Facebook's obvious disregard for stakeholders
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Companies today seek to align their focus on all five of their stakeholders in order to position themselves for long-term competitive advantage.
Facebook, however, appears to be disinterested in stakeholder alignment.
You've already heard about, or have been involved in, Facebook's IPO debacle. Some fault for that fiasco rests outside of Facebook, but much of it rests inside. In mid-May, the stock was expected to trade at $38. It was higher than that for a short time on opening day but has been nowhere near $38 since. The stock has risen in the last two weeks, closing yesterday at $32.06, down 16% from IPO price. However, even as the stock trends upward, Facebook and its investment banks are being sued by dozens of shareholders who allege that financial forecasts for Facebook were cut prior to the IPO but the change was not publicized.
Facebook contends it did nothing illegal with regard to changing its forecasts or how it announced the changes. Companies truly concerned with stakeholder alignment care when their stakeholders, including shareholders, are angry and feel cheated. Facebook has shown it does not care, as long as what it did was legal. Shareholders don't care much about the touchy-feely side of business, as long as they are making money. However, since they are obviously not making money, they will scrutinize (and sue!) Facebook until they are compensated and do not feel duped.
Duped investors are not the foundation of long-term success.
On to the next action that shows Facebook's blatant disregard for its stakeholders...
Yesterday, Facebook changed its users/customers' email addresses to the ones Facebook created for them. In 2010, Facebook introduced its own email service but it was not widely used. Yesterday, without any notification to its users, Facebook changed users' profiles to have their Facebook-created-whether-you-want-it-or-not email address as the primary email on the account. They did not change the way they reach users, just the way users could reach each other.
Facebook's customers do not want another email account and they certainly do not want Facebook changing their accounts without notification. In response to the outrage yesterday, Facebook did not explain or even admit to altering the default account settings. Facebook has made similar changes to accounts without notification. They continue to show lack of respect for their customers.
What Facebook should recognize is: they need its stakeholders more than we need Facebook.
Investors can make money elsewhere and users can be in touch with friends on other sites, and most are. If Facebook continues to show disregard for its investors and users, two primary stakeholders, they will erode the trust necessary for long-term sustainability. If Facebook continues to dupe investors and users, another social site can take its place. Get ready, that's what is likely to happen.
Facebook, however, appears to be disinterested in stakeholder alignment.
You've already heard about, or have been involved in, Facebook's IPO debacle. Some fault for that fiasco rests outside of Facebook, but much of it rests inside. In mid-May, the stock was expected to trade at $38. It was higher than that for a short time on opening day but has been nowhere near $38 since. The stock has risen in the last two weeks, closing yesterday at $32.06, down 16% from IPO price. However, even as the stock trends upward, Facebook and its investment banks are being sued by dozens of shareholders who allege that financial forecasts for Facebook were cut prior to the IPO but the change was not publicized.
Facebook contends it did nothing illegal with regard to changing its forecasts or how it announced the changes. Companies truly concerned with stakeholder alignment care when their stakeholders, including shareholders, are angry and feel cheated. Facebook has shown it does not care, as long as what it did was legal. Shareholders don't care much about the touchy-feely side of business, as long as they are making money. However, since they are obviously not making money, they will scrutinize (and sue!) Facebook until they are compensated and do not feel duped.
Duped investors are not the foundation of long-term success.
On to the next action that shows Facebook's blatant disregard for its stakeholders...
Yesterday, Facebook changed its users/customers' email addresses to the ones Facebook created for them. In 2010, Facebook introduced its own email service but it was not widely used. Yesterday, without any notification to its users, Facebook changed users' profiles to have their Facebook-created-whether-you-want-it-or-not email address as the primary email on the account. They did not change the way they reach users, just the way users could reach each other.
Facebook's customers do not want another email account and they certainly do not want Facebook changing their accounts without notification. In response to the outrage yesterday, Facebook did not explain or even admit to altering the default account settings. Facebook has made similar changes to accounts without notification. They continue to show lack of respect for their customers.
What Facebook should recognize is: they need its stakeholders more than we need Facebook.
Investors can make money elsewhere and users can be in touch with friends on other sites, and most are. If Facebook continues to show disregard for its investors and users, two primary stakeholders, they will erode the trust necessary for long-term sustainability. If Facebook continues to dupe investors and users, another social site can take its place. Get ready, that's what is likely to happen.
