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In current business, political, and social environments, data plays a critical role. The advent of technology, especially social media, has made the collection of personal data fast and easy. Most organizations have become aware of how data is an important corporate asset. As a result, organizations collect useful customer data for research, what will help in making key decisions. Despite the importance of data, many firms have revealed that personal data can be also a huge liability. One of the best examples that illustrate the double-edge nature of personal data is the Facebook–Cambridge Analytica data scandal, which is one of the major corporate governance issues in the modern-day society.
Description of the Issue
The FacebookCambridge Analytica scandal is a major business, political, and social issue that emerged in the early 2018. It was revealed that Cambridge Analytica had obtained personal data from over 50 million Facebook users without their consent and further used it for various political reasons. According to The Guardian (2018), a whistleblower revealed that it had obtained personal information from Facebook users without their permission in early 2014. It was aimed at building a data system that could be used to profile individual voters in the United States and target them with personalized political advertisements ahead of the general elections (BBC, 2018). The other models were used to exploit personal yet private information about people and target their inner struggles. The majority of the collected data played a huge role in influencing and targeting the electorate to vote for Donald Trump in the elections (The Guardian, 2018). Such data breaches raise key questions on the safety and the extent of privacy of the collected information. Moreover, the scandals raise questions regarding the freedom between the government and independent businesses. It then provokes the question whether all Wall Street companies are innately controlled by governments. Moreover, the presence of Steve Bannon as the head of Cambridge Analytica at the time and his simultaneous role as Trump’s key adviser draws key questions on the conflict of interest that organization heads may have. The major organizational data leak presents a key problem to the management of Facebook on the effectiveness of its corporate governance strategies.
Stakeholder Analysis
Stakeholders are an important part of any business. When it comes to Facebook, its major stakeholders are its users. Facebook services billions of monthly active subscribers and active users who receive the topmost company priority. They are important because they determine its popularity and attractiveness, especially in its advertising business. These stakeholders are interested in the ease of the app usage as well as the guarantees that the private information collected by the company is safe and secure.
Advertisers are the second major stakeholders at Facebook because the majority of Facebook's financial revenue comes from its advertisements. Hence, keeping advertisers happy is crucial in making profits, which can be done through automated reporting of advertisements and reduction of human involvements in the process (Edwards, 2018). Moreover, keeping their data and personal information private is also crucial in making them happy. The other stakeholders include company employees, investors, and the government. Keeping investors happy is also crucial in ensuring that the organization has necessary funds to run its operations.
Strategies Addressing the Issue
Facebook is governed by its founder and owner Mark Zuckerberg. Unlike the other organizations with a board of directors who make decisions on behalf of the firm, Facebook has none. Zuckerberg has 60% voting rights, which means that he makes all decisions and has the final say in what is to be done (Edwards, 2018). However, a change in Facebook's corporate structure is crucial in averting the future data breach scandals. The adoption of a more independent board of directors at Facebook would be better suited to control the company. If Facebook had an independent board of directors in 2015, when the first data breaches were cited, they would have paid more attention and nipped the problem before it escalated to the full-blown scandal.
Moreover, the dissemination of the multiple capital structures will give investors more rights in the running of the company. The multiple capital structures commonly divide stock into two major classes (Muhammad, Shah, and Islam, 2014). These are class A and class B, where the latter has fewer voting rights while those holding the former have more voting rights. Moreover, people owning class A shares can easily convert them into class B shares (Edwards, 2018). However, those owning class B shares cannot convert them into class A shares. The multiple capital structures leave many investors disenfranchised and without a say in the organization. Moreover, many organizations that had multiple capital structures, such as Snap and Blue Apron, gained little capital when they issued these shares to the public because people are not willing to invest in companies that do not give them a voice on issues that may affect them. Hence, Facebook should implement new capital structures that give investors a single vote per share. A single vote per share is an important philosophy in good corporate governance.
Conclusion
The corporate governance issues at Facebook refer to a major business, government, and social issue. The lack of proper governance has led to the major corporate data leak that was used for political reasons. Such level of poor corporate governance has led to the major questions on the security of users' data. Facebook should come up with a better corporate structure that can adequately combat the leak and misuse of data by various entities for their own personal gain.