Corporate Governance Issues at Facebook

Corporate Governance 1
Corporate Governance in Globalizing World
Student Name
Institution
Date

Corporate Governance 2
Outline and Summarize of the Article
Nils Pratley on Finance 2018 article highlights that the World's eighth largest company needs
governance structure to provide better oversight than its founder. In his article, Nils Pratley
focuses on Facebook board and explains why the board has to think and act past Mark
Zuckerberg’s primary ideas for financial reforms efficiency (Pratley, 2018). Nils highlights the
uncertainty surrounding Facebook’s future management. There is a doubt whether Facebook’s
board has been discussing Mark Zuckerberg stepping down as chairman and leaving him as chief
executive since Mr. Zuckerberg affirmed he is unaware of such as discussion.
On Wednesday 4th April 2018, Mark Zuckerberg revealed that he was not aware of any
discussions about his succession as the chairman. However, Nils states that it could probably
remain safe to assume that Zuckerberg was aware of such discussions from his fellow directors.
There have been calls for the appointment of an independent chair at Facebook, for instance from
NY City’s pension scheme which are always ignored (Pratley, 2018). Personal data and
information security are threatened due to Zuckerberg’s big blunders when handing FB users
information.
In Nils’s article, the board is seen to have acknowledged Zuckerberg’s bizarre loose version of
accountability. Recently, Mr. Zuckerberg committed a huge mistake of allowing private data of
87 million Facebook users to get “inappropriately shared” with Cambridge Analytics (Pratley,
2018). This was a great mistake that subverted his accountability as the board chairman. Abuse
of users’ data must be brought to a halt.
The fact that Zuckerberg is running the world’s 8th largest company does not allow the board to
ignore such mistakes and keep watching. Notably, $50 billion has been removed from

Corporate Governance 3
Facebook’s stock market value in financial scandals leave alone personal privacy concerns and
the influence of social media on democracy, and this provokes a regulatory backlash (Pratley,
2018).
Given these circumstances, the board feels there is no right corporate structure and this is driven
by stakeholders interest. Nils states that the board must ensure that the company is not run at the
whim of a chief executive who is plainly a technological whizz but accepts he failed in grasping
FB’s responsibilities since users numbers rose to 2 billion (Pratley, 2018). Again, users,
politicians, and advertisers demand a reassurance that the boardroom of FB undertakes basic
checks and balances.
The article further explains the lack of corporate governance reforms at Facebook given
Zuckerberg’s stranglehold over the company’s voting shares. The executive chair commands 60
percent voting shares and has a 16 percent economic interest in the company (Pratley, 2018).
Practically, shifting these roles from him is impossible. Nils advice Scott Stringer (the NY City
Comptroller) who has invested $1 billion pension fund in FB to keep pushing for the changes.
Stringer believes that Facebook must pursue a "reputation-enhancing second chapter" by
appointing an independent chair, establishing an independent board committee, and hiring three
external directors who are well versed than Zuckerberg in data and ethics complexities so as to
enhance oversight role for data privacy policies and risks (Pratley, 2018). Next week, the US
congregational committee will question Zuckerberg on the governance issue.
Discuss the corporate governance issues raised using corporate governance theories to
illustrate the importance of these issues

Corporate Governance 4
According to Nils Pratley on Finance article, Mark Zuckerberg owns 16 percent of the company
and controls 60 percent of voting power. There are various corporate governance issues raised in
this article about Facebook which will be discussed in close reference to corporate governance
theories as below:
The ownership structure (Board Composition)
Facebook’s ownership structure scares investors. There is no clear roles and responsibilities
definition of the board of directors in relation to oversight roles. The executive chair, Mr.
Zuckerberg is control behavior and handling of customers’ private data is questionable. From the
article, Zuckerberg is seen to have allowed data for 87 million Facebook users be shared with
Cambridge Analytics inappropriately (Vernimmen et al., 2014, p. 50). Such a huge mistake is not
allowed in such a big company. However, due to poor governance structure in the company, he
cannot be removed as the executive chair of the company since he controls over 60 percent
voting power of the company. Stakeholder theory explains how this poor ownership structure at
Facebook affects the companies’ interested groups such as employees, customers, and potential
investors (Holly & Sidley, 2014, p. 8). There is not board independence in the company and this
is risking customers’ data privacy. The fear by investors to invest in FB has contributed to the
company’s removal of $50 billion from its stock market value due to financial scandals.
Potential investors of the company are running away from the company due to these mistakes.
Zuckerberg is not an independent executive chair and needs to vacate his role. Other board
members have been discussing how Zuckerberg can get replaced from his position so that their
independence and ideas are not compromised (Wan & Idris, 2012, p. 10). The users of Facebook
have been complaining about their private data insecurity that originates from the top
management, in particular, Zuckerberg. Improving the image and reputation of Facebook