Facebook's (FB) CEO Mark Zuckerberg Hosts 2016 Annual Stockholder Meeting (Transcript)

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Facebook Incorporated (NASDAQ:FB) 2016 Annual Stockholder Meeting June 21, 2016 2:00 PM ET

Executives

Dave Kling - Deputy General Counsel & Corporate Secretary

Mark Zuckerberg - Founder, Chairman and CEO

Sheryl Sandberg - COO

Dave Wehner - CFO

Erskine Bowles - Board of Director

Sue Desmond-Hellmann - Board of Director

Alex Bender - Ernst & Young

Christine Jantz - NorthStar Asset Management

Kristina Veaco - Veaco Group

Leigh Lamb - Arjuna Capital

Analysts

Justin Danhof - General Counsel, National Center for Public Policy Research

Dave Kling

Good morning. Welcome and thanks for joining us at Facebook's Annual Meeting of Stockholders. I'm Dave Kling, Deputy General Counsel and Corporate Secretary of Facebook, and Chairman of this Annual Meeting which I now call to order.

Let me run through today's agenda. First we will focus on the formal business set forth in our proxy statement. Mark will then spend a few minutes talking about how Facebook is doing and then we'll conclude with the Q&A session. Before we begin with the formal business, I’d like to remind you to please turn off all mobile devices and of the rules of conduct that were provided to you when you entered the meeting, including the rule prohibiting photos or recording devices of any kind. To conduct an orderly meeting we ask that participants abide by these rules. Thank you for your cooperation.

Let me start by introducing the members of our Board of Directors who are here today, Mark Zuckerberg, Sheryl Sandberg, Erskine Bowles, and Sue Desmond-Hellmann. I would also like to introduce two more people who are in attendance. Alex Bender of Ernst & Young LLP, our independent registered public accounting firm, and Kris Veaco, who'll act as Inspector of Election for the meeting and will tabulate the results of the voting. Ms. Veaco has previously executed the oath of Inspector of Election.

Turning now to the formal business, I have a copy of the notice together with the declaration as to the mailing of the proxy statement made available to all Facebook stockholders of record as of April 29, 2016. I also have a list of the stockholders entitled to vote at this meeting, which is available for inspection by any stockholder present or by any proxyholder representing a stockholder and which list will be filed with the records of this meeting. I am advised by the Inspector of Election, that the holders of shares representing at least a majority of the voting power of the Class A common stock and Class B common stock voting together as a single class and the holders of shares representing at least the majority of that voting power of our Class B common stock, voting as a separate class are present or represented by proxies here today. And therefore the requisite quorum for each proposal is present. Accordingly, this meeting is authorized to transact business set forth in our proxy statement.

We have 13 proposals to consider at this meeting, each of which is described in the proxy statement. We will discuss these proposals momentarily. First, however I’ll remind you that the voting today is by proxy and written ballots. If you have already sent in a proxy and do not intend to change your vote, there is no need for you to cast a ballot today. Your vote will be counted automatically without any action on your part. Any stockholder present who has not returned a proxy or who wishes to change your vote must, may cast the ballot at this meeting. If any stockholder wish to cast the ballot today, if so, please raise your hand and one of our volunteers will bring a ballot towards you. Okay, there's a couple.

All right, it's currently 11:05 AM and the polls are now open. You may vote at anytime during the discussion of the proposals on the agenda. Once you've filled out your ballot, please raise your ballot in the air and our volunteers will come and collect it. I will now review the proposals to be voted on at this meeting. The first item of business is to elect our Board of Directors to serve until our next Annual Meeting of stockholders or until the earlier of their death, removal or resignation. The director nominees are Marc Andreessen, Erskine Bowles, Susan Desmond-Hellmann, Reed Hastings, Jan Koum, Sheryl Sandberg, Peter Thiel and Mark Zuckerberg. The qualifications of each proposed director are set forth in the proxy statement. No other director nominees have been properly submitted for election pursuant to our bylaws or SEC rules. Therefore no other nominations may be accepted at this time. The Board of Directors recommends a vote for the election of each of the nominated directors.

The second item of business is to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2016. The Board of Directors recommends a vote for this proposal. The third item of business is to hold a non-binding advisory vote on the compensation program for our named executive officers as set forth in the proxy statement. The Board of Directors recommends a vote for this proposal. Next, we have three proposals related to director compensation. Proposal number four is to ratify our grant of restricted stock units to our non-employee directors in 2013. Proposal number five is to ratify our grant of restricted stock units to our non-employee directors in 2014 and 2015. And proposal number six is to approve our annual compensation program for non-employee directors on a go-forward basis. The Board of Directors recommends a vote for each of these three proposals.

Next, we'll ask you to preview adoption of our amended and restated certificate of incorporation which comprises all related proposals as set forth in our proxy statement. The Board of Directors recommends a vote for each of the four proposals to make up proposal number seven. The eighth item of business is to amend and restate our 2012 Equity Incentive Plan as described in our proxy statement. The Board of Directors recommends a vote for this proposal. Finally, we received five stockholder proposals to comply with requirements of our bylaws and SEC rules and are therefore eligible to be voted on at this meeting. Proposal nine is the proposal regarding a change in stockholder voting. Proposal 10 is the proposal regarding an annual sustainability report. Proposal 11 is the proposal regarding a lobbying report. Proposal 12 is a proposal regarding an international public policy committee. And finally proposal 13 is the proposal regarding a gender pay equity report.

The Board of Directors recommends a vote against each of these proposals. The applicable proponent with each of the stockholder proposals may now make a statement in support of their proposal at this time. I’ll call you up one-by-one, please limit your statements in no more than three minutes. First with respect to proposal 9, Christine Jantz representing NorthStar Asset Management, Ms. Jantz?

Christine Jantz

Thank you. Good morning my name is Christine Jantz from NorthStar Asset Management in Boston, the beneficial earner of over $5.4 million paid per common stock. I am here to represent resolution number nine, a good governance proposal which we give an equal share and each vote share an equal vote and allow outside shareholder votes to be reported same as the insider shareholder votes. Before today's meeting Facebook has two share of stock, Class A with one vote per share, Class B with an overwhelming 10 votes per share which is closely held my management insiders. After today's meeting during which time company insiders will likely vote in favor of creating a non-quoting class of stock, it will continue to be impossible for outside shareholders to have any meaningful input on company decisions, Mr. Zuckerberg has brought this company into fruition and led into profitability. But the company's decision to offer common shares of the company on public exchanges making Facebook a public company brings with it a responsibility to shareholders to prep it as good governance. And the shareholders have been very concerned about the governance risks that come from the line upon one person’s vision and predictions of the future and that same person’s ability to reduce stress to the company long-term.

This Annual Meeting itself has suffered from a lack of consideration for outside shareholders, rather than releasing the proxy vote at 30 to 45 days before the Annual Meeting as is standard by most companies, Facebook held off until 18 days before the Annual Meeting, by releasing proxy voting materials with little time allowed for shareholders to consider their votes, Facebook is discouraging shareholders from voting. Clearly the creation of differently weighted voting classes is the result of insiders and management seeking to insulate the governance of the firm from shareholder oversight despite the risks that it brings to shareholder value. Studies have shown that excessive voting control given to insiders rather than enhancing performance can be deport performance of the long run. Another study reported that the more control that insiders have the more they can pursue strategies that IFD expense with outside shareholders. Furthermore, these reports tell us that on average and overtime in companies with multiclass capital structures underperform those with one share of one vote standard in which earners economic risk is commensurate with voting power. And as others point out with few constrains placed upon them managers holding a super class stock can spin out of control.

Given that a part of our company's mission is to make the world more open, limiting substantial shareholder input is wildly counterintuitive. We believe that putting control of the company with market capitalization is a third of the trillion dollars in the hands of single individual is not the most responsible way to run our company. And so we urge you to vote for proxy item number 9.

Dave Kling

Great, thank you. Next with respect to proposal 10, [Conrad McCarron] on behalf of the State of New York, Office of the State Comptroller. Mr. [McCarron].

Unidentified Company Representative

Good morning. Mr. Chairmen my follow shareholders, my name is [Conrad McCarron] and I am here today on behalf of the New York state common retirement funds to introduce the fund resolution calling on Facebook’s issue annual sustainability reports describing the company's environmental, social and governance policies and practices. Environmental, social and government issues compose significant risks to businesses, and without proper disclosure shareholders and analysts cannot determine whether the company is managing these risks properly. The majority of Fortune 500 and S&P 500, companies already recognize the value of sustainability reporting by regularly issuing such reports. We believe that Facebook should join in that number and therefore on behalf of the New York state common retirements fund over those 6.1 million Facebook shares I submit resolution on sustainability reporting found in your proxy materials. Thank you.

Dave Kling

Thank you. [Conrad McCarron] is also representing with a proposal number 11, representing the City of Philadelphia Public Employees Retirement System.

Unidentified Company Representative

Right thank you again. As you just mentioned I am representing the City of Philadelphia Public Employees Retirement System on this next proposal number 11, which asks the company to disclose its state and federal lobbying expenditures, including indirect funding of lobbying for trade associations, transparency and accountability of corporate spending to influence public policy are in the best interest of our shareholders. Our company spends more than $19 million in 2014 and 2015 on several lobbying but there is incomplete disclosure about spending at the state level where our company also lobbies extensively. For example Facebook spent more than 280,000 in lobbying in California and Texas last year. Corporations contribute millions of dollars to trade associations to lobby indirectly on their behalf without a specific disclosure or accountability. Our company provides a representative list of its trade association memberships, but it's far from clear that this is comprehensive and Facebook does not disclose its paid association payments and the amounts used for lobbying. For example here, Facebook is the member of the U.S. Chamber of Commerce, the Chamber have spent more than $1.2 billion on lobbying since 1998 making us the country's largest lobbying spender, but stockholders have no way to know how much of Facebook's trade associations and contributions are being used to lobbying on its behalf with this Facebook's level of funding for the Chamber is a secret.

For example Facebook's signed the American business act on climate Climax Pledge and the pledge to reduce its submissions and tackle climate change. Yet as many of you know the chamber of the commerce have gracefully attacked EPAs clean power plan to regress climate change, how does an [indiscernible] our matched our company's principles. The Facebook support for the chamber pose a risk for our company's reputation given its position on climate change, our company's faced that it is our responsibility to reengage in political, legislative and the regulatory processes to advance a lot of the policies that are in the best interest of our company stockholders and the people who use our services and our partners.

Our request for disclosure is simply asking Facebook to show that lobbying has been done for the company in stockholders’ best interests. Lobbying is stockholders money that is being spent for the company to stand behind its spending on lobbying and if it does then why won’t it disclose the great association memberships and lobbying. Proxy advisor ISFS should test this proposal noting that Facebook either provides information on trade association payments, or discloses the portion of such expenditures used for lobbying purposes. In conclusion publically available data does not provide a complete picture of Facebook's lobbying expenditures, Facebook's Board and its stockholders make a disclosure to be able to evaluate the use of corporate assets for lobbying and any risks that spending might pose, we therefore urge stockholders to vote for this proposal. Thank you.

Dave Kling

Great, thank you. With respect to proposal 12 Jing Zhao, Mr. Zhao?

Unidentified Company Representative

Thank you very much. As our shareholders will recommend now that Facebook is facing you [indiscernible] committee to oversee our company's policies under practice as it relates to [indiscernible] public issues including [indiscernible] corporate social responsibility charge of giving public principle activities and its potential and for empowerment of regressions as may affect our company's operations performance and the reputation worldwide highly -- there is no need to read the entire supporting statement but I want to say after I submitted my proposal half a years ago there is many events happened in relation to this proposal is basically relations as for China and myself principally here from China by the way and as I've said in the proposal so obtain to a falling [indiscernible] the reason of foreign language it is very easy actually English is third language by the way. But keeping all the public policy through the Chinese government is very discouraging, is very hard on that case I lost my freedom so that's the reason especially we know our company has very gift card situation to how to business in China and in the world and worldwide so I've heard our company to establishing a public accounting committee to oversee our company's various and practices and I would recommend our company for loyal friend Google I have some major promotion 2010 and we are appreciate that Google really changed these policy in 2010 and we hold our company to adopt agro practice of public policy. Thank you very much.

Dave Kling

Great, thank you. Finally with respect to proposal 13 Leigh Lamb on behalf of Arjuna Capital. Ms. Lamb.

Leigh Lamb

Good morning Mr. Chairman Members of the Board and fellow shareholders. My name is Leigh Lamb and I am here to move proposal 13 filed on behalf of Arjuna Capital and Baldwin Brothers clients Michael Baldwin and Margherita Baldwin. Specifically we are asking the board to publish a report of the company's policies and goals to ensure gender pay equity. The medium income for women working full time in the United States is reported to be 78% of that of her male counterparts. And forecasts indicate that women will not reach pay parity until 2058. This issue is particularly salient to the technology industry, where men reportedly earn nearly $10,000 more than women on average and would struggle to attract, retain and move women into positions of leadership.

Facebook has disclosed that 31% of our company's workforce is female and yet only 23% of our management team is female. Our company is best served by a proactive approach to address the structural biases including pay in cuts and equities that prevent women from moving into positions of leadership. Gender pay disparity is not only one of the biggest personal drastic issues of our time. It poses a risk of company's performance, brand and investor returns. Research indicates gender diverse teams are more productive, innovative and drive better results but clearly a failure to attract and retain qualified female employees is detrimental to Facebook's ability to innovate and compete. And while Facebook has said that they pay men and women the same there remains a complete lack of transparency, quantitative and qualitative disclosures for instance does that statement apply to all components of compensation include base, bonus and stock.

Given the materials of business risks, gender and equity presents investors expect transparent, honest disclosures and employees expect a new level of structural support to address root causes and empower fair negotiations, promotions and ultimately equal pay. Facebook’s current lack of meaningful disclosure only serves to perpetuate the black box surrounding gender biased compensation structures. The good news is that many of Facebook's peers companies have made commitments to transparency disclose and enclose a gender pay gap including Intel, Apple, Amazon, Expedia, Microsoft and eBay, Facebook could and should commit to transparent disclosures on gender pay equity today. Proxy advisors, institutional shareholder services agrees stating a vote for this resolution is warranted. As Facebook lags its peers in addressing gender pay disparity by not addressing this issue at the same level of its peers, Facebook has put at a competitive disadvantage, for the recruitment of candidates and retention of employees, thank you.

Dave Kling

Great thank you. I believe a gentlemen had a question here just about. Do you still have your ballot? Sounds like you still need a ballot there. Okay if you could have one of the volunteers maybe come over and see if you get a new ballot for this gentlemen. Great, thanks everyone for your statements. So the company will not be providing responses at the meeting, as the company's position on any proposal has already been set forth in the proxy statement. We'll now go ahead and collect any remaining ballots. Please raise your ballots and our volunteers will come around and collect them if you have completed. Just wait a second here we got a couple of ballots, a couple here.

Yes we're going to have a separate Q&A session at the end of the meeting. We're going to complete the voting on the proposals and we're going to do a full Q&A session at the end with the management team. All right has everyone completed their ballots, does anyone need a ballot still. I see no hands, great. All votes have been cast on the proposals to be considered at this meeting and as of call it 11:23 the polls are now closed. I'll now confirm with the Inspector of Election on the preliminary results of the meeting.

The vote required to approve proposal one is the plurality of the voting power of the Class A common stocks, and Class B common stock voting together as a single class, which is present in person or by proxy at this meeting. Which means the eight nominees receiving the highest number of affirmative votes will be elected to the Board of Directors. Based on the results tabulated by the Inspector of Election each of the eight nominees has been elected to the Board of Directors.

The vote required to approve proposals two through six and proposals eight through 13 is the majority of the voting power of our Class A common stock and Class B common stock voting together as a single class. Based on the results tabulated by the Inspector of Election each of proposals two through six as well as proposals eight have been approved by at least the requisite majority of the votes cast and each of proposals nine through 13 has been rejected by at least the requisite majority of the votes cast. Finally the vote required to approve with each of the proposals under proposal seven is the majority of the voting power of the outstanding Class A common stock and Class B common stock voting together as a single class and a majority of the voting power of our outstanding Class B common stock voting as a separate class. Each of the proposals comprising proposal seven is cross conditioned on the approval of all of the proposals there under, based on the results tabulated by the Inspector of Election, each of the proposals comprising proposal seven has been approved by at least the requisite majorities, therefore proposal seven has been approved.

Final results of the voting will be filed with the Securities and Exchange Commission on a Form 8-K within four business days. There are no other items of business on the agenda, so this concludes the formal part of our meeting. The annual meeting is now adjourned. Now before I ask Mark to come up on stage I want to remind you that Mark's remarks and the Q&A that follows may contain forward-looking statements regarding future events or our future financial performance. We caution you to consider the important risk factors that could cause actual results to differ materially from those in any forward-looking statements. These risk factors are more fully detailed under the caption risk factors in our quarterly report on Form 10-Q filed with the SEC on April 28, 2016. In addition any forward-looking statements we make today are based on assumptions as of this date. We undertake no obligation to update these statements as a result of new information or future events.

Mark Zuckerberg

Hi. All right, so I'm going to give a quick update on our strategy and what we're building here. I'll talk for a few minutes and we'll take some questions. So it's been a busy year, we've gotten a lot done and we're off to a good start. So as you guys know our mission is to give people the power to share and make the world more open and connected and what that means is building products that gives every person in the world a voice and the ability to share everything that they care about with the people they care about, whether that is just an individual they want to message to, small groups like their family or small group of friends, large interest based communities like the Warriors which unfortunately did not win last night. Sorry to bring that up or someone as everyone in the world. So, you know in 2016 we're off to a good start so far and we reported on our last earnings call that we now have more than 1.65 billion people using Facebook every month including more than 1 billion people who use Facebook on mobile devices every single day, so some good progress and you know so far in the year more than $5 billion in revenues as compared with the last quarter, so good progress and a lot more opportunities ahead, that I'll talk about for a second and then we'll move to questions.

So when I'm thinking about our strategy, we think about it over 3 time horizons, what is going to make the biggest impact on the world over the next 3 years, over the next 5 years and then over the next 10 years and we have some projects that go on beyond that but that's the majority of the investment or kind of investing over these three time horizons. So for the next three years, the biggest thing that we can do to help people and grow the business is to focus on improving and expanding this already really dynamic and large community that we have using the Facebook app, right. It's a large community as the staff here has shared but we think that it can, we can serve a lot more people, right because there are 7 billion people in the world and then from our perspective you may look at it and say that 1.65 billion people are on it, that is a lot I look at that and think we have 5 billion I think next. So we have a lot of work to do there and over the next few years, although we have a lot of more products that we're also working on, I think by far the biggest impact that we're going to have is by just continuing to improve this core Facebook experience.

Over a 5 year period, some of the newer initiatives that we're working on, I think we'll start to not only become a very large communities in their own rights and some already are but some of these new initiatives will also start to contribute meaningfully to our overall business. So I am thinking about the new apps that we're working on like Messenger, and WhatsApp which I think you can say are pretty meaningful communities at this moment with WhatsApp more than 1 billion people and Messenger there are 900 million people, but we are really just getting started working on the business part of those and we think video is going to be a huge opportunity, LinkedIn Research and Instagram is really just starting to grow meaningfully as a business as well. So over a 5 year time horizon in addition to growing the core Facebook app and the community around that in serving our existing business partners that we have I think we just had this great opportunity ahead of us to develop these new products that we get an opportunity to build a business around as well.

And then over the 10 year time horizon what we're really focused on doing are making more fundamental changes in the world that will be required to achieve this mission of making the world more open and connected over the long-term. So for example if we're really serious about connecting everyone in the world, not just people who are on the Internet today, then we need to really focus on help things to make sure that everyone is on the Internet and today there are less than half of people in the world that are on the Internet. We think that if we at this point if we invest in as a company, it will not only be very good for the world and for all these folks who will get access to the opportunities of the internet, but over the long-term will be valuable for our business as well because we'll also be able to address and build a larger community.

Now we're making some long-term investments in artificial intelligence which I think are going to be very helpful and making it so people who can interact with both your friends and computers through messaging apps and will help us show more relevant content and news feed by being able to rank all the content that is better and show you the very best stuff and you know the third big long-term investment that we're making is in building the next generation of computing platforms. So for every 10 to 15 years, a big new computing platform comes along whether that is the desktop and then Web, and now mobile phones and we want to make sure that the next big computing platform that comes along is fundamentally social and has people built in as kind of the base of that, speaking to that how we are going to serve our community best over the long-term. So with these investments over the 3, 5 and 10 year periods, we're optimistic about how well we're going to play out and is excited to keep investing in them and we're excited about the progress that we've made so far in 2016 and we thank you guys for your support.

So now we should take some questions.

Question-and-Answer Session

A - Dave Kling

Great. Thanks Mark I’d now like to invite Sheryl Sandberg, Facebook's Chief Operating Officer; Dave Wehner, Facebook's CFO and Joel Kaplan, Facebook's Vice President of Global Public Policy to join Mark and answer some of your questions. We'll now open the floor for questions from the audience. We anticipate taking questions until approximately 12 Noon so that we may answer questions for as many stockholders as possible. But we request that you ask only one question and limit your questions to no more than 1 minute. [Operator Instructions] If you have a question, but cannot to a mic, please raise your hand and someone will bring one to you. As stated in the rules of conduct, stockholders should not address the meeting until recognized. Right, we will just kind of go and forth across right in the center aisle gentleman.

Unidentified Analyst

Going to down side of, downsides of being successful and rich is you create some resentment from people and it’s hard to pull you down. I remember [indiscernible] in the parking lot now [indiscernible] great. But I see your moments and how do you keep everybody on point in the game, and how do you make yourself, warm and fuzzy and loved throughout the world?

Unidentified Company Representative

He is the one in question.

Mark Zuckerberg

So there are two different questions, how do you keep people motivated and how do you build a strong community. I mean I think, for both whether you’re focusing on building a strong community inside a company that motivates towards, doing sometime or externally I believe strongly in self selection. So if you stake worthy what you care about, and how you are going to make this vision than what you are going to invest in, then people who want to be a part of that opt in and choose to be a part of that and people who don’t like it, chose not to. So in terms of building the company from the very beginning, from well before you would have considered us, a successful company, that’s always been an important part of, what we have tried to do we have been very, unafraid to talk about what our values are and what our mission is and I have no doubt that, that has made some people decide that this isn’t for them they want to be a part of different company. But I do think that we have gotten the best people because of that, because I believe very strongly that the best and most talented people want to be a part of something that is both successful and doing something important in the world, and that just the ethos that we have tried to build in the company.

As we have grown I have spent more time on external communication, because now we do have this community of more than 1 billion and a half people and that is a greater task to make sure that people around the world understand, what we stand for, but that’s our responsibility to make sure that we do that.

Unidentified Analyst

Same thing goes for jealous politicians, throughout the world too.

Mark Zuckerberg

Ask himself.

Dave Kling

Great thank you. We’ll take a question now from the gentlemen in the front row.

Justin Danhof

Good morning. My name is Justin Danhof I am general council with the National Center for Public Policy Research I have a quick comment and a question. First I applaud the shareholder to reject proposal 11, the proponent and the entire proposal was a fraud, designed to limit Facebook’s speech. But my question is also about free speech and the issue of anti-conservative bias?

It’s a multi faceted problem, but it boils down to one core issue and I believe that that is transparence. I think that unless and until the company is completely transparent as to how it selects trending these items and why it removes certain posts. Many conservative individuals and organisations will write the deal that the company has treated them unfairly. Even when you included conservative story in a trending new section for example Facebook’s buy is evident. When true life actors [indiscernible] and recent experience in support of the crisis pregnancy centre. Facebook’s trending news curator somehow headlined item [indiscernible] shares after shares entire portion message, such support life, that is an outrageous characterization and this incident happened after your so called summit with the conservative peers and like dozens and dozens of more incidents that have happened after since that meeting.

So whether you are willing to admit the company has a biased issue or that you think bias is merely a matter of perception. The fact is that perception is often reality for folks and Facebook has an extra duty now, since former employees have called out the company’s action. So my question is this, what affirmative steps are in place to increase transparency regarding Facebook’s new section and its renewal of pages and posts and what do you have to say the conservative individuals and groups, who either have been harmed or feel like they have been harmed by the companies biased actions?

Unidentified Company Representative

Mark why don’t I take that one, when the trending topic story that you referenced broke a couple of weeks ago, one of the things that was important to us was to understand, what the concerns were and to make sure that we were addressing them, because Facebook is a platform for all ideas, that’s the vision that Mark has had for the company from the very beginning. And so when concerns were raised as to whether this particular feature in Facebook was living up to that value and that ideal that we wanted to make sure that we got to the bottom of it immediately. And so we undertook an investigation of the specific allegations and determined as there was no systemic bias in the product, but we also wanted to make sure that we were having an open dialog with conservatives because they has that concern and that was important to make sure that everybody felt like they were welcome on our platform and so Mark invited a number of leading conservatives to come to Facebook to start that dialog, so that we could hear directly from them as to what their experience was and what their concerns were and to make sure that we were addressing it both in the immediate context of the trending topics discussion and going forward.

So we have made changes, trending topics notwithstanding the results of the investigation and found there was no systemic bias. To make sure that we’re addressing any concerns that are significant part of our community has and the commitment that Mark and Sheryl and the executive team made in that meeting was to continue to discourse and when age history comes up, we want to know about it and we want to try to address that quickly so that all the people, who come onto Facebook and use it understand that it is platform for them and for their ideas.

Dave Kling

Let’s go over the far [indiscernible].

Unidentified Analyst

So, Facebook is has the entity of platforms to bring people around altogether and to some extent I think this is very successful. At the same time I get this feeling that we also seem to have like it is also, maybe just the Internet in general and more subtle ways turning it's part as well, when I watched my colleagues that are maybe more conservative or liberal that adds and everything that makes [indiscernible] are only the ones that they're interested in on every site so it is like they're all stuck in their echo [indiscernible] for instance [indiscernible], are those things that Facebook is doing to maybe well first of all do you guys see this as a problem, that technology could do, are these things that working on the sort of bring us together, so we're not stuck in our own little echo chambers.

Unidentified Company Representative

This is something we care a great deal about and what happens is that Facebook actually in many ways brought in the kind of news you hear and here's why. When you think about the connections you make on Facebook people think about strong ties and weak ties. Strong ties are five to seven people you keep in touch with all day, your parents, your spouse, your partner or your best friend. Those people your interactions aren't really your interaction with them on view each [indiscernible]by Facebook as you're in constant touch with them. What Facebook does is let us show some more people on a daily basis what you might call your weaker ties, the people you went to school with, the people not near current company like your last job, the people who used to be in your town. And so what you get are just more ability to keep in touch with more people and overtime we believe more diverse, more diverse viewpoint. We also are really encouraged by the amount of international connections that are coming, we're measuring that and more people are connected to someone outside their borders today then were a year ago, then were a year before that, and that's another proof point that as we're able to create more human connections we're able to connect with more people with more diverse places.

Dave Kling

We will take a question from the center on.

Unidentified Analyst

Hi. I'm very happy to be just Facebook shareholder and what -- I hooked on Facebook shares for a long time to come. And my question to Mark is over the past year you have announced that you're very much involved in charity, and foundation and which is very admirable but as a shareholder do you plan to really have hands on running this Facebook for decades to come even though you're obviously going to be involved in charities or do you see yourself more graduating to like a Bill Gates role where he's more involved with the charity than lending his money?

Mark Zuckerberg

Yes, to the original question, plan on being involved in running Facebook for a very long time. That is very nice. Let us take a question over from the far column.

Unidentified Analyst

My name is [Shen], shareholder based in San Francisco. So, my question is around virtual reality, augmented reality. So, I got a chance to check out the Oculus Rift demos at [indiscernible] which is anybody can sign up for. So, that was really interesting but one thing I realized since I'm not a gamer myself, I play Tetris but I didn't particularly feel social or connected to people when I was using that device. So, I'm just kind of curious about and I know that is kind of 10 year out and that technology things like how do you imagine bringing that to be more social and also are you looking to like more augmented reality type stuff or you're not totally kind of immersed in an environment?

Mark Zuckerberg

So, was the one that you did, with that touch the hand demo?

Unidentified Analyst

No, it didn’t have it yes, it's just…

Mark Zuckerberg

Yes, so later this year, we're coming out with reverting out this Oculus Touch, right it's the hands counterpart to the headset. And what that allows you to do is not just feel like you are in a space and look around and have an immersive experience but also kind of change it, reach out and grab things and. So, we have a handful of different experiences that some we built in house and some other developers have built that allow you to be in a space with another person, and you feel like you're physically there and interact with them physically even if they're all the way across the world, somewhere else. And to me that is what VR is really about, is this feeling of presence, right now you're there with another person often when you can actually be there with them in real life and sometimes experience something that would be very difficult or impossible to experience in real life. So, and we've the demo Facebook where it's a ping pong demo, so you're in a different room, you're playing ping pong, you go in and you had your control and you pick up a ping pong paddle and there's an infinite supply of balls, because it is VR there's always more balls and one of the things that you can do since you're playing ping pong and it's fun. And one of the things that you can do is actually turn up and down gravity in the room. So, you can make it so that there's no gravity and it feels that you're playing ping pong in outer space or you can make it anti-gravity, the default as things float up, unless you hit them down and you're having this experience with someone else, and you're in a completely different place, so you feel like you're there with them and you're hanging out and it's a new kind of social experience that I think it took some folks a few weeks to put together. So, I'm really excited about how VR I think is going to bring people together in new ways and give you this feeling of presence like you are there with people who you might not have the opportunity to be there with in person in real life.

Dave Kling

Great thank you. Let's go over here to this gentleman.

Unidentified Analyst

Just a very simple question, regarding WhatsApp and Messenger, can you share with us what your plans are for the two of them? It seems like they are both very good very thriving. But is there any plans to in the work or what can you tell us about that?

Mark Zuckerberg

Yes, we are not planning on combining them. We think that the messaging space is incredibly important and very large, and what we are seeing is that even in the countries where WhatsApp or Messenger are growing the fastest, the other one is also typically growing which suggest that it's not that they kind of compete for a mind share absolutely against each other. There is actually a lot of space for both of them to grow. And they represent somewhat different philosophy is in utilities. For WhatsApp is much more utilitarian right, it's very basic, it's focused just speed and having a simple tool that people can use and Messengers is much more focused on expression. And giving you all these different tools that be able to special stuff in different ways, there are many more features in it so different people like different ones, and a lot of people use both for different things. And we think that is the bigger opportunity to go after just to provide our community with both tools rather than trying to combine them together and just make one size fit all here.

Dave Kling

Great. Let us go in the center aisle here.

Unidentified Analyst

Hi my name is Jason and I am a shareholder. And I wanted to ask, do you ever see Facebook in China someday?

Mark Zuckerberg

We are just in China.

Unidentified Company Representative

I have been in China yesterday. We have said that our mission is to connect everyone in the world and China is not any part of everyone in the world. We are learning, we are studying about the Chinese market and we will see what happens. We do have and it's in our reports as we do our earnings each quarter, a growing and increasingly important business in China, working with the Chinese companies, we are selling their products overseas. So when I was there this past week, I had a chance to meet with some of our kind of our top clients, and talk to them about how they are able to use our products to market their services outside of China.

We had one great example with Air China they opened up a new route to Mumbai. But that’s not something people would necessarily know that Air China was flying to Mumbai, and they used our advertising to specifically target ads to people who let’s say were living in the United States but had a relative in Mumbai. And they did very well opening up that route. So we are excited about the role we can have with Chinese companies now as they grow their global business.

Dave Kling

All right, let's go to the far aisle.

Unidentified Analyst

Hi, my name is Ashy I am a long-term shareholder from South Africa. And the first thing I would like to just commend you and congratulate you on building an incredible company and incredible community as part of that and other company is in the focus initially. I have two quick questions the first is how do you think about just buying our revenue streams from advertising in the future? And the second the is around you said there is like three areas of focus and the first being in the three years of [indiscernible] and it sounded like that a lot of that was making Facebook more compelling to people who may have excess to Facebook already but don’t use it. What do you think is the limiting factor on people not joining Facebook now that or you could -- or using it long-term?

Mark Zuckerberg

Yes, you answer the first one and I could answer the second.

Unidentified Company Representative

On the first one, the advertising business for us is a great business. We have enormous amount of time and attention from people all over the world, we have an ability to share people the right ad at the right time, and the shift to mobile has really benefitted us because I think we have the most compelling mobile ad product anywhere in the world. We now also have the Facebook platform and the Instagram platform. So for a very long run, I really believe that our monetization will be primarily advertising because that’s really what we are set up do well. We are also beginning to expand in a little with other forms of monetization looking at business to consumer connections and Messenger and some ecommerce stuff we have done. But thinking about our business is advertising base is the right way to think about it. And we think we are poised to really take it up advantage of the opportunities we have in front of us and the investments we can still make.

Mark Zuckerberg

Yes, and just to add one point to that I think people think about advertising as one thing but it's a huge market and there are all these different used cases that people have right, so some businesses are trying to tell an inspiring story through branding, some small businesses have completely different views often to try to attract new customers, those can be completely different products. And a lot of what we have done over the last several years has I think built a very healthy and diverse ad business that covers all these different areas. So we are very happy with that and there is a lot more to do.

To your second question around what do we need to do continue growing the community around the Facebook app, it's a handful of different things in different places. And it's not just about the number of people who are using the app, it's also about the definite engagement, and I know there is a big opportunity there as well. Where -- there is so much content in the community that people are sharing that we are still -- we still and being able to do surface for you, all of the most interesting things. I talked about AI a bit in the intro remarks I gave and right now the way that we rank news feed for people is we look at what your friends are posting and the pages that you follow what they're posting and how many people have engaged with those posts and try to figure out what are going to be the most interesting things and show those to you first but the reality is, I mean there're millions of posts right that are available for you that people share publically everyday and right now we don’t understand the meaning of those posts.

And with AI in the future we'll be able to have technology that can actually read the text or, look at the video and understand what it means and whether that matches up to your interest and show that to you and I think that that's going to be very, that's going to make it so you can see much more relevant and more content that you're interested in, which I think should deepen engagement. If you look around the world there are certain countries that we're stronger in than others, so some of -- there are opportunities for growing the communities, is not necessarily evenly spread around the world, but it can be very focused on succeeding certain countries where we've grown a lot historically and should be growing more. So it's a number of different things, but I think that there is no reason in my mind why we shouldn't be able to continue growing both the size and depth of the community and engagement over the next couple of years.

Dave Kling

Let’s bring it over here this side of the room.

Unidentified Analyst

I am Elena [indiscernible] first I'd like to say Mark a Happy Father's Day. The question I had, what would you or your daughter would say about you as we look down the line to the future because I also have a five year old that I have to talk to about what I am doing at this presentation and how it would affect turning down that line in the future?

Unidentified Company Representative

That's my favorite question that's ever been asked at any shareholder meeting at any company ever. What a great question. Thank you, made my day.

Unidentified Analyst

Happy Mother’s Day.

Unidentified Company Representative

That is a specialized question.

Mark Zuckerberg

I mean it's interesting but I'm not sure that how related that is to Facebook. I mean I hope that I nurture for her I guess similarly to our employees and our community this desire to learn. Right and I'm sure it's a bit early, right she's about six months old. So I read to her and all that but I mean.

Unidentified Company Representative

She's checking it all in there already.

Mark Zuckerberg

She is very focused but I think this is pretty deep in my personal plots again, how I think about running the company too and we try to engineer the company that be a learning organization, I really believe that the people and the companies that can learn the fastest succeed at whatever it is that they're trying to do and so if I can inspire Max to do that and if I still can build that ecosystem into our company than I'm hopeful that both will reach their goals overtime.

Dave Kling

So you just got up, this guys have been waiting a little while I'm going to swing it back over here.

Unidentified Analyst

Hi there, Alan Wool from South Africa. Can you possibly shed light on what the monetization strategy for WhatsApp is seem it was quite a big acquisition?

Mark Zuckerberg

Sure, so the way that we think about this, is first you build up a product that people love, right that is the kernel of everything and you can't build anything valuable unless you have that. And you know part of the reason why I was so optimistic about us acquiring WhatsApp was there's so many people around the world who love it and use it so deeply right it is more than 1 billion people now are using it, that's what we kind of forecasted when we made the acquisition I think when we announced it we thought that within a few years it was going to get to 1 billion, people using it which is it now has and basically every consumer product that has that kind of breadth and depth of engagement has business kernels build into a strong business overtime.

So once you have that then I think the next question is how do you broaden the behavior so it's not just people interacting with their friends and you know people that they want to message, but also communicating with businesses and the way that we have a playbook for doing this. That is what we've done with Facebook and what we've started doing with Instagram and it's off to a good start, where first you build the customer behavior then you build what we call organic business behaviors which are making it so that we provide tools for businesses, to use our products for free to start engaging in the community to create value for people who are using the products but we don't start charging for that yet, so in Facebook that analogy is pages.

We don't even charge for pages, there are what there are more than 50 million of the last public stat on active business pages, so that's awesome, and that builds the foundation on top of the consumer behavior for now you have an active in business community. And then the kind of the blocks out there is once you have all these businesses engaged and they're getting value from the platform then they kind of, we get to a point where they come to us and ask can we pay to just get more distribution or more reach with the tools that we're providing for free. So, and that's where it actually starts building revenue and profit. We're in the starting stage 2 with WhatsApp and Messenger, now in terms of starting to think about how we build a good organic business used case and that we people in addition to messaging your friend and your family maybe you message a restaurant to try and get a reservation right or you message a company if you have a question about how to use their product.

And these are things that company's want and people don’t typically want it to be on the phone for customer support for half an hour at a time if they can spend a message and then get a response back then I think that is a great experience but both people and businesses are going to want to engage in but that will be the foundation for building this business.

Dave Kling

Bring it back here we will have just some time to get the last few questions here.

Unidentified Analyst

Good morning. My name is Frank Weiss. My wife and I've been shareholders since day one and I was really, really young when I first got my Facebook account I think I was 65 and I use it three or four times a day because I just love it to see what my in laws are doing and my kids and everything. But when my nieces and nephews find out and grandchildren find out that their uncle Frank or grandpa Frank is on Facebook they have even though it is just cool as it can be he is not young anymore so we had a visitor in our house this morning a young women who has got a teen age girl and she said that the teen age young girl does not even have a Facebook account and neither do her friends and all know these other magic names and WhatsApp and my wife and children here all mentioned this morning. I'm sure that company has recognized that and do you have any strategic plans in the future to bring the young people back in? Thank you.

Unidentified Company Representative

I can take that because I've had haven’t had a question yet. And I am worried so actually we said this in the past Facebook has the largest audience of global teams and teams remain very engaged on Facebook and we are also as Mark talked about building lots of different social products so messaging is incredibly important for all demographics but especially for younger demographics Instagram is very popular we have younger users as well, so we've got all sorts of different forms of sharing for all source of different used cases and we think that's very important to serve the broadest possible audience via Facebook and for all of our properties.

Dave Kling

Center aisle.

Unidentified Analyst

Following up on what you were talking about earlier on Facebook being a learning organization. As the CEO what are the areas where you feel like you need to learn to improve or the current two or three focus areas for you?

Mark Zuckerberg

Great question, what do you think?

Unidentified Company Representative

I mean we have this really incredible cultural learning I think it is really set by Mark. Mark is the President who [Multiple Speakers] Mark really sets out to learn every year he sets out these grand goals every year that and I think it inspires all of us. I think we are trying to learn a couple of things one is we are trying to learn about the impact sharing can have and the impact the other platforms have so we know we enable 1.6 billion people around the world to learn and we increasingly learn from them about what that sharing means to them. So I was in Germany recently and I got to visit a non-profit that's helping Syrian refugees living in Germany get jobs and I went to the factory where they were making the furniture and they talked about how they were using Facebook to sell those products and also using Facebook to keep in touch with people back home. That's an understanding how our product impacts people and it goes into the product design as we iterate.

I think we also want to learn what happens when the next billion people or the next several billion people come online. Because there are 4 billion people in the world who aren’t connected it's something we are really focused on and we know that it's not just that bate on how the benefit of acts the access of data and learning from us. In fact we are missing an opportunity to learn from their voices and so the work Mark has led to force our company to face through how do we learn how to connect people, how do we make data that are faster cheaper so anyone in the world can access it, how do we get more people on to the Facebook platform is about learning how we do that so that we as human beings can learn from them.

Mark Zuckerberg

Yes it's a better answer.

Dave Kling

All right, thank you, all right and thanks for being so patient, we will take our last question from the gentlemen in the far aisle. Thank you.

Unidentified Analyst

Overall I am confident that Internet and Facebook have been tremendously beneficial to the world, but you do hear about the negatives for instance how ISIS uses Facebook to recruit or for more local crime how threats and counter effects that sometimes lead to shooting sometimes are on Facebook. How are you working with the good guys to help solve to help reduce the way that Facebook can be negative in small but significant ways?

Mark Zuckerberg

Why don’t I take that one, so we have on Facebook we have community standards about what sort of how people can communicate in a way that keeps our platform and our communities safe. So we want people to come on and express themselves and share but we know that they won't do that if they don’t feel that it will provide them a safe environment in which to do that. So our community standards address things the things that you talked about like terrorism content or hate speech or some of those things we see out in the world that unfortunately people also come online to try to communicate so for instance with terrorism we have a very clear policies that terrorists -- that there is no place for terrorists content or terrorists on Facebook and so when that type of content is reported to us we take it down as quickly as we can. We also work very closely with law enforcement to be responsive to them when they have information about threats or if we see something on our platform that suggests imminent harm and we do the same with respect to all other types of speech on our platform like hate speech can violate our community standards but the most important thing to recognize is that no matter how much speech we take down, there is going to be someone somewhere around the world who wants to communicate a dangerous idea or a hateful idea. And so what we're trying to work on is encouraging people around the world to use our platform to combat that type of speech because the answer to hateful speech or negative speech is more speech and positive speech, so we're working with governments, we're working with civil society and organizations to train them on the best practices to use our platform to spread messages of moderation and tolerance and we think overtime that's going to be the best answer as to use our platform and its ability to connect people and to combat the hateful messages that are out there in society.

Dave Kling

Okay, that concludes the Q&A session. Thanks everyone for attending our annual meeting and for your continued support to Facebook as our stockholders. Have a great day and see you next year.

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