Corporate Governance of Facebook

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Corporate
Governance
Facebook

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Table of Contents
1. Introduction...........................................................................................3
2. Development of CG in the United States..............................................4
3. Background of the Industry...................................................................4
4. Background of the Company.................................................................5
4.1 Brief History.......................................................................................5
4.2 Organisational Structure and Change................................................6
IPO of the Company..............................................................................7
5. Breakdown of CG in the company.........................................................8
5.1 How is the board elected?..................................................................9
5.2 What type of board Facebook currently has?.....................................9
5.3 Who are the shareholders? Stakeholders?.........................................9
6. Objectives of CG of Facebook.............................................................10
6.1 Has Facebook achieve its CG objectives..........................................10
6.2 How often objectives are monitored................................................11
7. Implementation and monitoring of CG................................................11
8. CG Issues............................................................................................12
8.1 Issues faced by Facebook................................................................12
8.2 Role of the board of directors...........................................................13
8.3 Cases involving corruption, bribery or price manipulation...............13
9. Conclusion...........................................................................................14

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10. References........................................................................................15

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1. Introduction
In today’s competitive business world, organisations are struggling
to gain and sustain a competitive advantage which has raised a number of
illegal and unethical concerns due to the actions taken by organisations to
increase their profitability in the market. It raises the importance of the
concept of corporate governance (CG) since it allows companies in
ensuring that they did not solely focus on one stakeholder to maximise
profits, and they implement policies that benefits them as a whole (Cule &
Fulton, 2013). The objective of this report is to evaluate the corporate
governance policies implemented by Facebook Incorporation and identify
their impact on its stakeholders. This report will evaluate the background
of the industry in which Facebook operates in and analyse the brief history
of the company as well. The stakeholders of the company will be
identified, along with an evaluation of the board selection process of the
organisation. The objectives of Facebook will be analysed and whether the
company has been able to achieve these goals or not will be assessed in
this report by determining how it implements and monitors CG. The issues
faced by the company and how it has dealt with these issues, along with
the evaluation of the actions taken by the board of directors will be
analysed in this report as well.

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2. Development of CG in the United States
Facebook was founded in the United States, the concept of CG has
gained momentum as the number of illegal and unethical practices by
organisations increased. Securities Exchange Act of1934, Maloney Act of
1938 and Securities Act 1933 are certain legislative in the US which set up
the ground for CG practices in the country (Altintas, 2010). As per these
laws, organisations can implement CG principles and practices to control
their actions, maintain transparency and increase accountability on their
directors to make sure that they did not engage in unethical or illegal
practices while taking business decisions. Due to awareness between
customers and governments, CG policies are enforced on organisations in
the US and corporations started implementing a CSR structure to comply
with reporting requirements that were imposed by the government
(Jacoby, 2018).
3. Background of the Industry
Facebook was founded in 2004, and it operates in the social media
industry; currently, it is the biggest social media site around the globe
with over two billion people that use its services every month. Since 2004,
the social media industry is growing exponentially with the popularity of
smartphones and ease of accessibility of the internet on a global stage
(Jussila, Karkkainen & Aramo-Immonen, 2014). However, the industry has
not reached its peak yet, and people across the globe rely on social media
sites to use them as a source of news and information. These websites

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allow people to communicate at a global stage and interact with others
instantly. Since people and organisations are able to interact with others
without local and social boundaries, it has opened countless possibilities
and opportunities for businesses. Organisations rely on these social media
sites to advertise their products and interact with their customers to
collect their valuable feedback which allows them to further develop their
products and services and expand their customer base on a global stage
(Ashley & Tuten, 2015).
There are over 3.2 billion daily active users on social media sites
which equates to around 42 per cent of the population. 90.4 per cent of all
millennials uses social media sites as compared to 77.5 per cent of
Generation X and 48.2 per cent of Baby Boomers (Mohsin, 2019). On
average, users spend around 2 hours 22 minutes daily on social networks
and messaging. The social media industry has disrupted the marketing
sector since 73 per cent of marketers believe that social media marketing
is effective or very effective for their businesses. This industry has opened
new opportunities for small as well as large enterprises since 54 per cent
of customers use social media sites while researching products (Mohsin,
2019). Active social media penetration is considerable high in countries
such as the United Arab Emirates (99%), Taiwan (89 %), South Korea
(85%), Singapore (79%) and Australia (72%) (Statista, 2019). The social
media sites such as Facebook has provided a platform to influencers that
build their brand by using these services and interact with their audience
on a global stage. Around 49 per cent of customers rely on the
recommendations given by influencers through social media sites.