The leadership of Facebook is failing to face facts, preferring to live in a world of fiction. Well, at least not facing certain facts. Given the public outrage over Facebook’s reckless handling of user private data, inadvertent complicity with electronic fraud and resulting plummeting stock, Mark Zuckerberg did appreciate the reality that it was time to sell Facebook. He sold well over $100 million in stock last month and Recode is reporting an expected sale of another $13 billion of Facebook stock based on Zuckerberg’s plan to sell 35 to 75 million shares between last September and next year.
But he missed five key realities having to do with 1) the underlying Facebook misconduct, 2) the leadership’s efforts to deny and conceal the business model problems, 3) the inadequate personal model set by its top leaders, 4) the governance problem having to do with his unchecked control of the CEO, and 5) the apparent inadvertent complicity of this seemingly disengaged board.
First the 50 million Americans’ personal information shared with the Cambridge Analytica, with ties to the Russian government and the 2016 election fraud, was a consequence of Zuckerberg’s 2007 unwise invitation to build businesses around Facebook data with little oversight. When Facebook detected the abuse of this information, they warned the firm but never conducted a compliance audit.
The experts reviewing Facebook’s systems and policies report that the rules for accessing the social network’s information treasure chest were far too lax. A Russian academic at Cambridge University accessed the data of 270,000 people when they downloaded an app allowing him—an academic—to scarf up their data as well as that of millions of their friends without permission or knowledge. This may well have been in violation of 2011 Federal Trade Commission consent decrees against Facebook. As Marc Rotenberg, president of the Electronic Privacy Information Center, which that has brought privacy cases before the FTC said: “No one could have known that their friends were disclosing their personal data on their behalf. It’s entirely illogical, and it breaks the consent law.”
“Instead of demonstrating personal accountability, Zuckerberg retreated from public discourse while selling Facebook at the rate of 228,400 shares a day.”
Second, the firm’s public reaction through last year was to deny all such abuses and Russian intrusions. Zuckerberg called such allegations “crazy” even though Alex Stamos, Facebook’s chief information security officer had already told him otherwise. The New York Times reported that Stamos was pressured to water down his findings on Russian intrusions and to delete references to Russians. Following this model, last month, just after a dozen Russian officials were implicated in abusing Facebook and other U.S. social media to interfere with the elections, Facebook’s vice president of advertising Rob Goldman, posted a series of messages on Twitter. “Most of the coverage of Russian meddling involves their attempt to effect the outcome of the 2016 US election,” Mr. Goldman tweeted. “I have seen all of the Russian ads and I can say very definitively that swaying the election was *NOT* the main goal.”
Third, as to accountability, when asked to come before Congress last November, Facebook, like other tech companies sent their attorneys—not their leaders. They were proudly announcing that revenue rose 47% to $10.3 billion in the third quarter from a year ago, with profit surging 79 percent to $4.7 billion. Where was Mark Zuckerberg, back under the hoodie he hid behind during their catastrophic 2012 IPO? For that matter, where was Sheryl Sandberg’s legendary “lean in” model for engagement as she too hid under her desk?
Instead of getting out there and demonstrating personal accountability, Zuckerberg retreated from public discourse while selling Facebook at the rate of 228,400 shares a day. For those who say that this was required due to a pre-set plan by an SEC Rule 10 B-5 schedule to fund his charity, this is an error. Those plans can be halted at any time, especially at a time of distress, with the firm losing 12% of its value in two days!
Fourth, Zuckerberg has little accountability as CEO. As of last April, he still controlled 60% of the vote and he can’t be replaced without his own consent – much like President Xi, President Putin, and Jack Ma. Perhaps he was advised by Steve Jobs, who was once thrown out of the company he created, to insulate himself. Still, we are reminded by such models as Idi Amin, Papa Doc Duvalier, Fidel Castro and Ferdinand Marcos that there are high costs to these “emperor for life” models. The early career dragon slayer often comes to resemble the dragon themselves later career.
Fifth, some might question why Facebook’s board has been so quiet. Might the problem be Peter Thiel, a Trump campaign backer, or Russian-Ukrainian-American WhatsApp founder Jan Koum, both of whom are on the board? Shouldn’t Zuckerberg now surrender one title—the chairmanship—to another director, like former American Express CEO and chairman Ken Chenault?
Finally, through all this, the business model was to just keep growing and figure things out later. Robert Oppenheimer, the father the atomic bomb, reminded us 70 years ago that scientists can know sin, and that Dr. Frankenstein was not the only creator to lose control over his creation.