Zuckerberg Defends Company in Friday Meeting With Employees

Zuckerberg Defends Company in Friday Meeting With Employees
Facebooks Mark Zuckerberg isnt accountable to anyone, so its time Congress took away the source of his power
SAN FRANCISCO — Mark Zuckerberg fiercely defended Facebook in a question-and-answer session with employees on Friday afternoon, pushing back against criticism of the company in the wake of a New York Times investigation into how it reacted to Russian influence operations.

In an hourlong videoconference broadcast to Facebook offices around the world, Mr. Zuckerberg responded to questions from employees on a range of topics, from Facebooks behavior over the past 18 months to how it should handle leaks to the media, according to three people familiar with the discussion but not willing to discuss it publicly because it was a private meeting.

Another possible link: Facebooks chief lobbyist, Joel Kaplan, worked in the George W. Bush White House at the same time as Rhodes and has strong ties to Sandberg. The two attended Harvard together and he reportedly consults with her on high-level strategy at Facebook ― including deciding to downplay Russian disinformation activities on the site, another bombshell allegation made in the Times report. (Facebook denies this).

Video: Facebook: Mark Zuckerberg plans to give users more control over what they see

Facebooks Top Brass Say They Knew Nothing About Definers. Dont Believe Them.

The idea that Facebook tried to cover up anything was dead wrong, an impassioned Mr. Zuckerberg said, using an expletive in his response, according to these people. Some employees responded with muted applause and cheers.

The session came at a fraught time for the social network, as executives mobilized to deal with a torrent of criticism of the company. A Facebook spokeswoman declined to comment on the Friday meeting.

On Wednesday, The Times reported about a struggle at the top ranks of Facebook with how to respond to Russian disinformation operations and revelations of weak data privacy protections. In particular, there was considerable tension between Sheryl Sandberg, Facebooks chief operating officer, and Alex Stamos, the companys former chief security officer.

– Propagating disinformation about Facebook critics and competitors like Apple and Google ― via a verified Facebook page operated by Definers called NTK Network― that was dutifully picked up and disseminated by far-right outlets like Breitbart. (A former Definers employee described NTK to NBC as our in-house fake news shop.) 

Yup, Sheryl Sandberg yelled at me, Mr. Stamos said in an opinion piece published in The Washington Post on Saturday. I had no confidence that wed found out everything the Russians were up to, and it was quite possible that things would get worse before we built the teams and invented the technology necessary to stop it. Sheryl — as reported in this past weeks New York Times investigation — felt blindsided by this. (She later apologized.)

The Facebook CEO was shocked and appalled at the conduct of his company, he told reporters on a conference call Thursday, responding to a bombshell New York Times report that Facebook hired a D.C. opposition research firm called Definers Public Affairs which proceeded to undertake all manner of ethically fraught actions on its behalf.

Video: Zuckerberg defends Facebook after release of NYT article

The company had also hired Definers Public Affairs, a Washington, D.C. consulting firm, to seed opposition research on Facebook critics. Definers also linked George Soros, the liberal financier, to anti-Facebook groups. Facebook cut ties with the firm after The Times investigation was published.

That sterling reputation took a serious blow this week. A report from The New York Times shows that, while Sandberg was building her global brand, she was using aggressive and underhanded tactics at Facebook. As the company faced increasing criticism and pressure over its handling of fake news, election interference, data abuse, and the incitement of ethnic violence and genocide, she embraced a strategy to suppress information about Facebooks problems, discredit its critics, and deflect blame onto its competitors. She berated her security chief for being honest about the extent of the Russian campaign on the site. And she employed multiple crisis PR firms that spread fake news as a defense tactic, in one instance tying critics to the liberal billionaire, George Soros, a frequent subject of anti-semitic abuse online.

Mark Zuckerberg, missing in action

In a conference call with reporters on Thursday, Mr. Zuckerberg criticized what Definers had done on behalf of his company and said he and Ms. Sandberg were not aware of the specific work the outside firm was doing. He added that someone on the companys communications staff probably hired Definers, although he later complimented the communications staff for their hard work.

How Facebooks crisis PR firm triggered a PR crisis

In general, we need to go through all of our relationships and evaluate what might be more typical D.C. relationships and decide if we want to continue with them, Mr. Zuckerberg said on the call.

Mr. Zuckerberg said much of the criticism of his company over the past 18 months — specifically regarding election security, content moderation and disinformation — had been fair and important.

The Facebook founder tasked Sandberg with a daunting goal: Make the company profitable. It took her just two years to do so. In 2017, Facebook made in $40 billion in advertising revenue, and today the companys market capitalization is $400 billion. Sandberg also brought a corporate professionalism to the company. If Zuckerberg was the baby-faced tech visionary, Sandberg was lead adult in the room, taking care of Facebooks economic and political needs. She has been so successful that she was rumored to be the frontrunner to lead the Treasury Department if Hillary Clinton had become president.

Ms. Sandberg, who also attended the session, added that I fully accept responsibility for Definers, according to two people familiar with the conversation. That was on me.

Having turned Facebook into a money-making enterprise, Sandberg took over the reins from Zuckerberg, who increasingly spent time on extracurricular activities like last years listening tour across America. The Times portrayal of her leadership in his absence is damning. Its report opens with her seething over the fact that the companys chief security officer, Alex Stamos, told its board that it had yet to deal with all of the Russian activity on its platform. You threw us under the bus! she reportedly yelled at him. (Stamos has since left the company.)

But Mr. Zuckerberg and Ms. Sandberg said The Timess investigation was completely unfair and at times simply not true.

The allegation doesnt bode well for Facebook, which is under pressure to combat misinformation and hate speech. Soros, a Hungarian Jewish billionaire, has publicly criticized Facebook in the past, but hes also been the target of anti-Semitic and far-right conspiracy theories, and a pipe bomb was delivered to his home in October. The fact that Facebook, through Definers, was pointing a finger at alleged behind-the-scenes activity by Soros played on the conspiracy theories, intentionally or not. Facebook partners and advertisers also said Definers work revealed that Zuck & Co. were willing to use dirty politics to protect their brand.

Much of the discussion centered on boosting employee morale. Elliot Schrage, Facebooks former vice president of global communications and public policy, returned to the company for the meeting on Friday.

At the start of the year, Facebooks biggest ongoing scandal was the investigation into Russian interference in the 2016 US presidential election. The tech firm announced in 2017 that it had found evidence Russian operatives used the social network to purchase ads about politically divisive topics. But questions remain about when Facebook knew about Russian activity and if it acted quickly enough. This year, on the eve of the US midterm elections, Facebook pulled down more than 100 accounts that mayve been tied to Russias Internet Research Agency.

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Mr. Schrage said that Facebook was in a difficult news cycle, and that things would eventually calm down, and he urged workers to keep trying to do their best and work on the companys tough problems.

In March, the company faced a new scandal when The New York Times and the Guardians Observer newspaper revealed that tens of millions of Facebook users data was acquired by a political consulting firm called Cambridge Analytica. The scandal sparked concern about how well Facebook was safeguarding the trove of info it gathers about users. To make matters even worse, Facebook took nearly three years to alert users about the data misuse. The uproar prompted Zuckerberg to make a rare appearance before Congress. 

Some Facebook employees indicated that they believe The Times and other news outlets are unfairly targeting the company because of its outsize influence — a sentiment shared in the session on Friday when employees asked executives what would happen to employees who leak information to the press.

Then, in the summer, Facebook joined the rest of the tech industry when it banned far-right conspiracy theorist Alex Jones from its platform for violating its rules against hate speech and violent content. Jones has been widely criticized for spreading false stories, including one that claimed the mass shooting of 20 children and six adults at Sandy Hook Elementary School was a hoax. The ban reignited allegations that Facebook was censoring conservative voices, which the company has denied.

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Mr. Zuckerberg made it clear that Facebook would not hesitate to fire employees who spoke to The New York Times or other publications. But after an employee asked whether the company should issue a report about how many leakers Facebook had found and fired, Mr. Zuckerberg played down the idea.

Facebooks string of scandals over the last several years have highlighted the poor job Mark Zuckerberg has done running the company — and his lack of accountability. The social networking giants stock structure gives Zuckerberg near-absolute control over it, because the shares he holds get far more votes than those held by ordinary investors. Facebook is one of a growing number of companies that have such structures, which help to insulate insiders from outside investors and the public at large. Many investors have been agitating against such structures, but little can or has been done to bar them at already public companies such as Facebook. Congress can and should address the problem. No matter how poor a job Mark Zuckerberg has done lately running Facebook, hes almost certainly not going anywhere, because hes effectively his own boss.

But with a small change to the nations securities laws, Congress could weaken his grip on the company and potentially introduce some public accountability — not only to the social media giant, but to dozens of other companies besides.

A recent article published by the New York Times titled Delay, Deny and Deflect: How Facebooks Leaders Fought Through Crisis, provides insight into how Facebook has operated through numerous crises over the past few years. The report also alleges that Facebook hired a PR firm which published articles critical of Facebooks competitors through an associated conservative news website. Facebook also reportedly hired a Republican opposition research firm to discredit activist protesters critical of Facebooks data breaches. This was done partly by linking them to the left-wing financier George Soros.

Video: Facebook shares drop after Zuckerberg tried to defend company

Accountability is sorely needed at Facebook, given all the scandals and fiascos the company has been embroiled in for much of the last two years. Zuckerberg and his top executives repeatedly failed to anticipate those problems then reacted poorly to them once they came to light.

The article in the NYT claimed that Facebook hired a Republican opposition research group called Definers Public Affairs to target protesters angered by Facebook’s multiple user data breaches Facebook employed a Republican opposition-research firm to discredit activist protesters, in part by linking them to the liberal financier George Soros. It also tapped its business relationships, lobbying a Jewish civil rights group to cast some criticism of the company as anti-Semitic,” the article stated.

Just this week, for example, The New York Times reported that Zuckerberg and Sheryl Sandberg, his top lieutenant and COO, repeatedly downplayed in public what the company had found out about the Russian-link propaganda campaign conducted on Facebook during the 2016 election. Also, amid rising criticism of the company this year, Facebook embarked on a public relations campaign to hit back at its critics, including by using the anti-Semitic chestnut of of linking them to Jewish financier George Soros.

Facebook CEO Mark Zuckerberg also discussed the NYT report at a press conference, eerily echoing Sandberg’s statement: Ive said many times before that we were too slow to spot Russian interference and we certainly stumbled along the way, but to suggest we werent interested in knowing the truth or wanted to hide what we knew or wanted to prevent investigations is simply untrue.

Zuckerberg and Sandberg have denied that they tried to hide what they knew about the Russia investigation. Theyve also denied knowing about the PR campaign that was conducted on its behalf.

The Times report alone might have led to the ouster of top executives at another company. But it focuses only on a handful of the myriad of missteps Facebook has made under Zuckerberg and his team of late. Other notable fiascos include the leak of millions of users personal data to Cambridge Analytica, the more recent hacking attack that compromised some 30 million accounts, and the use of its service to incite violence in Myanmar against the Rohingya people and to spread fake news and hate speech.

Mr Zuckerberg did not know, he said, that Definers was, on behalf of Facebook, allegedly pushing a narrative to journalists that an anti-Facebook campaign group, known as Freedom from Facebook, was secretly funded by George Soros. If you’ve ever been unfortunate enough to peer into the internet’s dirty basement, you’ll know conspiracies about Mr Soros, mostly with anti-Semitic undertones, are commonplace.

Christopher Wylie helped expose the leak of Facebook data to Cambridge Analytica. YouTube/The Guardian Taken together, the scandals have shown vividly that while Facebook under Zuckerbergs leadership was hell-bent on growth, it massively underinvested in, or simply gave short shrift to, concerns such as privacy, security, and the ability of malicious actors to hijack its service. He and his team have been scrambling ever since to address such problems. In the process, Facebooks user growth has slowed, its costs have gone up, and its stock price has slumped.

And Alex Stamos, the firm’s now-departed head of security, is said to have been “alarmed” at Mr Zuckerberg’s lack of awareness of fake news. As Mr Zuckerberg brushed off the concern as a “crazy idea”, Mr Stamos knew very differently – but was reportedly later scolded for investigating without permission from his superiors.

Those things alone would likely have upset investors and had them agitating for a management shakeup. But each new scandal thats arisen has highlighted Zuckerbergs chief shortcoming as a leader. However technically proficient and visionary from a product perspective he may be, hes consistently seemed to be asleep at the switch when major problems were brewing on Facebooks service. Whether because he was unable, unwilling, unavailable, or just unimaginative, hes repeatedly failed to foresee and head off problems before they arose.

Mr Zuckerberg, who has spent the past two years filling his staff with Washington DC political veterans (and more recently, in Nick Clegg, European ones), said he was surprised to learn that his firm had employed underhand tactics to smear activists, put pressure on political opponents, and criticise rival firms.

Take the Soros smear. Zuckerberg on Thursday said hed been unaware until he read it in The Times the day before either about the attempt to link Facebooks critics to Soros or that Facebook had hired the public relations firm that led the effort. Youd think the CEO of a company would be well informed about a major PR effort being conducted on his companys behalf, particularly if it was planning to do something so controversial. But apparently not Zuck.

Its no wonder, then, that investors have repeatedly shown they are indeed unhappy with Zuckerbergs leadership. Last year, a majority of independent shareholders of Facebook voted in favor of a proposal that would have required it to replace him as chairman with someone who had no ties to him or the company. A similar proposal is slated to be up for a shareholder vote again next year. Meanwhile, the company has seen numerous shareholder resolutions in recent years that have sought to take away some of Zuckerbergs power and to provide more outside oversight the company.

Facebook Should Say Whether It Attacked Critics, Lawmakers Say

Technically, what empowers Zuckerberg is Facebooks stock structure. The company has two classes of shares — Class A, which is mostly held by everyday investors; and Class B, which is mostly held by Zuckerberg. Each Class B share comes with 10 times more votes than each Class A share. What that means is that even though Zuckerberg owns or controls about 15% of Facebooks total outstanding shares, he gets about 60% of its votes.

That means that just by himself he can vote down any shareholder proposal, nominate anyone he wants to Facebooks board of directors, and pretty much run the company as he sees fit.

Zuckerberg is one of a growing number of executives — many of them in the tech sector — who are insulated from investors and the public by their companies multi-class stock structures or by outsized voting rights. Others in that group are Snap CEO Evan Spiegel and Spotify CEO Daniel Ek.

I spent the past few days chatting with people in and around Facebooks orbit about the likelihood that Zuckerberg and Sandberg didnt know they had hired Definers. The former employees I spoke with were in unanimous agreement that they believed Zuckerberg when he said he did not. Communications, they said, has generally been something he was willing to delegate. I talked with other CEOs, outside the social realm, who told me they almost never knew what agencies their communications people were working with at any given time. I talked with people who hired agencies who said their CEOs never asked about them.

Many investors are getting fed up with such arrangements and for good reasons. Not only do they get little to no control over the companies they own, but research indicates that shares of companies with such stock structures underperform their peers over the long run.

As many observers have noted, not knowing who your agencies are gives you a plausible deniability that can come in handy when they go rogue. But in the midst of a true crisis, it would seem that greater attention to detail is warranted. Certainly it was unlikely that Facebooks hiring of a crisis PR agency would itself become a crisis. But the unexpected has been rippling across every corner of Facebook for more than two years now. The effort to reset the narrative on terms friendly to you — and the tactics by which you intend to go about it — would seem to deserve the CEOs full attention.

Institutional investors have started to pressure individual companies such as Facebook to eliminate or agree to sunset their dual-class stock structures. Theyve also started to press exchanges and index funds to bar companies with such stock arrangements.

Delay, deny and deflect: How Facebooks leaders fought through crisis

Natasha Lamb, managing partner at Arjuna Capital, an activist investment firm that has challenged Zuckerbergs power at Facebook, with little success. Natasha Lamb Theyve had some success. A growing portion of newly public companies that have dual-class structures have sunset provisions that will end them over a period of some years. S&P Dow Jones Indices announced that going forward it will not include any additional companies in the S&P 500 or related indices that have dual-class stock structures. And FTSE Russell announced that to be listed on its indices, companies must have shares worth at least 5% of the companies voting rights held by outsiders or trading freely.

In a year marked by scandals, Facebook continues to be shaken by damning revelations. The social network is once more in the eye storm, thanks to a bombshell report by the New York Times, which details how the company relied on shady tactics and misdirection to hide its problems and manage its public image during the last 3 years.

But none of these developments address the problem at Facebook or other companies that have refused to end or sunset their dual-class stock structures. King Zuck has simply refused to give up power, regardless of the pressure that outsider investors have tried to place on him.

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Meanwhile, the S&P Dow Jones grandfathered in companies with dual-stock structures that are already included in its indices. And should the exchanges make a move to bar such companies, they too will likely give a pass to companies that are already listed.

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Thirty years ago, as the number of companies with dual-class structures started to tick up, the Securities and Exchange Commission tried to force the stock exchanges to bar the practice among their listed companies. Unfortunately an appeals court struck down the rule less than two years after the SEC approved it, clearing the way for Facebook, Google, and other companies to go public with dual-class structures. The appeals courts reasoning was that Congress hadnt explicitly given the SEC the authority to force the exchanges to mandate companies have particular stock structures.

Definers says it wasnt hired by Facebook for opposition research

Its long past time for Congress to correct that oversight. It ought to either ban dual-class stock structures among public companies outright, or make clear that the SEC can do so itself.

Doing so wouldnt just help shareholders get a handle on Facebook. It would help make the company — and its tech peers that similarly insulate their insiders — more accountable to the public at large.

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