In early 2018, an online movement of #deletefacebook was going viral after the scandal of political date firm, Cambridge Analytica hired by President Trump’s 2016 election campaign gained access to private information on more than 50 million Facebook users to identify their personality in order to influence their voting behavior. Facebook also failed to notify the Federal Trade Commission about the data leak because the company “considered it a closed case.”
The story does not just end there. Facebook was involved in the special counsel Robert Mueller’s investigation into Russian interference in the 2016 president election as well.
Facebook admitted during 2016 president election, 126 million users were exposed to Russian paid content and advertisement.
This is not the first time that Facebook was involved in data privacy matters. In February 2018, Facebook was ordered to stop tracking and collecting private information on Belgian users by Belgian court. In 2013, Facebook bug exposed private contact information including email address and phone number of 6 million users. In 2011, Facebook was charged by the Federal Trade Commission for not keeping its privacy promise to users by allowing private information to be made public without warning.
Facebook’s long history of data privacy issue has led to users deleting their accounts and Facebook employees leaving the company. Many believe that Facebook’s data practices and its entire advertisement model is unethical as it generates profit on the use of private user information.
Facebook’s story starts when Zuckerberg enrolled at Harvard University at 2002. Soon he was recognized as the go-to software developer on campus.
He invented CourseMatch, a course selection software as well as Facemash, a software that compares attractiveness between students which was deemed as inappropriate and was banned by the school administration.
Three of his fellow students, Divya Narendra, and twins Cameron and Tyler Winklevoss invited Zuckerberg to work on a social networking site they called Harvard Connection soon after recognizing Zuckerberg’s sounding previous projects. Harvard Connection was designed to use information from Harvard’s student networks in order to create a dating site for the Harvard elite. Zuckerberg accepted the invitation, yet he soon left the project and started working on his own social network website with his other friends.
Zuckerberg created the initial Facebook with the help of his friends, the website allows its users to create their own profile, upload pictures, and communicate with each other. They were running the site in their dorm room in Harvard University until June 2004. Zuckerberg decided to drop out of college after his sophomore year in order to devote himself fully to Facebook. He moved the company to Palo Alto, California. Soon after that, Facebook reached 1 million users by the end of 2014. In 2005, Zuckerberg’s enterprise received a huge funding of $12.7 million from the venture capital firm Accel Partners. By December 2005, Facebook has reached 5.5 million users and has begun attracting interest from companies who want to advertise on its site.
In 2009, Facebook was able to achieve cash flow positive from online advertisement and it no longer needed funding from venture capital. In 2010, Facebook has over 400 million registered users and online active users over 100 million at a given time. In 2012, Facebook filed for IPO with the SEC and named Morgan Stanley, Goldman Sachs, and JPMorgan as its main underwriter. It was the largest IPO in the Silicon Valley at the time.
In 2010, the movie “The Social Network” directed by David Fincher and written by Aaron Sorkin was rated as the best film of 2010 and won 3 Oscars. The movie was based on the story written by Ben Mezrich, the author of Bringing Down the House when Saverin approached him with the story of how a group of Harvard students made it big in the Silicon Valley.
Zuckerberg vs. Winklevoss
In 2004, ConnectU filed a lawsuit against Facebook alleging that Mark Zuckerberg had broken an oral contract with the Winklevoss brothers and had copied their idea and used codes that he was hired to create illegally. After lawyers searched Zuckerberg’s records, incriminating Instant Messages revealed that Zuckerberg may have intentionally stolen the intellectual property of ConnectU and offered Facebook users’ private information to his friends.
Zuckerberg vs. Saverin
In 2003, Mark Zuckerberg asked Eduardo Saverin to deposit $15,000 in a bank account that would go toward the servers needed to host TheFacebook.com. In 2004, Facebook was doing so well that Zuckerberg, Saverin, and Dustin Muskovitz formed The Facebook as a limited-liability company (LLC) under Florida law.
However, Zuckerberg later felt that Saverin was not doing his part in the company when Saverin did not complete the tasks Zuckerberg assigned to him and delaying the process of receiving funding from venture capitals in the Valley. “Zuckerberg decided to solve the problem by cutting Saverin out of the company. He reduced Saverin’s stake in TheFacebook.com by creating a new company, a Delaware corporation, to acquire the old company (the Florida LLC formed in April), and then distribute new shares in the new company to everybody but Saverin.” (Nicholas Carlson May 15, 2012)
Facebook’s data practices
Mark Zuckerberg has been on a 14-year apology tour that still hasn’t fix Facebook’s data practices. According to WIRED, “IN 2003, ONE year before Facebook was founded, a website called Facemash began nonconsensually scraping pictures of students at Harvard from the school’s intranet and asking users to rate their hotness. …And in 2006 the young company blindsided its users with the launch of News Feed, which collated and presented in one place information that people had previously had to search for piecemeal. Then in 2007, Facebook’s Beacon advertising system, which was launched without proper controls or consent, ended up compromising user privacy by making people’s purchases public.
In 2010, after Facebook violated users’ privacy by making key types of information public without proper consent or warning…” (ZEYNEP TUFEKCI, April 06, 2018) Facebook has a long history of violating the privacy agreement with its users by using private information without the proper consent of users on generating company profit.
Ethical Challenge Resolved
A settlement agreement was reached between Facebook and ConnectU in February 2008 at $65 million. Although Business Insider states that “According to documents viewed by Business Insider, this figure is wrong – by half.” However, Winklevoss brothers later alleged that they were misled on the valuation of the company at the time of the settlement and appealed. (Nicholas Carlson, Sep. 23, 2010) Like the Winklevoss brothers, Saverin was able to reach a settlement with Facebook. According to his SEC filing, he holds just under 2 percent of Facebook’s shares which worth $2.18 billion.
Facebook was fined £500,000, the maximum amount possible for its lack of transparency and failed to safeguard its user information. And Zuckerberg wrote on a statement posted on his Facebook wall, ‘I’ve been working to understand exactly what happened and how to make sure this doesn’t happen again,” he wrote. “The good news is that the most important actions to prevent this from happening again today we have already taken years ago. But we also made mistakes, there’s more to do, and we need to step up and do it.’ (Alyssa Newcomb, Mar.24.2018)
Integrate course content
There are many to be discussed behind the successfully story of Facebook and its founder Mark Zuckerberg. For instance, he demonstrate arguable ethical followership while he agreed to work on the Harvard Connection project with the Winklevoss bothers back in Harvard. He agreed to work on the social networking project with Winklevoss brothers at the first place but later decided to work on his own social networking website. It is arguably unethical as he undertook the obligation to complete the task but instead went almost the opposite direction.
Intriguingly, both projects are based on social networking; hence the Winklevoss brothers later alleged Zuckerberg stole their idea of the “initial Facebook”. As settlement to the lawsuit remained confidential, there’s no evidence that suggests the projects are similar. But Zuckerberg’s action demonstrate a certain level of dissent as if he has not revealed his thoughts or inputs on the improvement of the Harvard Connection project.
One can argue that Zuckerberg’s need for authority and fear of powerlessness has motivated him to start his own company. During his first public Q&A session, he says “I really want to clear my life so that I have to make as few decisions as possible about anything, except how to best serve this community [of Facebook users].” His action later with removing Saverin from the company has also demonstrated that he wants to be in the center of activity and control the company as after Saverin leaves, he would be the only decision maker left in Facebook.
Although Saverin has contributed to the final outcome of being removed from the company by putting ads on Facebook and holding up the process of receiving funds from venture capital, Zuckerberg was not being an entirely ethical leader as his action of removing Saverin from the company was uncaring/unkind. On the other hand, Saverin has his fair share of the final outcome as well. When Zuckerberg assigned him the task of ‘to set up the company, get funding, and make a business model,’ he was not putting more effort & time in completing the task. He decided to work on his own venture Joboozle and took advantage of Facebook by placing ads on the website without Zuckerberg’s knowledge which was harmful to the company at the time.
Facebook surely has demonstrated unethical behavior with its data practices on user information. The breach of data in 2013 due to a Facebook bug shows its product safety and quality are questionable. The launched of News Feed and Beacon without the proper consent of users shows Facebook’s decision making has disregard the corporate value of “protecting the community.” Data leak with Cambridge Analytica was kept private as Facebook “considered it’s a closed case” shows lack of transparency in the company. Such actions are direct violation of “Do Not Harm, Act in Good Faith, and Be Transparent” under the American Marketing Association Statement of Ethics
Learning from the case and Planning for the future
What we can learn from the Winklevoss brothers’ case is that Business Ideas Aren’t Protected. It does not matter who came up with the idea first; rather it is a competition of who can execute the idea and put it into market first. However, it is also important that no matter we are the follower or the leader in a company, we shall control ourselves from harming other people.
In the Saverin’s case, we can learn the importance of having a Signed Agreements when investing/co-founding a company. Unfortunately, there are many “dirty trick” in the business environment that can undercut someone easily. Also, when we are the follows in a company and undertook obligations, we should act and good faith to complete the tasks even if it requires extra time and effort.
Zuckerberg went from the standpoint at the beginning of “Content and community first, revenue second” to generating profit from user information on Facebook later when the company went public. It is understandable in the aspect of as a public company, there’s always demands and expectations to be met on the company’s earning. However, a company should not harm its users’ interest in exchange of company gains.
As Mark Schaefer, an internationally-acclaimed speaker, author and college educator wrote in his article Facebook’s biggest problem isn’t ethics, hate or fake news. It’s Facebook, “…the problems might become even worse because to truly solve the overwhelming ethical issues, the company would have to uproot its entire advertising model. Becoming more ethical hurts their bottom line.”
He argues that being ethical with user data practices will create a conflict with Facebook’s fundamental advertisement system. As a result, Facebook will not undertake the risk of jeopardizing its revenue stream unless the ethical issue is causing an extreme decline in Facebook’s stock price.
At the congress hearing, Zuckerberg took responsibility for the missteps. “We didn’t take a broad enough view of our responsibility, and that was a big mistake. And it was my mistake, and I’m sorry. I started Facebook, I run it, and I’m responsible for what happens here.” (Alyssa Newcomb, Mar.24.2018) After the congress hearing, Zuckerberg promised that Facebook will be more proactive on protecting its user information from third parties. He suggested on his Facebook page that there are three steps for Facebook to take in order to do so. Facebook will investigate all apps that were granted access to user data before 2014. The company will also limit data apps can access to only a person’s name, photo and email. Lastly and most importantly, Facebook will develop a tool to let its users to see which apps are accessing their data and allow them to revoke such access.
Donie O’Sullivan and Jeremy Herb, July 31, 2018 https://money.cnn.com/2018/07/31/technology/facebook-removes-pages/index.html
Nicholas Carlson May 15, 2012 https://www.businessinsider.com/how-mark-zuckerberg-booted-his-co-founder-out-of-the-company-2012-5
ZEYNEP TUFEKCI, April 06, 2018 https://www.wired.com/story/why-zuckerberg-15-year-apology-tour-hasnt-fixed-facebook/
Nicholas Carlson Sep. 23, 2010 https://www.businessinsider.com/the-facebook-movie-is-wrong-heres-how-much-zuckerberg-actually-gave-the-winklevosses-to-go-away-2010-9
Alyssa Newcomb, Mar.24.2018 https://www.nbcnews.com/tech/social-media/timeline-facebook-s-privacy-issues-its-responses-n859651