Facebook Maximizes Profits, Shareholders Demand Transparency
Facebook has once again found itself in the crosshairs of public discourse after a whistleblower was interviewed on “60 Minutes”. Frances Haugen (“Haugen”) is a former product manager at Facebook for the civic disinformation team. (Matt Levine, Bloomberg Law). Haugen shared in the interview that she was increasingly concerned with Facebook’s decision-making processes, which consistently choose profit over the public good. Id. Senators on a U.S. Senate subcommittee heard more than three hours of testimony from Haugen in which she provided specific examples of the impact of misinformation on teenagers’ mental health, and a lack of accountability on events in the United States. (Cecilia Kang, New York Times). Haugen brought internal documents and spoke candidly about the deliberate efforts Facebook makes to keep people, including children, hooked on their services. Id. She further said Facebook had hidden disturbing research about how teenagers felt emotionally worse about themselves after using its products, which include the popular social media app Instagram, and how Facebook was willing to use hateful content on its site to keep users hooked on its products. Id.
Frantic concern from Haugen led her to file a whistle-blower complaint with the Securities and Exchange Commission (“SEC”) alleging that Facebook misled its investors. (Matt Levine, Bloomberg Law). Her complaint stipulates that Facebook maximizes profits instead of caring about the public good, while simultaneously representing to their shareholders that they care about the public good, and not just about maximizing profits. Id. Haugen argues that shareholders are deceived because they think they are investing in a corporation that puts public good over the maximization of profits as part of their value proposition to shareholders. Id. Therefore, according to Haugen’s argument, the SEC should fine Facebook and return money to the shareholders to compensate them for the deception by the company’s executives. Id. There is a view among investors that sometimes the interests of shareholders and society divulge, and where that split is present, regulation should hold the corporation accountable. A question remains, however, of whether or not shareholders’ interests and the interests of the public good can ever be in harmony. Id.
There is a value proposition to investors and existing shareholders that doing the right thing, such as implementing carbon neutral plans, for society in the long-term will maximize the value to shareholders. In the example of Facebook, the long-term stability of its business model and profits would be much more assured if it committed to increased transparency regarding what its algorithm pushes to consumers and its process for screening misinformation and hate speech instead of maximizing short-term profits, as alleged by Haugen.
While Haugen clearly states the threat she believes Facebook presents to society, Facebook leadership has repeatedly pushed back on the criticism, claiming that its products and research are misunderstood and taken out of context. (Cecelia Kang, New York Times). Mark Zuckerberg (“Zuckerberg”), Facebook’s Chief Executive Officer, rebutted that Facebook prioritized the bottom line, including sponsored harmful content, over implementing controls to limit things such as hate speech from the platform. Id. Zuckerberg believes that it is illogical that Facebook would prioritize harmful content because advertisers do not want to buy ads on a hate-filled, misinformative platform. Id.
The internet age has provided an ease of access to a wide array of educational materials, and an increased understanding for the impact of business decisions on society at-large and not on the value proposition to shareholders. CEOs of major corporations are increasingly promising that instead of merely choosing the traditional shareholder interest of profits first every time, their business plan will include incorporating the greater good of society as well. (Matt Levine, Bloomberg Law). While these may seem like hollow words, there has been concrete evidence of corporations shifting to embrace corporate social responsibility as a business plan, not as a check box. Id. Corporations choosing the greater good more often may allow for a harmonious existence between society as a whole and the pursuits of profit and success in the board room. Id.
Overall, the role of Facebook’s executives and board of directors should move towards accountability being more directly tied to responsible sharing of information over maximization of profits. Much like the big tobacco industry, the Federal Government may need to implement regulations to ensure responsible deviation from maximizing profits to also ensuring the public good. Facebook can embrace their original goal of connecting the world while also ensuring that the connection does not turn sinister and create even more divisiveness in the public conscious.