TO: Mark Zuckerberg

FROM: Emily Wu

DATE: February 9, 2017

SUBJECT: Stakeholders of Facebook, Inc.

Recently, Facebook has come under pressure for its utilization of user data, marketing
strategy, and employee relations. When addressing these issues, it is crucial that the
company focuses on mending its relationships with its stakeholders to effectively rebuild
its brand image.

Facebook Stakeholders

Every decision Facebook makes affects a large sphere of individuals and parties. The
most obvious stakeholders include Facebook users, company employees, and
stockholders. Facebook users place an enormous amount of trust in the company because
they share their private and sensitive personal information on the website, such as
address, phone number, and implicit user activity data. Company employees depend on
the financial success of Facebook in order to make a living and provide for their families.
Stockholders have a financial stake in the company and depend on a continuous
profitability to make a return on their investments.

Some stakeholders are not as explicit. These include third-party brokers, the media, the
federal government, other countries (specifically the UK, India, the EU, and Brazil), and
other technology companies like WhatsApp and Google. According to an article from
International Business Times, third-party data brokers sell additional user data to
Facebook and depend on these transactions to generate revenue (Dellinger). The media
plays can affect Facebooks image to consumers and the general public. The federal
government is impacted when Facebook battles with privacy legislation in court. Other
countries in the world also use Facebook and their governments depend on Facebook to
provide them with user profile information that could assist them in emergency
situations and criminal proceedings (Russon). Other technology companies with similar
data tracking capabilities as Facebook have an indirect stake in the company, since they
will face the same regulations if courts were to rule against a decision Facebook makes,
and vice versa.

Stakeholder Prioritization

Facebook should implement a stakeholder-focused approach when facing ethical

dilemmas as well as conducting day-to-day business in the future. A stakeholder-based
approach is more valuable than a company-based approach because it will ensure long-
term support and loyalty, increased quality and resources, and ultimate success
(Thompson). The following list shows the order, from most important to least important,
in which stakeholders should be prioritized and the reasons for that order:

1. Facebook users: Without its users, Facebook would not be able to operate as a
business. The active involvement, engagement, and addition of users
contribute almost entirely to Facebooks success as a company. Since
Facebook is a social media corporation and does not sell a physical product,
the company needs to prioritize and adapt to the ever-changing demands of its
users and the tech industry in order to remain profitable and relevant.
2. Company employees: In order for a business to exist, it needs employees to
support and carry on its operations. Long-term employee knowledge and
experience are invaluable assets to a company and employee turnover is
extremely expensive. Happy employees are 12% more productive (Addady),
which will lead to increased efficiency, innovation, and profitability.
3. Stockholders: Stockholders are prioritized after customers and employees
because if the customers and employees are happy, the business itself will be
successful and will automatically lead to the happiness of stockholders.
However, the goals of stockholders may not necessarily translate well with
customers and will lead to a lower performance.
4. Media: After the stakeholders with the most direct influence on the company
are considered, the media also plays a significant role in the success of a
 company. The media directly influences the markets perceptions of a
company, so it is crucial that Facebook proves to the media that it is doing a
good job maintaining a respectable relationship with the aforementioned
stakeholders.
5. Federal government: Every company should already be strictly adhering to the
governments laws for running a business. However, as a technology
company, Facebook may operate in some grey areas that are not clearly
regulated and are on the border of legal and illegal. While the company should
strive not to near the line, Facebook needs to be aware that the federal
government could pass new regulations at any time.
6. Other tech companies: While the business plans of other tech companies are
important for Facebook to note as a competitive strategy, the internal business
operations should not necessarily be emulated. Even if Google is heavily data-
mining its users and selling that information to a third party, Facebook should
keep its customers and the media as a top priority and refrain from following
Googles actions. This will ensure that the company retains a clean brand
image and avoids possible scandals or litigation.
7. Foreign countries: As a corporation and not a government entity, Facebook
has no legal responsibility to assist other countries in criminal cases. Facebook
should not give out private user information to foreign countries because the
act breaches the trust with its most important stakeholder: the customer.
8. Third-party brokers: Facebook should not consider third-party brokers as an
important stakeholder because the company should not have been heavily
involved with them in the first place. The company gathers more than enough
user data from the website alone.

Responsibilities to Stakeholders

Facebook has an economic responsibility to its users, employees, and shareholders. These
stakeholders depend on Facebook to perform well financially. Users have chosen to
consume Facebook as a product and rely on the service to communicate and connect with
their friends and family. Employees depend on Facebook to stay in business so they can
have a job and make a living. Shareholders have invested money into the company and
expect to make a return on that investment. Facebook has a responsibility to increase
profits and expand the company.

Facebook has a legal responsibility to its users, employees, shareholders, the federal
government, and other countries. As a corporation, Facebook possesses the same legal
rights as a person. Like every citizen, the company should not be engaging in any more
illegal activity, especially in the distribution and collection of its user data, censorship, or
advertising, all of which have been done in the past (Solon). Facebook is responsible for
upholding the law and following government regulations.

Facebook has an ethical responsibility to every one of its stakeholders. Besides following
the law, the company should aim to treat its users and employees fairly and respectfully.
The company has a responsibility to be honest and transparent about its business
transactions, financial statements, and other practices when dealing with the media, the
federal government, foreign countries, and other technology companies.

Facebook also has a philanthropic responsibility to its users, employees, and the
community. Since the companys mission is to make the world more open and
connected (Solon), Facebook has a responsibility to keep that promise. Whether it be
through charitable giving, supporting social issues, or keeping the public informed about
the world around them, Facebook has an enormous capacity to give back to its
shareholders without sacrificing financially.

Recommendations

When making business decisions about ethical problems both currently and in the future,
Facebook should approach these decisions by focusing on providing value to all
stakeholders, not just users or shareholders.
First, Facebook should restructure its current an ethics review process. The new process
should be explicit on how dilemmas will be reviewed and the standard of ethics that will
be measured. The review process should give users and would-be research subjects
insight into whose ethical subjectivity and standards they are being subjected to at any
given time (Hoffmann). This will ensure that future ethical problems pertaining to any
stakeholder will be handled equivalently and transparently.

Second, Facebook should act on its promise to bring diversity to the workplace. By doing
blind interviews, recruiting candidates from multiple channels, incentivizing top
executives to take risks with potential candidates, and encouraging racial/cultural/or
social awareness, Facebook can take concrete steps to ensure that people from all
experiences and backgrounds have equal opportunity for employment. Even though
Facebook is considered a legal corporate person, the members of the company also have
the same rights as individuals for employment consideration.

Third, Facebook needs be transparent in its business practices when confronted by users,
employees, the federal government, other countries, and the media. This means detailing
exactly what kind of information Facebook is able to gather from users, how that
information will be used in terms of marketing advertisements and third parties, and
asking users for consent when further information is utilized outside of the terms and
agreements.

By handling dilemmas and making business decisions with a shareholder approach rather
than a stockholder-approach, Facebook can become a more ethical company. This will
not only boost the companys image in the eyes of the public, but also be financially
rewarding. Brand loyalty will increase, generating more revenue, and Facebook can save
money through decreased litigation fees and employee turnover. Ultimately, becoming a
more ethical company will benefit both Facebook and each of its stakeholders.
 Works Cited:

Addady, Michal. "Study: Being Happy at Work Really Makes You More
Productive." New Study Says Happy Employees Really Are More Productive |
Fortune.com. Fortune, 29 Oct. 2015. Web.

Dellinger, AJ. "Facebook Privacy: Social Network Buys Data From Third-Party Brokers
To Fill In User Profiles." International Business Times. N.p., 29 Dec. 2016. Web.

Hoffmann, Anna Lauren. "Facebook Has a New Process for Discussing Ethics. But Is It
Ethical?" The Guardian. Guardian News and Media, 17 June 2016. Web.

Russon, Mary-Ann. "Facebook Admits It Gave Personal Details of over 6,000 Users to
British Government." International Business Times UK. N.p., 30 Dec. 2016. Web.

Thompson, Rachel. "Stakeholder Analysis: Winning Support for Your Projects." Project
Management Tools from MindTools.com. N.p., n.d. Web.

Solon, Olivia. "2016: The Year Facebook Became the Bad Guy." The Guardian.
Guardian News and Media, 12 Dec. 2016. Web.