How to Save Facebook: Non Sibi

(Originally published on Linked In on April 9, 2018) The most eagerly awaited social event of each new academic year at Mark Zuckerberg’s boarding school was the publication of the “Facebook,” which contained the names, photographs and dormitory addresses of each student. Upon publication, the students would spend hours searching the Facebook’s pages for new friends. Mr. Zuckerberg found a similar Facebook at Harvard where he was inspired to start the eponymous company by taking the concept into the digital paradigm. This innovation changed the world.

Mr. Zuckerberg now faces enormous challenges because Facebook is incorporated as an old paradigm corporation. Facebook can’t “always put people first,” as Mr. Zuckerberg has claimed, because it is incorporated in Delaware whose traditional corporations, according to the current Chief Justice of its Supreme Court, exist solely to maximize stockholder welfare. Cambridge Analytica, which may have harvested the data of up to 78 million Facebook users, has shown the company’s 2.2 billion users that it puts selling their data first. Underneath the rhetoric, Facebook remains an old school company governed by the doctrine of shareholder primacy, which compels it to put its stockholders first by using its users’ data to maximize profits for stockholders.

Facebook’s governance architecture now threatens its survival. Facebook is a global monopoly and will come under increasing pressure for anti-trust actions as it continues to grow and dominate its market. It has become a public utility and many have argued that it should be regulated as one. Facebook’s perceived inability to police its network leaves it vulnerable to draconian legislation to protect its users. Finally, Facebook’s users have begun to mistrust its network and some have even started to leave it. No matter what it does to address these challenges, it will be difficult to restore the public trust because it’s now clear to everyone that Facebook’s true purpose, as is the purpose of every traditional, shareholder primacy-based corporation, is to maximize stockholder welfare.

Mr. Zuckerberg can restore the public trust by leading Facebook into a new legal paradigm by converting it into a Delaware public benefit corporation. This relatively new for-profit corporate form would allow Facebook to elevate its mission statement from marketing rhetoric into a legal commitment in its charter to make the world more open and connected. As a public benefit corporation, Facebook’s directors would be required to operate the company in a responsible and sustainable manner and balance the pecuniary interests of its stockholders with the interests of its users and other stakeholders and its chosen public benefits set forth in its charter. Being a benefit corporation would allow Facebook to legally put its users first, or at least give them legal standing similar to stockholders.

By boldly converting Facebook into a benefit corporation, Mr. Zuckerberg can turn Facebook into the global thought leader in governance and corporate responsibility. Facebook might then be able to stave off regulatory action long enough to create sustainable long-term value for all of its stakeholders, including its users, especially if it also followed Mr. Zuckerberg’s high school’s motto, non sibi – not for self – and truly put its users first.

 

 

 

Speak Your Mind

*