facebook can save itself by becoming a b corporation

The Imperative for Change at Facebook: Exploring For-Benefit Status

As Facebook navigates increasing criticism from both its workforce and the wider public regarding its handling of crucial decisions impacting public discourse, it’s evident that fundamental alterations to its business structure are necessary to resolve its current challenges.

The Flawed Ideology of Shareholder Primacy

For many years, a flawed belief has influenced corporations, economies, and societies: the notion that a company’s primary objective should be maximizing short-term financial gains for its shareholders. This principle isn't mandated by law or historical precedent.

However, the prioritization of shareholder value has become deeply ingrained in corporate practices, often at the expense of broader societal well-being. This manifests in several ways, including strict adherence to market perceptions, even when other social indicators are more significant.

The Pandemic as a Catalyst for Re-evaluation

The recent pandemic has accelerated a growing understanding that maximizing shareholder value is frequently a detrimental approach – it’s not inherently a moral obligation or even a fiduciary duty.

A Convergence Towards Stakeholder Capitalism

Leading institutions within the capitalist system are increasingly aligning around a new vision. The 2019 Business Roundtable CEO statement declared that corporate strategy should benefit all stakeholders – shareholders included, but equally customers, employees, suppliers, and the communities where companies operate.

Furthermore, BlackRock CEO Larry Fink’s annual letters have consistently advocated for a revised approach to investment, reflecting the trillions of dollars his company manages.

The Rise of Conscious Business Models

Fink’s 2019 letter outlined a new perspective on corporate purpose, with subsequent letters in 2020 and 2021 focusing on business responsibility concerning climate change, particularly in the context of the pandemic. The B Corporation and conscious capitalism movements are gaining momentum.

The World Economic Forum champions a “Fourth Sector,” blending purpose with profit. Business schools are adapting their curricula in response to student demands for a shift away from purely profit-driven education.

Facebook's Response and Ongoing Vulnerabilities

Facing societal pressures, many businesses, including social media platforms, are striving to project an image of corporate responsibility. Facebook, for instance, has increased its philanthropic efforts and initiatives to combat misinformation, even as its usage and share price remain high.

However, Facebook remains susceptible to criticism. Since the 2016 U.S. presidential election, the company has faced governmental scrutiny, public backlash, and substantial fines for privacy violations and alleged interference with democratic processes.

Historical Parallels and the Threat of Antitrust

A company that is simultaneously vital and heavily criticized is inherently vulnerable. History provides examples, such as John D. Rockefeller’s monopolies, which were eventually dismantled through antitrust legislation following public outrage and investigative journalism.

The Potential of For-Benefit Corporation Status

Given Mark Zuckerberg’s controlling stake in Facebook, he possesses the power to unilaterally address public concerns and preempt stringent regulation by transforming Facebook into a for-benefit corporation.

This legal model requires firms to commit to a public benefit mission and provide regular reports on both financial performance and progress towards achieving that mission. This status shields the company from shareholder lawsuits focused solely on profit and attracts employees and investors who prioritize purpose alongside financial returns.

Success Stories of For-Benefit Businesses

Numerous certified B Corporations, like data.world, have demonstrated strong financial performance. Allbirds, for example, achieved $100 million in revenue and a $1.7 billion valuation by focusing on sustainable materials and processes.

Other well-known B Corps include The Body Shop, Coursera, Danone, the Jamie Oliver Group, King Arthur Flour, Numi Tea, and Patagonia.

Beyond Certification: Integrating ESG Principles

Companies that haven’t pursued formal B Corporation certification, such as Interface, have also achieved success by transforming their business practices. DSM, a Dutch life sciences company, incorporates ESG (Environmental, Social, and Governance) principles into its management systems, with sustainability targets influencing executive bonuses.

A New Relationship with the World

A for-benefit Facebook could foster a different relationship with the world, mitigating reputational risks and regulatory challenges. Its operations would align with Zuckerberg’s stated goal of unlocking the potential benefits of global connectivity.

Envisioning a More Responsible Facebook

Imagine a Facebook town hall functioning as a genuine public forum, rather than a platform for data collection. Picture a Facebook prioritizing its users over advertisers, transparently disclosing ad origins, and earning user attention through value, not manipulative algorithms.

The Need for Accountability and Transparency

While initiatives like Facebook’s Oversight Board represent steps in the right direction, they don’t necessitate a legal change. However, if rewards continue to be primarily tied to the ad revenue model, a conflict between profit and public benefit will persist.

Adopting for-benefit incorporation and certification introduces different performance metrics and accountability systems with publicly available scores.

A Transformative Opportunity

By transitioning Facebook into a for-benefit corporation, Zuckerberg could alleviate political pressure, restore his reputation, and potentially catalyze a broader transformation of capitalism itself.