerberg and other insiders control 60% of the voting rights, owing to Facebook’s dual share class structure. But the atmosphere, with users deleting accounts and the threat of regulatory intervention, has rarely been more hostile. And Zuckerberg is listening, sort of. If Trillium’s proposal gets “something in the high teens or low 20s” percentage-wise of the vote, Kron says, “that indicates a level of seriousness amongst investors that they want to see structural changes.”

For the New York fund’s proposal, the threshold is even less; it needs just 3% of the vote to be able to resubmit the resolution next year, says Patrick Doherty, co-director of Corporate Governance for NYS Comptroller Thomas DiNapoli, who is trustee of the pension fund. “As long as we pass that legal threshold, we’re coming back.”

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The New York fund has already proved that no company is too big to engage with. Consider ExxonMobil (XOM), which this year will disclose more about what tightening climate-change regulations might do to the long-term value of its hydrocarbon assets, a hitherto unimaginable scenario. That came in response to the New York fund’s proposal requesting a report on the impact of climate-change policies. The first proxy failed in 2016, but passed last year with more than 62% of the vote. Doherty says he will speak out at Facebook’s annual meeting.


Once the proxy comes out—likely in April—expect both money managers to be talking their case to proxy advisors like Glass Lewis and Institutional Shareholder Services, which advise big investors like BlackRock, State Street, and Vanguard on how to vote their considerable shares. Zuckerberg may simply adopt changes to avoid further backlash.

Sustainable investing is all about ensuring a company’s longevity—and that’s why many shareholder proxies that seem idiosyncratic at first end up being prescient, like these two for Facebook. “We’d like to see the company strengthen its policies and practices. We’re very likely to engage with them,” says John Streur, CEO of Calvert Research and Management, the responsible investing arm of Eaton Vance . ESG investing, (according to environmental, social, and governance factors), focuses on themes and trends; alleviating the difficulty in modeling the impact of changes in data privacy or consumer behavior on cash flow.

Technology companies have long been favored by ESG investors given their generally low environmental impact and often positive social impact. The data privacy risks that Cambridge Analytica exposed have not been part of many ESG conversations. “This is part of a broader discussion they have to have about data privacy, given how central it is to investments,” says Sebastian Vanderzeil, global thematic analyst at Cornerstone Capital Group, which has $1 billion invested in sustainably managed funds. “We’d like to see information on changes in internal reporting processes, external engagement, and governance structures” that help Facebook address data privacy.

Don’t be surprised by a downgrade by ESG rating agencies like MSCI and Sustainalytics, which are reportedly reassessing their ratings. “This can’t be good for the score,” says Martin Kremenstein, head of ETFs at Nuveen Investments, whose NuShares ESG Large-Cap Growth ETF (NULG) doesn’t own Facebook. And expect concerns to widen to encompass other companies, including any that want to monetize their own mountains of data: New York State and Arjuna Capital also filed a shareholder resolution at Twitter (TWTR), and a European bank, Nordea, has forbidden managers in its sustainable funds from buying Facebook shares for at least three months.


Who might emerge as another Facebook foe? The most obvious candidate is a new fund run by JANA Partners, which recently teamed up with the nation’s second-largest public pension, the $224 billion California State Teachers Retirement System, to push Apple to study the negative consequences of children’s use of electronic devices. Facebook would fit the profile of the new fund that JANA plans to open to investment. I spoke to JANA last week and they didn’t deny that it’s possible. Stay tuned.

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