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Essay: Facebook Stakeholder Engagement Crisis

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  • Subject area(s): Business essays
  • Reading time: 7 minutes
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  • Published: 15 September 2019*
  • File format: Text
  • Words: 2,138 (approx)
  • Number of pages: 9 (approx)
  • Tags: Facebook essays

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Living Case Study Project: Facebook Stakeholder Engagement Crisis


Facebook is a global leader in social media with over 2.2 billion users and has an ethical responsibility to protect the personal information of its users. Recently, Facebook suffered huge reputational and financial losses in the wake of two cases of data breach where the personal information of millions of users was shared with external party without explicit consent. This report analyzes the data privacy issue to identify the root cause of the problem. A stakeholder analysis was conducted, and three key stakeholders involved have been identified to strategize communication plans to meet their interests. Following the stakeholder analysis, an analysis of Facebook’s response to address concerns of the key stakeholders in the crisis is conducted. The report provides recommendations to overcome stakeholder engagement challenges and to reinforce Factbook’s image as a socially and ethically responsible corporate citizen.


Stakeholder engagement is important to build long term positive relationships with key stakeholders such as customers, employees, shareholders, media, suppliers and the government. Effective engagement helps foster trust with various stakeholder groups and enhances brand reputation.

In this age of social media and internet, one must understand the motivations and interests of stakeholders and collaborate with them to find mutually beneficial solutions to complex problems or crisis situations. Digital channels provide unique opportunities to build brand awareness while directly interacting with stakeholders on a wide variety of issues affecting them. Data privacy crisis and technological vulnerability has caused a major damage to Facebook’s image as a trusted leader in handling personal information. This report analyzes Facebook’s approach in handling the stakeholder reactions in response to security breach crisis. The objective of the report is to identify key stakeholders and offer recommendations to manage stakeholder communications in an open and transparent manner.


Facebook is facing severe criticism from customers, media, shareholders and the government over two cases of data security breach in 2018. In first case, the developer of a personality quiz app transferred personal data of over 87 million people without their formal consent to Cambridge Analytica, a political consulting firm. This data was used in Donald’s Trump presidential election campaign. Lack of appropriate privacy protocols also lead to breach of people’s trust who share their confidential information with the company. Facebook’s response to situation was reactive and little too late. The company was not fully prepared to handle the controversy on illegal data sharing. Company’s claims that it took all the necessary measures to ensure protection of user data after the Cambridge incident were undermined when a group of hackers obtained access code to control user profiles of over 50 million accounts in September 2018.

Facebook is now managing the transparency and risk issues that were mismanaged for years. There was a lack of culture that proactively mitigates risks and reinforces the credibility and trust the stakeholders have in company’s policies. The company failed to recognize the need to launch a secured platform wherein even the people who did not read the lengthy terms and conditions understood the risks of violation of privacy rules. Facebook missed the opportunity to educate the users on how to prevent their personal information from being hacked. The issue is to win back the lost trust of key stakeholders and reputation of the company by proactively enforcing strict data security policies, consulting with regulators and engaging customers through various digital platforms.


Facebook needs to engage and address the concerns of following key stakeholders by tailoring its crisis management and communications strategies to rebuild brand credibility and trust in the marketplace:


Lawmakers and regulators are important stakeholders as they impose requirements and regulations to ensure compliance with government policies. They have launched an immediate investigation into Facebook’s privacy and risk management policies to better understand what happened and how it happened. Facebook’s CEO was required to testify before the Congress how the company failed to protect people’s information and why it was not transparent about how data was accessed by others on its platform. They have high interest and high power in this situation as they can impose significant regulations and fines that can impact the operations of the company. Facebook needs to work closely with regulators to reflect fairness and transparency in its data sharing polices and regain the trust of billions of Facebook users.


Facebook has billions of active online users who use the social network for entertainment, education and advertising. This stakeholder group is interested in the ease of using the social media platform and in the security of personal information. Users felt let down by Facebook’s lax privacy policies which allowed external app developers to harvest their personal information without explicit consent. The #DeleteFacebook movement which raises concerns over lack of privacy on social media has gained strong momentum in the wake of Facebook’s data sharing crisis. The backlash was particularly more pronounced in Canada as there was 175% surge in number of Canadian interested in deleting their Facebook profile. The user stakeholder group has high interest and high power as they receive highest priority in Facebook’s corporate citizenship charter. If people lose faith in Facebook’s handling of their personal information, they may boycott the company or spend less time on social network, limiting the company’s ability to make profits from its activities. Hence, Facebook needs to engage its online membership in its efforts to provide a secured social media platform that gets users explicit consent before sharing information about them.


Shareholders are also one of the primary stakeholders of Facebook as they provide funds for company’s growth and have an important role in governance, operations and control aspects of the company. Facebook has faced increased scrutiny and challenge from its shareholders at its annual meeting where shareholders have voiced their concern over corporate governance structure and need to make it easier for Facebook users to control and opt out of data sharing request. The company’s share prices dropped by 11 % after the news broke about its involvement in the data breach crisis. This stakeholder group has medium power due to dual voting rights structure but high interest in company’s operations. Facebook needs to rebuild its credibility with investors by putting in place strong risk management practices for managing risk.


The fact that Facebook has over 2.2 billion active users who log on to the social media platform at least once a month imposes a great responsibility on the company to protect its users and their personal information. Data privacy issue is one of the largest crises in the 14-year history of Facebook. This report conducts detailed analysis of Facebook’s response to privacy crisis:

  • Lack of clear direction- Facebook’s first statement from executive leadership came a week after the crisis. There was a lack of clear direction from the top leadership as whole issue was characterized as a legal and political issue. The response was delayed and focused on shifting the blame to Cambridge Analytica for violating rules for data sharing. This approach was deeply criticized by media, users and shareholders as they expected Facebook to tak
    e responsibility of the situation. The company ignored the deeper issue that Facebook users want a secured platform to share their personal information.

  • Lack of proactive risk management practices- Facebook had known the Cambridge Analytica issue since 2015 and still did not take adequate measures to mitigate the material risks associated. Facebook failed to verify whether the improperly collected information was deleted by Cambridge Analytica. Moreover, the users were not informed about any potential risks associated with the issue. This clearly highlights the lack of strong risk management culture in Facebook that proactively identifies and mitigates material risk.

  • Lack of credibility- After the Cambridge Analytica crisis, Facebook announced that it will conduct investigation into all the apps that had access to large amounts of information and will restrict developer’s access to data to prevent misuse of information. Facebook assured the stakeholders that it was taking all the right steps to prevent such data breach incidents in future. Soon after, these reassurances were undermined when a group of hackers broke into Facebook’s security system to take control of approximately 50 million users. This has greatly damaged Facebook’s reputation and credibility as social media leader.

  • Lack of data security and privacy awareness- Facebook failed to recognize the moral responsibility to create awareness around privacy and data sharing policies amongst its users. The reality is that majority of users do not go through extensive terms and conditions of applications. Rather than relying on legal terms of disclosure, Facebook should have engaged its user through online forums and digital campaigns to create awareness about privacy settings features on the social media platform.


    Facebook needs to take accountability for mishandling of user information and make sound investments in risk management to ensure security of personal information of its users. This is clearly an issue of customer trust and not a legal problem. It is recommended that Facebook should take a more ethical and transparent approach in PR issue to reinforce its commitment to create safe and secure communities where it operates. Based on the issues identified, the following recommendations will help Facebook tailor its communication strategies to rebuild its trust and credibility amongst key stakeholder groups:

  • Proactive Approach- Facebook should not have waited for three years to disclose this data privacy incident. The company should have identified and disclosed the issue to the stakeholders involved when it occurred and then followed up with plan of action to resolve it. This would have helped the company to mitigate the risk without the reputational and financial losses it experienced.

  • Review of Risk Management policies- Facebook needs to hire an external auditor to assess its risk management policies to ensure that the company is better prepared for all possible situations of vulnerability. Facebook needs to reduce the data given by users why signing up for an app. Developers should be required to get approval from Facebook to have access to user’s private data. These measures will enable Facebook to execute promptly and efficiently in risk situations and will reinforce its commitment to provide secured online platform for its users sharing personal information.

  • Take Responsibility- Facebook’s leadership should have acted with urgency showing how much significance they are placing on the issue. The longer the wait time in issuing statement, the lesser control you have over the crisis which lead to spread of negative sentiments in the public. The crisis should have been addressed in the first 24 hours and message should have placed the emphasis on the acceptance of the mistake and demonstrated Facebook’s commitment to making things right.

  • Multidisciplinary PR Team- Facebook needs to be better prepared for crisis situations to ensure its communicated strategies tailor to interests of various stakeholders involved in these situations. Facebook must formulate a multidisciplinary team of crisis management experts to anticipate possible risks and PR issues that can arise and develop list of actions which need to be followed to do the damage control and rebuild the company’s brand image.

  • User and Shareholder Engagement- Facebook needs to take responsibility of educating its users about the new changes which make it easier to find privacy tools. The company needs to use its online forums, social media platforms and company website to directly interact with users to solicit their feedback on the data sharing issue. This would help to rebuild trust and credibility with users and shareholders and ensure that that people’s ideas are being heard and developed into actions.

  • Partnership with Regulators- Facebook needs to launch consultations and partnerships with regulators in various countries to understand data privacy risks and find best practice for data sharing and protection of personal information. This process will help build strong relationship with regulators and demonstrate Facebook’s commitment to


    Fig 1. Implementation Plan


    To conclude, Facebook needs to take accountability of the data security crisis and conduct a review of its risk management policies to be able to identify potential risks and mitigate them before they become out of control. By educating the users about new transparent privacy features and ways to opt out of data sharing, Facebook can reinforce it commitment to creating safer and secure communities. Facebook can utilize this opportunity to strengthen its relationship with regulators by partnering with them in find best in class practices for data sharing and for protection of personal information. Hence, by engaging with various stakeholders involved in an open and transparent manner, Facebook can rebuild its image as a socially and morally responsible corporate citizen.





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