Facebook Under Scrutiny

Questions about Facebook's role in user privacy are getting increasingly serious, and shareholders are getting worried. Company shares fell 7% after the news that third-parties used FB users' personal information without permission.

Analysts say we know that Facebook monetizes users' data, but the number of people affected (50 million) and the extent of the violation is dramatic. One concern is how much additional regulation the company will face in the future. Already, the Federal Trade Commission (FTC) is investigating whether Facebook violated a 2011 settlement in which the company promised to get users' consent before changing certain privacy settings.

We have no comment yet from Mark Zuckerberg or Sheryl Sanberg, and critics say they need to be out in front of this.

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Discussion:

• A Bloomberg reporter called the company "tone deaf," but others say it's an impossible situation to fully address at this point. What's your view?
• What, if anything, should company leaders say? What could explain their silence?
• In what ways is this situation an issue of integrity for the company?

Stanford Event Criticized as "Too White and Too Male"

The organizer of a history conference at Stanford admitted to having trouble identifying a more diverse panel of speakers. All 30 are white men.

Priya Satia, history professor at Stanford said, “Given how prevalent women are in the history department, you’d have to try really hard to come up with a roster of speakers that looks like that." Satia also leads the history department's diversity committee.

Referred to as a "conservative British historian" by the New York Times, Niall Ferguson says he invited women, but only one could attend. Ferguson also said, "We all agreed that we must redouble our efforts to represent diverse viewpoints in future conferences." 

Discussion:

• What are some possible reasons for the lack of diversity?
• Should Ferguson have done more to recruit women and people of color? How could he approach the conference planning differently?
• What is Stanford's responsibility? I don't see a statement from the university.
• In what ways does Ferguson demonstrate vulnerability, and in what ways does he fall short?

Toys R Us Closes

https://www.toysrusinc.com/restructuring

Toys R Us will close its remaining 735 U.S. stores and will lay off about 33,000 employees around the country. The company tried to survive after a bankruptcy filing in 2017, but the retailer can't compete with large stores, such as Walmart, and online sellers, such as Amazon.

Critics say Toys R Us failed to generate excitement, as one analyst describes in The Washington Post article:

“The liquidation of Toys R Us is the unfortunate but inevitable conclusion of a retailer that lost its way. Even during recent store closeouts, Toys R Us failed to create any sense of excitement. The brand lost relevance, customers and ultimately sales.”

A professor of brand management echoed this theme:

“We know that customers are willing to pay more for an enjoyable experience — just look at the lines at Starbucks every day — but Toys R Us has failed to give us anything special or unique. You can find more zest for life in a Walgreens.”

New York Senator Chuck Schumer is asking for the Federal Trade Commission (FTC) to ensure that customers aren't left "holding the bag" if they can't cash in or buy products with gift cards, particularly those recently received in December for Christmas.

Toys R Us has only a short statement on its website announcing the liquidation.

Discussion:

• Should the company leaders say more about the decision? What else, if anything, could be included in the statement?
• In addition to legal responsibilities, do company leaders have ethical responsibilities to make good on outstanding gift cards? Why or why not?
• In what ways has the company failed to learn from failure?

Turnaround for Martin Shkreli

We see a different Martin Shkreli from the one criticized for smirking during a congressional hearing on Capitol Hill in 2016. Shkreli ran Turing Pharmaceuticals when the company was accused of raising drug prices 5,000% in 2015. At the time, he was only 28 years old and was called "the most hated man in America."

Last week, Shkreli was sentenced to seven years in prison for fraud committed while he was a hedge fund manager and while running another drug company, Retrophin.

Shkreli pleaded for leniency. According to a CNBC report, he "broke down in tears." Another  article summarizes his statements in court:  

"The one person to blame for me being here today is me," a choked-up Shkreli told a judge before she imposed the prison term in Brooklyn, New York, federal court.

"Not the government. There is no conspiracy to take down Martin Shkreli."

"I took down Martin Shkreli with my disgraceful and shameful actions."

"This is my fault. I am no victim here," Shkreli said, before breaking down into tears as he promised not to let his lawyer Benjamin Brafman down in his efforts to contribute to society.

"Do not feel bad for me," Shkreli told a packed courtroom that included supporters and family members, many of whom had written letters asking Judge Kiyo Matsumoto to spare him from a harsh sentence.

And he had a message for the investors he duped: "I am terribly sorry I lost your trust. ... You deserve far better."

"I was never motivated by money," Shkreli said. "I wanted to grow my stature and my reputation."

"I am here because of my gross, stupid and negligent mistakes I made."

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Discussion:

• Let's assume Shkreli's statements are sincere. How could you explain Shkreli's smirking in 2015 at such as serious hearing and his behavior more recently?
• Do you believe Shkreli's statements are sincere? Why or why not?

A Dog Dies on a United Flight

United Airlines, again, has apologized for a problem on a flight. A flight attendant told a family to place their dog, in a carrying case, in the overhead compartment. The dog didn't survive the trip.

The flight attendant's instruction is curious because the airline's policy states that pets are to be stored under a seat:

"A pet traveling in cabin must be carried in an approved hard-sided or soft-sided kennel. The kennel must fit completely under the seat in front of the customer and remain there at all times."

In a statement, a United spokesperson apologized:

“This was a tragic accident that should never have occurred, as pets should never be placed in the overhead bin. We assume full responsibility for this tragedy and express our deepest condolences to the family and are committed to supporting them.”

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Discussion:

• United's statement doesn't mention the flight attendant's role. Why do you think this isn't included? Should the statement be revised?
• What action, if any, should United take against the flight attendant if she did, as passengers report, instruct the family to put the dog in the overhead compartment?

Fired by Tweet

According to an NBC report, Secretary of State Rex Tillerson learned he was fired when President Trump posted a tweet. The President did call Tillerson in for a face-to-face meeting, but this happened "several hours after the president had publicly announced Tillerson's firing on Twitter." The White House claims that Tillerson was put on notice that his time was coming to an end, but Tillerson says he was shocked at the news.

The relationship had been rocky. The two disagreed over policy issues, such as the Russian's government's involvement in U.S. elections and negotiations with North Korea. In July of last year, Tillerson referred to President Trump as a "moron."

Of his termination, Tillerson said,

"What is most important is to ensure an orderly and smooth transition during a time that the country continues to face significant policy and national security challenges."

Discussion:

• What is the best way to deliver bad news?
• We have heard of many business situations in which employees are fired by text message. How does this situation compare?
• In what ways is this situation a matter of leadership character, for example, compassion or integrity?

Bias in Online Courses

A Stanford University study found biases in how instructors interact with students in online courses. In a review of 124 Massive Open Online Courses (MOOCs) in a variety of subjects, researchers found that responses to comments vary by students' race and gender: 

Each comment was randomly assigned a student name connoting a specific race and gender. We find that instructors are 94% more likely to respond to forum posts by White male students. In contrast, we do not find general evidence of biases in student responses. However, we do find that comments placed by White females are more likely to receive a response from White female peers. 

The study is significant because it identifies teachers' potential responsibility for different student learning outcomes. In other words, it's difficult to isolate why teachers respond differently to students because the students may, for example, be less prepared or have less ability. But in this study, the issue is clearly isolated: teachers tend to favor students based on race and gender, which were randomly assigned by way of fictitious names.

Discussion: 

• How well do these results match your own experience as a student?
• What are the implications of this study for instructors?
• What potential flaws or issues do you identify with this study? 

Is Blankfein Leaving Goldman?

It's big news on Wall Street: the 12-year CEO of Goldman Sachs is leaving the company. But Lloyd Blankfein and other Goldman executives say they were surprised to read the Wall  Street Journal report. 

CNBC's Jim  Cramer said the news made sense because Goldman has two co-presidents who are vying for the position: "Blankfein is deeply committed to letting a newer generation" lead.

Blankfein tackled some tough times at the investment bank. The firm managed well through the Great Recession despite criticism for misleading customers, for which Goldman paid $550 million to the SEC as a settlement. In 2009, Blankfein faced criticism when he, perhaps jokingly, told a reporter Goldman was "just doing God's work." He was positioning the firm as having a "social purpose." Finally, in 2012, a Goldman executive wrote a scathing report about the company in a New York Times opinion piece, "Why I Am Leaving Goldman Sachs."

For now, we don't know how true the WSJ report is. 

Discussion: 

• The Wall Street Journal report is very clear, although it doesn't identify sources, but that is typical. How do news reports like this happen? Who is responsible if it is a mistake? 
• How well did Blankfein handle the situation? What, if anything, should Goldman communicate as a company at this point?

NYT Learns from Failure

The New York Times admitted a mistake: the paper failed to write obituaries for some extraordinary women:

Since 1851, The New York Times has published thousands of obituaries: of heads of state, opera singers, the inventor of Stove Top stuffing and the namer of the Slinky. The vast majority chronicled the lives of men, mostly white ones; even in the last two years, just over one in five of our subjects were female.

The paper has begun a collection of obits for people "who left indelible marks but were nonetheless overlooked." Write-ups are available for 15 women, including Sylvia Plath, an accomplished poet who committed suicide; Margaret Abbott, the first woman to win an Olympics game; and Ida B. Wells, who fought racism and lynchings in the South in the 1890s.

Discussion: 

• How well does The New York Times address the failure? 
• Why are they writing these obituaries now? What are the arguments for the collection and against it?

Merck CEO Demonstrates Leadership Character

In an interview with The New York Times, Merck CEO Ken Fraizer demonstrates strong leadership character. He talks about his upbringing, building self-confidence, and learning from failure. He ends the interview with this quote: 

There are lots of examples of companies that have lost their way because they’ve sort of lost their soul, which is a funny word to use, but companies do have souls.

Frazier was last prominent in the media after being the first executive to quit one of President Trump's advisory councils. 

Now, he offers college students this advice: 

I think people should seek adventure in life, as opposed to just allowing their ambitions to drive where they want to end up. Lots of people say, "Tell me what are the steps to get from here to the C.E.O.’s office." I can say honestly I never sought to be a C.E.O. But what I’ve always wanted was a new challenge, what I call an adventure. Seek adventure. Seek excitement in what you do.

Discussion: 

• Read Frazier's interview. What do you learn from his perspective? 
• When asked about Vioxx, how does Frazier address the failure? How else could he have answered the question? Which was the better choice?
• How does Frazier demonstrate authenticity?

OpenTable Employee Fired for Hundreds of Fake Reservations

An OpenTable employee made hundreds of reservations on competitor site Reserve, causing no-shows at several Chicago restaurants. Apparently, the employee thought the move would bring business to OpenTable.

The company blames this one employee and denies a bigger scheme:

“We extend our sincerest apologies to the restaurants in Chicago that were impacted by the disgraceful, unsanctioned activity of a lone OpenTable employee. When this activity was brought to our attention, we swiftly investigated and the employee was terminated immediately. We have begun reaching out to the restaurants and are committed to making it right.”

Peter de Castro, co-owner of Tavern on the Park commented on OpenTable's lack of humility:

“If you’re the biggest guy on the block, you’re supposed to lead by example. Why would they stoop to the level of undermining the competition and hurting the restaurants that went to that competition?”

The no-shows left restaurants with open tables (no pun intended); restaurant managers filled some of them but not all and lost revenue as a result. 

Discussion:

• How could this situation demonstrate a lack of humility for OpenTable, as the co-owner of Tavern on the Park says?

• How well did OpenTable handle the situation? What else, if anything, should the company do?

United Backs Off of Bonus Plan

United announced moving to a lottery system for employee bonuses, but backlash caused management to rethink the plan. President Scott Kirby had distributed a memo describing the new process:

"As we look to continue improving, we took a step back and decided to replace the quarterly operational bonus and perfect attendance programs with an exciting new rewards program called 'core4 Score Rewards.' " 

The new program would include cash and other prizes and one quarterly prize of $100,000, which would be given to a random, eligible employee. Following the criticism, a spokesperson tried to clarify:

"We announced a new internal program based on United meeting certain operational and dependability metrics as a way of offering meaningful rewards to our employees. We believe that this new program will build excitement and a sense of accomplishment as we continue to set all-time operational records that result in an experience that our customers value."

Employee comments were harsh:

"Why should I be happy watching another employee get rewarded for my hard work? How would you feel if Oscar (United CEO Oscar Munoz) played roulette with your incentive package and it went to another vice president through a lottery drawing."

"This is truly disappointing. The current program 'costs' the company approximately $150 per 75,000 employees per quarter, totaling over $11 million. This new 'improved' program that we are supposed to be so excited about will cost the company $3.5 million per quarter. This saves the company about $8 million per quarter. Does Willis Tower really think the average front-line employee is stupid?"  

In a second memo three days later, Kirby announced a pause on the program, saying they would "consider the right way to move ahead" and "will be reaching out to work groups across the company, and the changes we make will better reflect your feedback."

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Discussion:

• What went wrong? Was it the bonus/lottery plan, the way it was announced, both, or something else?
• One employee commented, "Wow. I thought our morale was already as low as it could go, but I guess that was naive thinking on my part. I'm finally starting to understand that there will always be room for management to make me feel even less appreciated than I already do. How many times must they be taught, that if the employees aren't happy, no one is happy." What should the company leaders do now?
• The memos and employee comments were on an internal United system. What are the ethics of forwarding internal communications to the media?

President Trump Vs. Alec Baldwin

Alec Baldwin is a frequent imitator of President Trump on Saturday Night Live, and the President doesn't like it. In a Twitter feud for the world to see, the two are trading insults.

The President's response followed Alec Baldwin's interview with The Hollywood Reporter: 

How much longer with you play Trump on Saturday Night Live?

Every time I do it now, it's like agony. Agony. I can't. If things don't go in the right direction for the midterms. … I could go out on the street, stand on any corner and tap 10 people on the shoulder. And all 10 of them, in all likelihood, would be more qualified — ethically, morally, intellectually and spiritually — than Trump. I'll vote for Mitt Romney. I don't care. Anybody over this guy. It doesn't matter. We have to get rid of him. And that's another project I'm working on. I was the keynote speaker at the Democratic Dinner in Iowa, and I'm gonna go do a couple more of those this year. My wife and I agreed that we're gonna give it everything we have. And then if, God forbid, he wins again in 2020, I'm wondering can I host a game show in Spain.

Not to be outdone, Baldwin responded in a few tweets, including this one:

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Discussion:

• Should either or both of these men refrain from this type of argument on Twitter? Why or why not?
• We could say the President lacks humility, including the ability to laugh at himself. Do you agree with this statement, or do you believe Baldwin is out of line, or something else?

Travis Kalanick Gets a New Role

Travis Kalanick's dramatic fall from Uber has a potential happy ending. Kalanick has joined the board of health company startup Kareo, run by Dan Rodrigues. Kalanick was an angel investor in Kareo, and he and Rodrigues founded a music company in the late 1990s.

Rodrigues announced the appointment in an email to Kareo employees:

I’m very excited to have Travis join our board. He is one of the most successful entrepreneurs of our generation. He has not only scaled a high-growth company, but transformed an entire industry. Travis and I have a long-standing relationship that goes back more than 20 years. We were classmates at UCLA and co-founders at Scour, a peer-to- peer search engine company in the late 90’s. Travis made an early-stage investment in Kareo in 2009. He has been an enthusiastic believer in our vision since our inception and he is excited to work with us more directly to bring innovation to healthcare and help us reach our goals for market leadership.

This is Kalanick's first venture after being ousted from Uber and is encouraging for leaders who have experienced failure. He has been quiet on Twitter since January but tweeted the good news and highlighted his relationship with Rodrigues.

Discussion:

• What other examples do you know of fallen leaders getting a second chance? Will we see this for Harvey Weinstein?
• Assess the email to Kareo employees. What does the CEO want to accomplish? How well does the message meet these objectives?
• How much do you think the friendship between Kalanick and Rodrigues factors into his board assignment? Why would Rodrigues emphasize their relationship in his email?

KFC Shuts Stores and Blames DHL

About 900 KFC UK restaurants closed because they didn't have chicken. A problem with DHL as their new transportation partner caused the problem, which upset customers so much they called the local police and Parliament.

The company has been sending steady messages and is trying to find humor in the situation. A spokesperson said, "We know that this might have inconvenienced some of you over the last few days, and disappointed you when you wanted your fried chicken fix — we're really sorry about that. Shout out to our restaurant teams who are working flat out to get us back up and running again.” A notice on the company website reads, "Thanks for bearing with us," and lists other locations nearby.

In addition, KFC posted a message on Twitter:

Another post read, "KFC runs out of chicken. You couldn't make it up, but we'll make it up to you. Join the Colonel's Club and get a finger lickin' reward when your restaurant opens." 

Discussion:

• How well do you think KFC is communicating about the situation?
• DHL made a big announcement in October of 2017: "KFC revolutionizes foodservice supply chain with DHL." But a press release about the current situation is nowhere to be found. Should the company be more vocal? 
• Is it appropriate for KFC to blame DHL? In what ways does this both demonstrate and lack accountability?

More Companies Take Action to Curb Gun Sales

Dick's Sporting Goods has taken a strong stance on gun control. In a statement, the company announced it will no longer sell assault-style rifles and will no longer sell firearms to people under 21 years of age. The statement dances the fine line between both sides of the gun control debate:

We support and respect the Second Amendment, and we recognize and appreciate that the vast majority of gun owners in this country are responsible, law-abiding citizens. But we have to help solve the problem that’s in front of us. Gun violence is an epidemic that’s taking the lives of too many people, including the brightest hope for the future of America – our kids.

Walmart also announced it will no longer sell to people under 21 years of age. The company ended some firearm sales in 2015, so this policy further restricts what people can purchase when.

Companies are in a tough spot. Dicks, Walmart, Delta, and other companies have suffered backlash for their decisions, including people promising to boycott.

Discussion:

• Compare Dick's and Walmart's statements. How do they differ? Which is more effective and why?
• Describe Dick's choices. What are the risks and rewards of the announcement?
• Should other CEOs jump into the controversy? How might the decision depend on industry, customer base, or the leader him- or herself?

Companies Distance Themselves from the NRA

Following the school shooting in Florida, several companies are distancing themselves from the National Rifle Association. The organization lists many member benefits on its website, including travel and insurance discounts, but these are shrinking as more companies are discontinuing services.

For example, several major car rental companies—Enterprise Rent-A-Car, Alamo Rent a Car, National Car Rental, Avis, Budget, and Hertz—and major airlines, such as United Air Lines and Delta, will eliminate discounts for NRA members.

The NRA posted a statement on its website to deflect blame, reinforce its mission, and deny the impact of these companies' actions:

FAIRFAX, VA – The more than five million law-abiding members of the National Rifle Association have enjoyed discounts and cost-saving programs from many American corporations that have partnered with the NRA to expand member benefits. 

Since the tragedy in Parkland, Florida, a number of companies have decided to sever their relationship with the NRA, in an effort to punish our members who are doctors, farmers, law enforcement officers, fire fighters, nurses, shop owners and school teachers that live in every American community.  We are men and women who represent every American ethnic group, every one of the world’s religions and every form of political commitment.

The law-abiding members of the NRA had nothing at all to do with the failure of that school’s security preparedness, the failure of America’s mental health system, the failure of the National Instant Check System or the cruel failures of both federal and local law enforcement.

Despite that, some corporations have decided to punish NRA membership in a shameful display of political and civic cowardice.  In time, these brands will be replaced by others who recognize that patriotism and determined commitment to Constitutional freedoms are characteristics of a marketplace they very much want to serve.

Let it be absolutely clear. The loss of a discount will neither scare nor distract one single NRA member from our mission to stand and defend the individual freedoms that have always made America the greatest nation in the world.

Discussion:

• Did these companies make the right decision? Some NRA members are boycotting them as a result.
• In its statement, the NRA refers to companies' "shameful display of political and civic cowardice." Do you see their actions as cowardice, courageous, or something else? What is the difference?

NYU Criticized for Racially Insensitive Menu Items

One of the NYU dining halls created new menu items to observe Black History Month. Unfortunately, the items reinforced racial stereotypes and weren't well received, according to a New York Times report:

"Barbecue ribs, corn bread, collard greens, and two beverages with racist connotations: Kool-Aid and watermelon-flavored water."

After a sophomore, Nia Harris, complained about the menu and didn't get a satisfying response, she wrote an email calling the decision "racially insensitive" and "just ignorant." She described her perspective and experience in a Facebook post:

Harris seems more concerned about the failed response than the initial decision to create the menu. Clearly, staff members could have handled this situation differently.

Later, the university did respond, including statements from Aramark to which dining at NYU is outsourced.

Discussion:

• Describe Harris's point of view. What were the university's missteps in this situation? Why do you think Harris didn't get a better response?
• Assess the university's response. They blame Aramark. Is that appropriate in this case? Why or why not?
• Now assess Aramark's two statements. How well does the company address the criticism?

Students Fight for Gun Control

After the school shooting that killed 17 people in Florida, students across the country are protesting for tighter gun control laws. High schoolers left their classes to confront politicians on their failure to change laws and for taking money from the National Rifle Association. Delaney Tarr was one of the vocal students:

"We've had enough of thoughts and prayers. ... If you supported us you would have made a change long ago and you would be making change now. So this is to every law maker out there. No longer can you take money from the NRA ... because we are coming after you."

Adding fuel to the controversy, some GOP members have accused students of being hired actors. Rep. Daryl Metcalfe criticized the protests:

“This morning I was working out and listening to the news about ‘students’ being bussed in to the Florida Capitol. The hypocrisy of the left struck me! They expect lawmakers to listen to the policy advice of 18 year old and younger ‘students’ who are advocating for gun control, but they do not believe 18 year olds who are old enough to serve on the battlefields of Afghanistan are old enough to purchase a rifle.”

Other Republicans, such as Marco Rubio, contradicted such messages, calling claims that students are actors “the work of a disgusting group of idiots with no sense of decency.”

Image source.

Discussion:

• In what ways are students demonstrating courage? What obstacles do they face as they protest for greater gun control?
• Assess students' messaging. How do they balance emotional appeals and logical arguments? Which are most effective in this situation?
• What do Republicans want from this controversy? In other words, what are these lawmakers' interests? How do their criticisms of the students help or hurt their case?

Facebook Under Fire for Russian Interference

Facebook is facing more criticism following detailed reports of how the Russian government infiltrated U.S. social media platforms during the 2016 election. The report cites Facebook as the target for Russian bots far more than any other social media site.

Since the Florida school shooting last week, we see evidence of Russian bots weighing in on gun control. Experts say these efforts are to divide the American people on political issues and are "casting public doubt on institutions such as the police or the media."

Facebook is taking action, but it's been slow, and experts wonder how much the company can do at this point. A Wired article details Facebook's journey to accountability, with much time spent in denial. Now, Facebook promises to verify accounts for election ads, but critics say it won't be enough.

In a report, Facebookers point to inherent problems with the platform:

“The central problem of disinformation corrupting American political culture is not Russian spies or a particular social media platform,” they write. “The central problem is that the entire industry is built to leverage sophisticated technology to aggregate user attention and sell advertising.

“There is an alignment of interests between advertisers and the platforms. And disinformation operators are typically indistinguishable from any other advertiser. Any viable policy solutions must start here.”

Discussion:

• What's your view of the situation and Facebook's responsibility. Is the company doing enough?
• How could Facebook re-envision its platform to avoid the problem of infiltrators on the site?
• Read the report, Digital Deceit. What business communication principles are followed, and how could the report be improved?