By: Jon Neri,

Today, Facebook CEO, Mark Zuckerberg, submitted to Republican Senator Charles Grasley’s call for him to appear before the Senate Judiciary Committee on April 10.[1] The Committee wants Zuckerberg to answer questions about Facebook’s policies “regarding the protection and monitoring of consumer data.”[2] Such summons follows the discovery that political data firm Cambridge Analytica harvested information on millions of Facebook users which it utilized in relation to its work in the 2016 Presidential election.[3] Considering this is not Facebook’s first misstep when it comes to protecting its users’ private information, one must question what aspects of the company’s structure sustains its bad practices and, conversely, its positive reputation.

The discovery referred to above resulted from an investigation led by the Federal Trade Commission.[4] The FTC acknowledgment of its investigation noted that Facebook had entered into a “consent decree” in 2011.[5] In doing so it promised to reform its misleading privacy policies, as well as specifically protect its users from breaches via third-party apps.[6] Considering the decree was made over seven years ago, it is safe to say Facebook has had a long history, and certainly a reputation with lawmakers, of privacy concerns and miscarriage of private user information.[7] The social media mogul has a practice of “pushing the limits of privacy expectations,” operating under a doctrine that is very much similar to the quip “act without permission and ask for forgiveness later.”[8] The company consistently fails to notify users that information they lend, and commonly believe to be as private, is actually often open to public view during particular circumstances, such as the user accessing a publicly shared app within the Facebook interface.[9] It is not, however, new to having to publicly apologize for breaches in its user data, and is quick to come up with an excuse for the incident and a promise that the issue will be fixed.[10]

In the case of this most recent discovery, Zuckerberg took out full-page ads in several British and American newspapers on Sunday, March 25, to apologize for a “breach of trust” relating to the Cambridge Analytica scandal.[11] “This was a breach of trust, and I’m sorry we didn’t do more at the time,” said Zuckerberg before ensuring that the company was taking steps to make sure such a breach never occurs again.[12] Meanwhile, the CEO has come under harsh criticism for this most recent scandal which sent Facebook’s value plunging by nearly $50 billion last week.[13]

Some speculate that Facebook’s long history of privacy violations, even under its own consent decree to the FTC, is strongly linked to Zuckerberg’s secure position as the company’s CEO and majority shareholder.[14] Facebook is structured according to a two-tier stock option system in which Zuckerberg controls 77% of the company’s class B shares, which carry 10 votes each and easily outweigh the voting-power of the company’s 2.4 billion class A shares.[15] What this means is that Facebook’s CEO owns barely 16% of the company, but controls nearly 60% of the votes, meaning Zuckerberg is essentially not subject to the initiatives of Facebook’s board of directors to any significant extent and can’t be removed from his position as CEO.[16] As could be suspected, investors are now showing concern that the value of their investment could be rapidly deteriorating while they are left with no practical means of weighing in on how the company should address its issues.[17] The current argument circling the tech world is whether Facebook would be better off moving forward without Zuckerberg at the forefront. There is no dispute that the company would not be what it is today without Zuckerberg at its helm, but it can also be argued that many of its scandals could have been avoided, and might still be avoided in the future, if Zuckerberg were to relinquish some of his control.

The practice of companies to have multiple stock classes has traditionally been frowned on by the stock market, in fact the practice was banned by the New York Stock Exchange in 1940, only to reinstate their trade in 1956.[18] More recently, however, the New York Stock Exchange has displayed renewed doubts about the practice.[19] For Facebook, the issue is more pressing than ever before and a question arises as to whether or not publicly-traded companies should be more closely regulated in terms of their structure. For now, public opinion leans towards reserving the privilege of citizens to build our companies according to our own discretion and with fairly minimal government intervention. However, if the capitalist ideals that underline free trade continue to intrude on privacy, we may begin to see more legislature proposing increased regulation of companies that specialize in handling private information.

 

[1] See Kaya Yurieff, These are the Lawmakers Who Want Mark Zuckerberg to Testify, CNN tech (Mar. 26, 2018, 2:06 PM), http://money.cnn.com/2018/03/26/technology/lawmakers-seek-mark-zuckerberg-testimony/index.html.

[2] Id.

[3] See id.

[4] See Michael Hiltzik, Mark Zuckerberg Shows Why Giving Company Founders Total Control Can Be Disastrous, Los Angeles Times (Mar. 26, 2018, 12:35 PM), http://www.latimes.com/business/hiltzik/la-fi-hiltzik-zuckerberg-20180326-story.html.

[5] Id.

[6] See id.

[7] See id.

[8] Id.

[9] See Hiltzik, supra note 4.

[10] See id.

[11] Sheena McKenzie, Facebook’s Mark Zuckerberg Says Sorry in Full-Page Newspaper Ads, CNN World (Mar. 25, 2018, 2:17 PM), https://www.cnn.com/2018/03/25/europe/facebook-zuckerberg-cambridge-analytica-sorry-ads-newspapers-intl/index.html.

[12] Id.

[13] See id.

[14] Hiltzik, supra note 4.

[15] Id.

[16] Id.

[17] See id.

[18] See id.

[19] See Hiltzik, supra note 4.

Image Source: https://www.theverge.com/2018/3/27/17168228/mark-zuckerberg-congress-testify-cambridge-analytica.