What's happening at Facebook's shareholder meeting

Facebook CEO Mark Zuckerberg
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Is Facebook's dual-class stock structure—which essentially secures CEO Mark Zuckerberg's control of the company—good or bad for investors?

That will be the top question as Facebook kicks off its annual shareholder meeting on Thursday in Santa Clara, California.

According SEC filings, Zuckerberg, his co-founders and early investors control about 74 percent of the voting power, through ownership of Class B stock, which gives them 10 votes per share. Shareholders who bought stock in the IPO were issued Class A stock, with just one vote per share. Zuckerberg personally controls about 55 percent of the voting power through his ownership of 422 million class B shares and voting agreements with other shareholders.

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A proposal brought by activist shareholder Northstar Asset Management seeks to change this arrangement. "What we're asking for is for Facebook to recapitalize the shares so that each share gets one vote," Northstar Asset Management founder and CEO Julie Goodridge told CNBC.

Northstar has $250 million under management and bought Facebook shares at the IPO. It owns about 56,000 Facebook shares, worth just under $5 million. "I am convinced that shareholders need to be able to have some sort of a say in terms of appropriate corporate governance, especially auditors, who's sitting on the board and other issues around sustainability and you know, electioneering contributions, that sort of thing," said Goodridge. Northstar has also filed a similar shareholder proposal with Google, which has three classes of shares.

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Proxy advisory firm Institutional Shareholder Services is advising Facebook shareholders to vote for Northstar's proposal. "Dual-class capital structures can serve to entrench certain shareholders and management, insulating them from possible takeovers or other external influence or action," the firm said in its Facebook Governance QuickScore Profile.

"Providing equal voting rights for Class A and Class B shares would represent an improvement to shareholder's rights," ISS advised investors. ISS gives Facebook a high risk score of 10 out of 10 when it comes to governance.

With Zuckerberg's majority control of the company, the proposal has essentially no chance of passing. For that matter, the stock has done really well, up 25 percent in the past year and 117 percent since the IPO. By comparison, LinkedIn's stock is up 32 percent over the past year, and Google's stock is down 4 percent.

So what's the problem? "Well of course I am thrilled as a shareholder, but I would be even more thrilled if I had some authority to choose board members should somebody go off the deep end," said Goodridge.

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Also on the agenda and likely to be approved are three other company proposals; the re-election of Facebook's eight directors, the ratification of the selection of Ernst & Young as the company's independent registered public accounting firm and the re-approval the company's IRS code. Facebook's board is led by Zuckerberg who is chairman and CEO and includes two women: COO Sheryl Sandberg and Gates Foundation CEO Susan Desmond-Hellmann.

Two additional stockholder proposals will also be voted on: an annual sustainability report and a human rights risk assessment.

The meeting starts at 2 p.m. EDT and will be webcast.