Fidelity's Danoff backs Facebook's response to content, privacy issues

[Ulquiorra]

Facebook Inc’s (FB.O) second-biggest outside investor has offered backing for the world’s largest social media company as it faces public criticism for what people see on its service and how much user information is shared with third parties.


Comments by Fidelity Contrafund’s (FCNTX.O) Will Danoff, who like other top mutual fund managers rarely voices an opinion about a holding, represent key support for management as some investors seek change at Facebook, but also drew criticism that he should take a tougher line.


In a commentary emailed on Monday by the Boston fund firm, Danoff said Facebook, his fund’s largest position, “confronted some stiff headwinds” in the first six months of 2018.


Mark Zuckerberg, Facebook’s chief executive, was hauled before U.S. Congress in April to explain how data belonging to 87 million users was improperly shared with a political consultancy, Cambridge Analytica, and why it ran ads and posts placed by Russian operatives in what U.S. authorities believe was an attempt to influence the U.S. 2016 election.


“Facebook management responded thoroughly to legislators’ concerns and implemented a comprehensive plan to uphold the trustworthiness of its digital communities,” Danoff said in a question-and-answer portion of the commentary, which was dated June 30 and included in a ‘Fidelity Investment Insights’ email on Monday.


A Fidelity spokeswoman said Danoff would not elaborate on the comments. A spokeswoman for Facebook, which has described steps it is taking to combat abuse of its service, declined to comment on Danoff’s note.


Facebook’s failure to protect users’ data and to police some misleading content has caused some shareholders to call for change at the company.


Activists put several reforms up for votes at Facebook’s annual meeting in May, including calls for a risk committee and a report on content. None gained a majority of votes, but Facebook later gave a board committee new risk oversight responsibilities.


Passing proposals opposed by Zuckerberg is nigh on impossible, given that Facebook’s dual share structure means he has control of about 60 percent of the company’s voting shares.


A filing last week showed Contrafund sided against most of the reforms and backed all Facebook directors in board elections. Danoff’s commentary did not address the thinking behind the votes.


Some had hoped Contrafund, with $131 billion in assets, would push for reform at Facebook. “Support like this matters,” said Michael Connor, executive director of Open MIC, an organization that works with asset managers to file and promote shareholder resolutions including at Facebook’s meeting held on May 31. “Even Mark Zuckerberg will listen to these kinds of people.” Connor said.