Essay: Facebook Stakeholder Engagement Crisis

CMNS 3500: STAKEHOLDER ENGAGEMENT

Living Case Study Project: Facebook Stakeholder Engagement Crisis

EXECUTIVE SUMMARY

Facebook is a global leader in social media with over 2.2 billion users and has an ethical responsibility to protect the personal information of its users. Recently, Facebook suffered huge reputational and financial losses in the wake of two cases of data breach where the personal information of millions of users was shared with external party without explicit consent. This report analyzes the data privacy issue to identify the root cause of the problem. A stakeholder analysis was conducted, and three key stakeholders involved have been identified to strategize communication plans to meet their interests. Following the stakeholder analysis, an analysis of Facebook’s response to address concerns of the key stakeholders in the crisis is conducted. The report provides recommendations to overcome stakeholder engagement challenges and to reinforce Factbook’s image as a socially and ethically responsible corporate citizen.

INTRODUCTION

Stakeholder engagement is important to build long term positive relationships with key stakeholders such as customers, employees, shareholders, media, suppliers and the government. Effective engagement helps foster trust with various stakeholder groups and enhances brand reputation.

In this age of social media and internet, one must understand the motivations and interests of stakeholders and collaborate with them to find mutually beneficial solutions to complex problems or crisis situations. Digital channels provide unique opportunities to build brand awareness while directly interacting with stakeholders on a wide variety of issues affecting them. Data privacy crisis and technological vulnerability has caused a major damage to Facebook’s image as a trusted leader in handling personal information. This report analyzes Facebook’s approach in handling the stakeholder reactions in response to security breach crisis. The objective of the report is to identify key stakeholders and offer recommendations to manage stakeholder communications in an open and transparent manner.

PROBLEM DEFINITION

Facebook is facing severe criticism from customers, media, shareholders and the government over two cases of data security breach in 2018. In first case, the developer of a personality quiz app transferred personal data of over 87 million people without their formal consent to Cambridge Analytica, a political consulting firm. This data was used in Donald’s Trump presidential election campaign. Lack of appropriate privacy protocols also lead to breach of people’s trust who share their confidential information with the company. Facebook’s response to situation was reactive and little too late. The company was not fully prepared to handle the controversy on illegal data sharing. Company’s claims that it took all the necessary measures to ensure protection of user data after the Cambridge incident were undermined when a group of hackers obtained access code to control user profiles of over 50 million accounts in September 2018.

Facebook is now managing the transparency and risk issues that were mismanaged for years. There was a lack of culture that proactively mitigates risks and reinforces the credibility and trust the stakeholders have in company’s policies. The company failed to recognize the need to launch a secured platform wherein even the people who did not read the lengthy terms and conditions understood the risks of violation of privacy rules. Facebook missed the opportunity to educate the users on how to prevent their personal information from being hacked. The issue is to win back the lost trust of key stakeholders and reputation of the company by proactively enforcing strict data security policies, consulting with regulators and engaging customers through various digital platforms.

KEY STAKEHOLDERS

Facebook needs to engage and address the concerns of following key stakeholders by tailoring its crisis management and communications strategies to rebuild brand credibility and trust in the marketplace:

REGULATORS

Lawmakers and regulators are important stakeholders as they impose requirements and regulations to ensure compliance with government policies. They have launched an immediate investigation into Facebook’s privacy and risk management policies to better understand what happened and how it happened. Facebook’s CEO was required to testify before the Congress how the company failed to protect people’s information and why it was not transparent about how data was accessed by others on its platform. They have high interest and high power in this situation as they can impose significant regulations and fines that can impact the operations of the company. Facebook needs to work closely with regulators to reflect fairness and transparency in its data sharing polices and regain the trust of billions of Facebook users.

MEMBERS/USERS

Facebook has billions of active online users who use the social network for entertainment, education and advertising. This stakeholder group is interested in the ease of using the social media platform and in the security of personal information. Users felt let down by Facebook’s lax privacy policies which allowed external app developers to harvest their personal information without explicit consent. The #DeleteFacebook movement which raises concerns over lack of privacy on social media has gained strong momentum in the wake of Facebook’s data sharing crisis. The backlash was particularly more pronounced in Canada as there was 175% surge in number of Canadian interested in deleting their Facebook profile. The user stakeholder group has high interest and high power as they receive highest priority in Facebook’s corporate citizenship charter. If people lose faith in Facebook’s handling of their personal information, they may boycott the company or spend less time on social network, limiting the company’s ability to make profits from its activities. Hence, Facebook needs to engage its online membership in its efforts to provide a secured social media platform that gets users explicit consent before sharing information about them.

SHAREHOLDERS

Shareholders are also one of the primary stakeholders of Facebook as they provide funds for company’s growth and have an important role in governance, operations and control aspects of the company. Facebook has faced increased scrutiny and challenge from its shareholders at its annual meeting where shareholders have voiced their concern over corporate governance structure and need to make it easier for Facebook users to control and opt out of data sharing request. The company’s share prices dropped by 11 % after the news broke about its involvement in the data breach crisis. This stakeholder group has medium power due to dual voting rights structure but high interest in company’s operations. Facebook needs to rebuild its credibility with investors by putting in place strong risk management practices for managing risk.

ANALYSIS OF RESPONSE

The fact that Facebook has over 2.2 billion active users who log on to the social media platform at least once a month imposes a great responsibility on the company to protect its users and their personal information. Data privacy issue is one of the largest crises in the 14-year history of Facebook. This report conducts detailed analysis of Facebook’s response to privacy crisis: