Collaborative engagement with the social media companies

Give a brief overview of your initiative, its objectives, and why you decided to undertake it.

The Christchurch terror attack on 15 March 2019 was a defining point in New Zealand’s history. The premeditated attack on two Christchurch Mosques took the lives of 51 New Zealanders and severely impacted many more. By capturing an act of terror live on social media and by using the internet as a tool to boost exposure to the killings, the gunman ensured his hateful agenda was maximally amplified. The company’s algorithms had failed to recognise the nature of the damaging content. Copies of the live-stream went viral despite attempts to shut diffusion down. The video, in its various forms, reached millions of viewers and can still be found online today. The safeguards in place were drastically inadequate.

The terrorist attack came at a time of escalating levels of investor discomfort relating to social media platforms. Investors had been concerned for some time about poor corporate governance practices, with dual-class share structures leading to heavily skewed voting control and ineffective boards. More recently, concerns had focused on issues such as the Cambridge Analytica scandal, allegations of electoral manipulation and the spread of misinformation.

For New Zealand government-owned investors, enough was enough. Facebook, Alphabet and Twitter had betrayed their users, breached their duty of care and severely damaged their social license to operate. Led by CEO Matt Whineray and responsible investment strategist Katie Beith, the Guardians of the New Zealand Superannuation Fund rallied like-minded investors to join together and engage these three main social media companies with a single focus: to strengthen controls to prevent the livestreaming and dissemination of objectionable content.

Starting locally and expanding internationally, the Guardians approached their peers. To successfully engage with these multinational giants, a large collaboration was needed, speaking with a united voice, on an issue that represented both a moral imperative and a business case. More than 100 global investors, representing assets of approximately NZD$13.5trn, joined the Social Media Collaborative Engagement.

Describe how your initiative is aligned to Active Ownership 2.0, including:

• The significance of the systemic, real-world outcomes it seeks.
• How the initiative uses a variety or combination of stewardship tools/activities to achieve outcomes.
• The theory of change for the initiative (making clear how the initiative intends to drive real world outcomes through use of the selected tools/activities).
• The ambition, ingenuity and/or effort of the initiative.
• How collaboration was used to drive outcomes.
• Any challenges associated with the initiative and how these were overcome.

The issue of objectionable content being disseminated through social media platforms has severe and wide-reaching implications for investors, companies and the general public. Technology stocks are a significant part of many global indices and ESG risks in the sector – which include regulatory, reputational, litigation, data privacy and cyber risks – pose material consequences for global equity portfolios. These risks are compounded by the serious societal consequences of allowing such material as the Christchurch attack to be shared across social media platforms.

Globally, NZ Super is a relatively small investor, meaning it had to be creative in using a combination of stewardship tools and activities. Following the Christchurch attack, the first lever the NZ Super’s Guardians pulled was to speak out publicly on their intention to engage the social media companies on this issue. This was a deliberate step-change from their usual approach of confidential engagement with investee companies.

Second, the Guardians sought to build a global investor collaboration. One of the key factors in enabling such a large group is to establish a single, clear objective. This helped to break down barriers for those investors who had not joined a collaboration before and ensured there was a clear and uniting goal for the engagement.

Third, as the global collaboration grew, the Guardians announced the support of the Christchurch Call, a joint initiative by the governments of New Zealand and France which outlines collective, voluntary commitments from governments and online service providers intended to address the issue of terrorist and violent extremist content online. The Guardians also created and distributed an investor resource for shareholders not part of the collaboration who sought to engage on the same issue. This ensured the social media companies felt pressure from a range of investors.

Engagement letters were then sent to the chairs of the boards of the three companies on behalf of the collaboration, and the Guardians sought to secure engagement meetings to discuss each of the social media companies’ response to the Christchurch attack. They assured the collaboration they were making changes to strengthen controls. However, none of the companies agreed to a board-level meeting.

Despite the large group of influential investors behind this agenda, the Guardians did not feel there was enough commitment from the companies to let the matter settle. As the first anniversary of the Christchurch terror attacks approached, the collaboration had become frustrated with progress and the inability to discuss concerns directly with the different boards. To compound this frustration, two more terror attacks (in Germany and Thailand) had been live-streamed across the social media platforms, showing that the platforms were still open to abuse.

In response, the collaboration published an open letter, distributed via global press, calling for:

• Clear lines of governance and accountability to ensure social media platforms cannot be used to promote objectionable content such as the live-streaming and dissemination of the Christchurch terrorist attack; and
• Sufficient resources to combat the live-streaming and spread of objectionable material across the platforms.

Other tools considered were raising a shareholder resolution or campaigning to vote against a particular director; these were ruled out because of voting control issues and the inability to influence via these key investor tools. However, the Guardians did signal their voting intent to the collaboration and social media companies in advance of their annual general meetings and exercised NZ Super’s voting rights as follows:

• Withholding votes or voting against directors who were up for re-election and had not carried out their responsibilities as they relate to the live-streaming and dissemination of content; and
• Supporting shareholder resolutions which in some way drove progress towards meeting the objective of the engagement.

The collaboration has continued to hold meetings with key executives and to seek meetings with board directors. It has used a range of tactics to try to overcome this barrier, including using the whole power of the collaboration to request a meeting, using a subset of influential investors to engage, offering the NZ Super CEO Matt Whineray to meet with the board, and using the influence of a top 10 shareholder who is a member of the collaboration to reinforce its message. This is an area the collaboration remains focused on to achieve open and active engagement.

The results achieved in the initiative to date, including evaluation of its success against the objectives; any adjustments to plans going forward; any insights learned from this project that can be applied more broadly?

A key highlight of this initiative, and an improvement that is directly attributable to a specific request made by this collaboration, was the announcement by Facebook late last year that it has strengthened its audit and risk oversight committee charter to explicitly include a focus on the sharing of content that violates its policies. It also included a commitment to not only monitor and mitigate such abuse but also to prevent it. This is a major win for the collaboration and a real strengthening of governance and accountability for the Facebook board on this issue.

Without doubt, the platforms have all moved to strengthen controls to prevent the live streaming and distribution of objectional content. However, it is difficult for investors to assess if these changes are equal to the scale of the problem. Therefore, the collaboration has commissioned external research to help with this assessment.

The platforms’ success or failure in moderating content and preventing abuse is likely to determine whether users stay on the platforms or move towards alternatives. In addition, if the platforms are perceived as unable or unwilling to effectively moderate user-submitted content, regulation is likely. The research will have some core recommendations for the companies. The plan is to distribute it to the companies and regulators and hold a further (and final) round of engagement meetings.

Insights for future engagement

The Social Media Collaborative Engagement was the first global engagement initiative the Guardians led. Key insights include:

• Research in advance of engagement is crucial.
• Be persistent.
• Take time to build trust in order to have an authentic conversation where both parties understand motives.
• Using a CEO or a top 10 shareholder helps level the conversation and can help secure meetings with the right people.
• Be very explicit in your asks; seek out who the decision maker is and put deadlines on expectations for responses.
• Be clear in your responsible investment strategy and know what your organisation stands for. This allows you to be agile when a significant event occurs.
• Speaking publicly about engagement efforts helps to hold everyone to account.