political spending

Facebook's hypocritical approach to transparency

March 27, 2014: 9:10 AM ET

Mark Zuckerberg feels all too comfortable clamoring for transparency from the federal government. But when it comes to his own company, well, that's a very different story.

131031151741-mark-zuckerberg-620xa

FORTUNE -- Instead of focusing on virtual reality, Facebook ought to be taking a long, hard look at its own reality.

The social media firm has built its business and its brand by extolling the virtues of transparency and open sharing of information. It continued to express this public mantra a couple of weeks ago when a "frustrated" CEO Mark Zuckerberg wrote that the government needs "to be much more transparent about what they're doing, or otherwise people will believe the worst."

But what about when it comes to letting the public know about the use of company resources to support values it claims to despise? No way, says Facebook.

Facebook (FB) has done a "lousy job of incorporating their business interests in their political spending -- and its public statements don't match its political contributions," says Julie Goodridge, CEO of NorthStar Asset Management. Shareholders will vote this year on a proposal by NorthStar that would require Facebook to address the risks the tech firm is creating for its brand and shareholder value. Facebook opposes the disclosure requirement.

MORE: Citi and four other banks stumble in Fed stress tests

Facebook is no minor political player. Zuckerberg picked up the phone to complain directly to the President of the United States -- and turned it into a public confrontation earlier this month. Also earlier this month, Facebook sent Don Seymour, who previously served as an aide to John Boehner and is now the company's U.S. politics and government outreach manager, to the Conservative Political Action Conference (CPAC) to teach Republicans how to use social media. And late last year, the Federal Election Commission found that the company's political action committee (PAC) had overspent beyond legally allowable limits. The tech firm then scrambled to get senators, including Mitch McConnell, who received more than the permissible contributions, to cut checks back to the company.

Facebook shareholders have expressed concerns with the branding and recruitment risks posed by the company's political spending on candidates opposed to LGBT (lesbian, gay, bisexual, transgender) rights. In 2011, "Facebook announced the formation of its Network of Support -- a panel comprised of five leading LGBT … advocacy organizations … to help Facebook effectively address issues faced by the LGBT community," the company wrote on its official diversity page. Last year, Zuckerberg led employees in marching at the LGBT parade in San Francisco and distributed specially designed T-shirts for the 700 (or more) employees who marched.

Yet over 41% of Facebook's PAC contributions since its inception have gone to politicians who voted for the marriage protection amendment that would prohibit same sex marriage and voted against hate crimes legislation and the repeal of don't ask/don't tell, according to NorthStar's shareholder proposal. Facebook's official opposition statement doesn't address the issue.

But on its careers page, Facebook says, "we work hard to make sure everyone at Facebook has access to as much information about the company as possible." Do the employees who marched in the parade last year know that their PAC funded candidates who oppose gay rights?

NorthStar's proposal also addresses Facebook's 2012 opposition to SOPA (the Stop Online Piracy Act) and PIPA (the Protect IP Act). Zuckerberg said Facebook opposed those bills and any laws that would "hurt the internet." Yet, Facebook's PAC gave the legislative sponsors or co-sponsors of the bills over $80,000, the proposal states.

Facebook was silent on this matter in its opposition statement to NorthStar's proposal.

While many of Facebook's free content providers may not know about the anti-LGBT spending or the SOPA and PIPA examples, they clearly haven't failed to notice Facebook's "good for the goose but not for the gander" approach. In a CNNMoney article related to Zuckerberg's call to Obama on transparency, Jose Pagliery wrote, "On Facebook, you're the product and advertising clients are the customers. When it comes to what data is collected, how it's used and where it's sold, there's little oversight and no transparency."

In its rebuttal to the shareholders' transparency requests, the tech giant says that their VP of public policy works with senior management to ensure political activities "are consistent with our public policy objectives." The statement shows Facebook's governance naiveté. Political spending oversight is the job of the independent members of the board. That's to make sure that PAC and corporate resources aren't spent to serve a few individuals' political aims.

EMC (EMC), a company that took one of its shareholders to court for recommending that the board chair be independent, is facing a proposal on political transparency similar to Facebook's. EMC is opposing the disclosure proposal, saying that its board oversees political contributions.

MORE: Fed: Taxpayer subsidy for 'Too Big To Fail' banks? $8.5 billion

Facebook also argues that the requirements of the proposal are "not required by law" and "not standard amongst other companies, including our competitors." To which any parent would say, "if all your friends jumped off a cliff, would you?"

Intel will be implementing the kind of reporting called for in the Facebook proposal this year, Goodridge told me.

Political spending risks that aren't addressed now will continue to grow. Facebook is now a public company. Its shareholders and stakeholders have a right to see more than the tech giant's glossy exterior.

In 2011, Zuckerberg wrote, "I'm committed to making Facebook the leader in transparency." Apparently, he didn't mean it. So what are we to believe -- the worst?

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board education and advisory firm.

Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.