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Nov 16, 2018

The Facebook and Russia Investigation: Do Companies Have Ethical Obligations?

The ethics of the social media network are under the microscope.

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Facebook knew about Russian interference in the 2016  presidential election, but looked the other way and attempted to hide its involvement. It also employed lobbyists to smear rival tech companies in a campaign designed to take attention off itself, when it surfaced the company sold political data of many of its users.

These are among the allegations from a comprehensive investigation of Facebook by the New York Times, published Wednesday.

News of the investigation hit the company’s stock, which fell 2% in Thursday morning trading.

Earlier this year, Facebook founder Mark Zuckerberg testified before Congress about what he and other company executives knew about how user data was used to tamper with the election.

Here are the details from the Facebook and Russia investigation:

  • Executives at the company allegedly knew that Russian trolls had infiltrated its network to spread propaganda related to the 2016 election, but covered it up.
  • Facebook reportedly hired opposition research groups to discredit rival tech companies, following news of the Cambridge Analytica scandal in 2017, in which it was discovered the social network sold the private political data of millions of users.
  • It knowingly allowed anti-Semitic conspiracy theories involving financier George Soros to spread on the network, according to the report. Soros has been vocal about his opposition to the mounting power of tech companies including Facebook and Google.

Ethics are important

The big lesson is that it’s probably a best practice for public companies to behave ethically, and they are vulnerable to news of investigations when they do not. Not only their stocks, but ultimately the value of the companies themselves, are determined by how responsible companies are to their customers and shareholders.

Further, the ethical values and actions of companies are something that investors might consider before making an investment.

Companies can bow to pressure

Both private and public companies are frequently the subject of investigations, which can often prompt change for the better.

Walmart: In 2012 and 2013, fatalities from a factory fire and factory collapse at facilities that the giant retailer uses to manufacture garments in Bangladesh, put Walmart under the microscope for its safety standards overseas. (H&M and the Gap also used the factory that collapsed in Bangladesh.) Walmart refused to sign on to a legally binding agreement to improve standards, but set up an alliance to improve the safety of workers in that country.

Nike: In the 1990s, Nike was found to have maintained sweatshop working conditions in its overseas factories. News reports prompted improved conditions and now Nike is often viewed as a model for manufacturing standards in emerging markets.

Uber: After numerous scandals involving alleged sexual harassment, spying, false advertising, and other possible misdeeds, the ride-sharing company got rid of its chief executive officer and replaced him in 2017 with a new leader who hopes to rebuild relationships with customers and communities.

How can you know if a company is doing the right thing?

It’s important to do research on any company you or fund in which you plan to invest.

One good place to start is the Securities and Exchange Commission (SEC), where you can read all of the public documents that companies file every quarter about their operations.

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    Jeremy Quittner is the editorial director for Stash.


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