ETHICS CASE CONTROVERSY
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| The four cofounders of Facebook |
On February 4th, 2004, “The Facebook” was launched by
four college students at Harvard University – Mark Zuckerberg, Eduardo Saverin,
Dustin Moskovitz, and Chris Hughes. Meta, formerly known as Facebook, would
become one of the largest social media platforms in the world, amassing three
billion user profiles in 2021, the most it has ever seen, half of which were
using the site every day to share photos, post status updates, and for the
promotion of businesses and political campaigns.
Every large company has its
fair share of problems, and for Facebook, privacy issues were one of the major
ones that often-caused users to question the platform’s credibility. One large
scandal that put Facebook in the headlines for privacy concerns was the
Cambridge Analytica Scandal in 2016. Facebook had exposed the data of close to
87 million Facebook users to Cambridge Analytica, a political consulting firm
which worked for the Trump Campaign. A Russian-American researcher who worked
for CA at the time, engineered an app using the Facebook App that allowed users
to take a quiz that would expose their data to CA but also the data of their
friends when CA discovered a loophole in Facebook’s programming interface. This,
in addition to many other privacy incidents have caused many users to delete
their accounts and stop using the platform parent platform Facebook, and
Instagram, another social media platform that was acquired by Facebook in 2012
for $1 billion.
From the start of the company, no one could have predicted the
magnitude in which Facebook would grow. Zuckerberg made company history in
October of 2021, when Facebook Incorporated changed its name to Meta Platforms
Incorporated to reflect an emphasis on their newfound mission towards building
the “metaverse,” which would eventually allow users to interact in virtual
reality environments (Rodriguez, 2021). The company has made it clear that
augmented and virtual reality would become a key part of its growth strategy in
the upcoming years. With this being an extensive and costly project for the
company, we begin to see it encounter massive hurdles that make the public and
their shareholders question whether there is a company for this once high-flying
company.
With the COVID-19 pandemic, every person was forced to move online, and
that meant increased time shopping online, thereby significantly boosting
e-commerce, and more time browsing social media for hours on end – Meta and
other platforms like it took full advantage of this. Over the course of the
pandemic, the company underwent a massive hiring spree. The rationale for this
was because the pandemic pushed everyone to accelerate online activity and the
company had predicted this trend to be permanent. Because of this, not only did
Facebook want to recruit and retain the brightest talent, but so did every other
large company who followed Facebook in doing so – namely Twitter and Amazon.
Facebook in particular needed to invest in numerous personnel to oversee
everyday operations with work-from-home jobs and moderation for their platform
(Frenkel, 2022). Over the course of two years, Meta continued to hire without
deeming it necessary to do so. Little did they all know, Meta had miscalculated
big time believing that this trend would be sustainable.
This miscalculation
would cost Meta, and many others big time, In October of 2022, Meta’s stock
plummets after having a “dismal earnings report” (Yang, 2022) to end the third
quarter, yet again. This caused Meta’s capitalization to be wiped off more than
$65 billion by investors when it finally joined the economic slowdown. With
rising competition from short-video platforms such as TikTok, falling sales and
users, and rising costs, the company’s net income in the third quarter fell by
44% to $4.4 Billion, below analysts’ estimates for $5 billion with revenues also
falling by 4%, depicting the slowest growth pace since going public in 2012
(Murphy, 2022). This caused low faith from investors and shareholders, as they
all had a hard time seeing the vision for the Metaverse turning things around
for the company.
In September of 2022, Meta Platforms had amassed its largest
ever number of workers, totaling 87,314 people – this is where they realize they
would need to make major changes amidst the rising economy before they are
unable to recover. On November 9th of 2022, Mark Zuckerberg announces layoffs
and job cuts for 11,000 individuals, making up 13% of their workforce – a number
that made history. Zuckerberg announces that the company is also taking steps to
become leaner and cut spending as well as enacting a hiring freeze through the
first quarter of 2023 (Vanian, 2022). Although these layoffs were made across
all departments and regions, most of them affected areas like recruiting and
business teams. Less engineers were affected as they are an essential part of
building up Zuckerberg’s vision of the “Metaverse.”
STAKEHOLDERS
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| Mike Schroepfer, former CTO of Meta and top shareholder |
The layoffs
came amid a tough time for Meta and with the projections for fourth quarter
earnings announced in late October of this year, investors were “spooked”, and
this caused their shares to sink by nearly 20%. Investors have raised concerns
about Meta’s rising costs and expenses, which jumped 19% year over year in the
third quarter to $22.1 billion (Vanian, 2022). Analysts and investors are both
losing confidence in the company because despite their decisions for cost cuts
and hiring freezes, expenses in 2023 are expected to reach an all-time high at
$96-$100 billion, a large sum compared to 2022’s total expected expenses,
totaling $85-$87 billion. During this period, Meta was facing intense investor
scrutiny for spending so heavily on the Metaverse project – Zuckerberg's vision
of building an “avatar filled world” (Murphy, 2022). Zuckerberg continues to
reassure them by warning that these promises of efficiency will take time and
patience. Wall Street Analyst, Brent Thill sides with investor concerns and
says: “There are too many experimental bets versus proven bets in the core.”
Needless to say, investors are worried about Meta platforms and rightfully so,
but according to Zuckerberg, these efforts will be “of historic importance” to
create a basis for an entirely new way for humans to interact with one another
and “blend technology into our lives” (Yang, 2022).
INDIVIDUALISM
Milton
Friedman, an economist and a Nobel prize winner for economics rose to prominence
in the 1970’s. His theory of Individualism states that a business’ only goal is
profit. Therefore, the only obligation that a business has is to maximize profit
for itself and its shareholders within the law. Generally, this theory holds
true with some exceptions, some of which are the social identity of the company
and of the leaders. There are many investors, customers, and employees who wish
to be involved with socially responsible businesses meaning ethically sound
businesses and those who profit within the law, seeing as social responsibility
can generate profit. Just because something is legal, does not make it ethical
and this is emphasized by Tibor Machan who believes that the direct goal of
profiting may need to be met by indirect goals that are not aimed at profiting.
Businesspeople may have other goals and social objectives but must prioritize
profit-maximizing strategies.
Under the circumstances, Meta was reporting growth
rates at all-time lows since going public and declines in revenue and net
income. These declines are dismal to their shareholders and the company’s
growth, especially one of this magnitude. The aftermath of the layoffs was mixed
– some former employees were glad and wanted to explore the next chapter of
their lives, while others were devastated and immediately went searching for new
opportunities, seeing as the cost of living only continues to rise, especially
in highly populated areas in the country, where many have relocated for their
position at Meta. Mark Zuckerberg and Meta set certain goals for the company,
and to achieve those goals, this was the decision he had to make. There is no
denying how empathetic and apologetic he was during the announcement of the
layoffs, and he was saddened to let his talent go under these circumstances.
This is ultimately the decision he had to make to maximize his company’s profit
as expenses are only going to increase. This was in the best interest of his
company and stockholders.
UTILITARIANISM
What makes something good? When we
think about something that is good, we are typically searching for some
intrinsic value. Our attitudes and preferences influence our happiness and
usually, all actions are aimed at something good and will bring us happiness.
Utilitarianism, founded by John Stuart Mill emphasizes that we should bring
about happiness and pleasure in all beings that can feel it. When there is a
perfectly imperfect mix of egoism and altruism, we get utilitarianism, an
ethical concept that wants humans to maximize happiness for ourselves and for
others. Meta heavily contradicts this theory, as the company could have avoided
a lot of the adversity that is currently being endured by his former employees.
Meta layoffs provided a good example of ends not justifying the means – it is
hard for utilitarianism to hold true in all cases, no matter how much we wish it
could. Under these circumstances, the Meta layoffs could have been avoided if
Zuckerberg wasn’t blinded by the social media boom amid the pandemic. The CEO
should have looked into the future and considered his employees’ futures during
his rapid hiring spree rather than making rash decisions dictated by greed. The
employees that were hired at this time and were laid off, would have been better
off finding a more permanent and stable career elsewhere. According to Mill,
this decision was highly unethical and selfish of the CEO and shareholders, who
should have found a middle ground with their employees, which would have been
making other cuts outside of employment and provided employees the option to
sever their relationship with the company peacefully rather than being forced to
unexpectedly without warning.
KANTIANISM
Immanuel Kant was a German Philosopher
and was one of the primary thinkers of the Enlightenment. The basic principles
Kantianism consists of rational decisions through consistent behavior, and
respect for individual autonomy, needs and differences. He pushes humans to
evaluate whether certain actions are coming from good will. In the business
context, this theory implies that businesses and businesspeople have an
obligation to treat everyone with respect, and this treatment is an obligation
regardless of one's goals or missions – meaning that the desire to make profit
or for any other outcome cannot be a reason to treat people without respect and
fairness. To help individuals reason with their decisions, Kant created the
Categorical Imperative. The Formula of Humanity is one of the most prominent
moral formulations within the categorical imperative which states that
exploiting and using others in order to fulfill a desire is unethical and may
involve manipulation tactics that deprive them of their rationality (Salazar
2014).
In the case of the Meta layoffs, it was clear that there was a
discrepancy between what Zuckerberg did, and the Formula of Humanity. In this
case, we see that the intention behind the massive hiring spree that Meta
underwent during the pandemic was so they were able to acquire the biggest and
brightest talent – talent that they could use to get ahead of competitors. But
the layoffs make it evident that these employees were dispensable, and their
talents were utilized but once it became a burden to the company to pay them for
what they’re worth, it was quite easy for them to just cut ties with these
employees and because of this, there was a clear violation to the Formula of
Humanity. There is a motive behind every business decision, whether the motive
was to intentionally do damage or not, decisions that businesses like Meta make
such as these layoffs will impact every component associated with the company.
In the case of the Meta layoffs, the apology that was released by Zuckerberg to
his employees and the CEO’s general reputation showed that there was no real
intention to do any harm to the affected individuals here. Although, it would be
difficult to argue the moral permissibility of Meta’s actions considering the
former employees were not allowed to vouch for themselves so therefore, there
was no respect for these individuals’ autonomy and rationality.
VIRTUE THEORY
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| Snippet of Mark Zuckerberg from leaked video call where he apologized to those affected by the layoffs. |
When we take the time to think about our personality, we should take the time to
ask ourselves if there are traits within our personality that positively
contribute to our growth and our social responsibility. In an ideal world, we
would all want to avoid viciousness or unfavorable traits. This virtue theory
differs from the previous three ethical theories but lay the foundation for a
business’ ethics and moral code. This theory is comprised of four main virtues:
courage, honesty, temperance, and justice.
One of the virtues that Zuckerberg
demonstrates is honesty. Once he himself was able to come to terms with the fact
that his company numbers were declining. Though, there is a gray area where we
are unsure if Mark Zuckerberg only came clean about his company’s numbers
because he couldn’t run from it, or if he genuinely wanted to be transparent
with his team, shareholders, and users. Regardless, his display of transparency
gained him and Meta a sum of respect, but unfortunately didn’t mask the decline
in Meta’s numbers.
Another virtue displayed by Zuckerberg is courage. He
apologizes in the letter announcing the layoffs: “I want to take accountability
for these decisions and for how we got here. I know this is tough for everyone,
and I’m especially sorry to those impacted.” By doing so, he demonstrated that
he had the ability to take accountability for his own actions without placing
blame on others. This is a trait of a exemplary leader, which he possesses.
In
addition to this letter the CEO attempts to make things right post layoffs for
the individuals affected, demonstrating justice. Zuckerberg did what he could to
make this time as easy as possible by offering impacted employees 16 weeks of
pay along with two additional weeks for each year of service to Meta. Plus,
health insurance will remain covered for six months (Vanian, 2022). The CEO is
aware of what this decision has done and how it would potentially affect his
former employees, and he attempts to reconcile these wrongs.
Although Zuckerberg
demonstrates a majority of the four main virtues, he does not exemplify
temperance. There was a lack of self-control throughout the course of two years
leading to the layoffs. The CEO’s overambitious behavior ultimately led him to
burn bridges with many people—his former employees, shareholders, many Meta
users. The potential that he sees in the future of Meta and the formation of the
“Metaverse” blinded him and motivated him to make decisions that were irrational
and impulsive. Because of this lack of temperance, there are now 11,000
individuals fighting for their livelihood.
JUSTIFICATED ETHICS EVALUATION
In
retrospect, it is quite easy to shame Meta and Zuckerberg, CEO of Facebook
parent company, Meta for laying off so many employees. These employees are
people who do work to make a living and are very dependent on their careers in
the company. We look at Meta and how long they’ve been a prominent social
platform, one that almost all of us use or have used at one point and it’s
difficult for us to wrap our brains around the fact that they couldn’t keep the
11,000 people on their payroll. The reality is the state of the economy proving
to carry rising expenses and costs will make this almost impossible for Meta to
sustain while remaining in business.
Meta’s active user count has been steadily
decreasing for quite some time now and we are all aware of where Zuckerberg
wants to take the company – to the Metaverse. This requires the company to
invest as much time and finances into the project as they can sustain in order
to execute this vision that Zuckerberg has for his company. When we have a
vision for what is essentially our livelihood, we want to do what we can to help
it come to fruition and this is what Zuckerberg did. In this case, it was
evident that the CEO did not want to burn bridges with the people that
contributed so much to his company’s growth and success.
After the layoffs,
there is no denying that his decision has paid off. There were signs of growth
instantaneously as Meta’s stock rose 5.2% by end of day November 9th, the day of
the layoffs and closed at $101.47. While there is a huge deficit the company
still must reconcile, it continues to persist and analysts, while skeptical,
attempts to put their faith in the power and potential that Facebook holds. Not
only was the CEO struggling, but there would be losses for his investors and
other shareholders if he didn’t make this executive choice – Zuckerberg did so
compassionately and with transparency. Therefore, his actions were ethical and
justified.
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