Facebook parent faces vote on road into the metaverse

Facebook parent Meta Platforms appears set to face a shareholder vote regarding its much-discussed shift into new virtual technologies.

In the company’s words: ‘Meta is moving beyond 2D screens toward immersive experiences like augmented and virtual reality to help build the next evolution in social technology.’

Facebook founder, chair and CEO Mark Zuckerberg wrote in a letter announcing the new company name and strategy last October: ‘The defining quality of the metaverse will be a feeling of presence – like you are right there with another person or in another place. Feeling truly present with another person is the ultimate dream of social technology. That is why we are focused on building this.’

He added: ‘In the metaverse, you’ll be able to do almost anything you can imagine – get together with friends and family, work, learn, play, shop, create – as well as completely new experiences that don’t really fit how we think about computers or phones today.’

The SEC recently rejected a request by the company that it face no action if it excludes a proposal on the new strategy. The proposal, brought by Arjuna Capital, requests that Meta’s board ‘commission a report and seek an advisory shareholder vote on its metaverse project. The report should summarize results of a third-party assessment of:

• Potential psychological and civil and human rights harms to users that may be caused by the use and abuse of the platform
• Whether harms can be mitigated or avoided or are unavoidable risks inherent in the technology.’

Arjuna Capital continues: ‘After the report’s publication, the company should seek a shareholder vote, expressing non-binding advisory approval or disapproval of the metaverse project, advising the board and management whether investors consider continued implementation of the metaverse platform to be prudent or appropriate.’

In its materials with the proposal, Arjuna Capital writes: ‘[S]hareholders worry the metaverse will generate dystopian downsides and investment risk… The same issues Facebook is reckoning with – discrimination, human and civil rights violations, incitement to violence and privacy violations – may be heightened in the metaverse.’

It adds: ‘Mr Zuckerberg has said the metaverse will require ‘new forms of governance’ but has provided scant detail, while simultaneously overseeing poor corporate governance practices at Meta as CEO, chairman and controlling shareholder.’

‘ORDINARY BUSINESS OPERATIONS’
Meta argued in its request for no-action relief that the proposal could be omitted per Rule 14a-8(i)(7), on the grounds that it deals with matters related to the company’s ‘ordinary business operations’ involving the sale of products and services.

‘The proposal addresses matters clearly within the scope of the company’s ordinary business operations within management’s responsibilities, because it relates to the company’s decision-making on topics that include the development, marketing, policy-making, revenue generation and vision of its metaverse products,’ Meta wrote. ‘The proposal seeks to subject product decisions to shareholder oversight. It is the fundamental responsibility of the company’s management to decide how it intends to develop, market and sell its products and services, including the metaverse products.’

It also argued, among other things, that the proposal does not suggest that it relates to any underlying ‘significant social policy issue’ that transcends the company’s ordinary business operations: ‘Alluding to ‘potential... harms’ does not by itself produce a social policy issue, and this is especially true when the products and services do not currently exist and any potential harms are theoretical at this time.’

The SEC did not agree, writing: ‘In our view, the proposal transcends ordinary business matters.’

Meta has not filed its proxy statement but its 2021 AGM took place on May 26. A request for comment from the company on the SEC’s decision and the proponent’s criticisms was not returned immediately.