July 10 ,2020

When it comes to responsible corporate behaviour, you don’t get to choose the issues that will become the most important to your customers and investors. Not even the world’s most dominant companies are exempt from societal pressures that demand change. This includes Facebook.

Two years ago, we wrote a blog about investor challenges with Facebook. In the wake of the Cambridge Analytica scandal, we were specifically concerned with Facebook’s ability to navigate its business ethics and the digital privacy of its users.

Two years later, those concerns have grown to be shared by millions. Facebook has not changed.

So is the company immune to influence over its operations, regardless of the risks imposed on its users and investors? The company’s behaviour, two years ago and now, suggests that it thinks that it is.

Today, Facebook remains embroiled in an ethics-based controversy punctuated by a growing advertising boycott over the perceived accommodation of hate speech on its platform. Big name brands like Coca-Cola, Ford, Unilever, Levi’s and countless smaller businesses (totalling 350 and counting), have committed to stopping their paid advertising on Facebook for at least the month of July. Many are applying this to Facebook-owned Instagram as well, and others are applying it to all social media. Canadian banks (including NEI co-owner, Desjardins) have made such commitments.

Is Facebook worried? It’s stock price fell on this news (as it did during the Cambridge Analytica scandal).  CEO Mark Zuckerberg’s personal loss was in the billions. But he is acting non-plussed, seeming to feel that the boycott is temporary and that everyone will soon be back, having “made their point.”

Companies making it clear from the outset that this boycott is temporary would tell you that he’s probably right. To think otherwise is to ignore the fact Facebook is essentially a utility – a utility with over eight million advertisers (a long way from 350). Clearly that’s the more important number in this equation.

But that may not be the most important issue. What really matters is that the choice that companies are making to not advertise on Facebook is not being driven by the actions of Facebook, but rather by the justice-based social unrest that has gripped the world in the wake of the death of George Floyd. It is not Facebook or its advertisers that hold the power here, it is society. Society is deciding what responsible business practice means. And companies are responding.

Social movements the likes of which we are experiencing now are hard for even the most aloof companies to ignore. We know firsthand through our climate-focused engagements that if sometimes you’re early to the party in raising awareness of burgeoning investment risks, when social momentum starts to build, it becomes too costly to avoid the issue. It’s pretty much unheard of now for companies who want to appeal to their customers, employees and investors to not have a climate strategy.

We believe the same will hold true with respect to how companies address human rights. As with climate, digital rights is an issue we raised with Facebook well in advance of the current controversy. At Facebook’s Annual General Meeting (AGM) in 2016, we voted against all board members, including Chair Mark Zuckerberg, because we felt the board had failed in its duty to provide risk oversight in relation to data privacy and other issues. We also supported shareholder proposals filed by our responsible investor colleagues, calling for a risk management board committee, a report on global content governance, an independent chair, and the dismantling of Facebook’s dual class structure.

If all this sounds familiar, it parallels the shareholder proposal we co-sponsored at the Alphabet (Google) AGM in 2020. Both votes were executed within a human rights framework for understanding and accommodating issues like a company allowing hate speech on its platform—a framework that allowed NEI to address human rights concerns with technology companies well in advance of those concerns finding a place in the broader social consciousness.

The boycott of advertising is exactly the kind of social risk we raised with Facebook over two years ago. Although we’d never quite put it in these terms, there is a ‘we told you so’ quality to what’s happening now. And just because Facebook has chosen to still ignore calls for change, doesn’t mean the business risks the company is facing today will go away. They won’t.

As much as it might like to, Facebook doesn’t get to choose the issues it needs to focus on to manage its risks. Sooner or later the company will need to respond.