Nissan's CEO Caught in the Crosshairs of Business and Society in Japan

Ordinarily, courses that include business & society (with business & government, and business ethics material also included as if the three fields were somehow one) have been relegated to the periphery in American business schools. Perhaps the business sector and its sycophantic deans have simply assumed that little actual cost comes from business managements deviating from societal norms and values. Admittedly, such a schism decreases reputational capital, a long-term intangible asset. Even so, the long-term-oriented and intangible can manifest as immediate jolts to such capital, with actual, measurable financial costs kicking in. They are triggered by news-worthy incidents in which a company or even one high-level manager, such as a CEO, are perceived societally as being in the wrong. The general perception of wrongness in turn depends on how far a company or manager have deviated from societal norms and values. Crucially but typically ignored, even though societal norms and values can absorb certain ethical principles or theories, business ethics is a distinct field because reasoning from or to ethical principles or theories lies at the core there. That is, no philosophical reasoning is involved in business & society; rather, the norms/values of a business sector, industry, or company are compared or contrasted with relevant societal norms and values. In this essay, I analyze the case of Carlos Ghosn, who was CEO of Nissan, Renault, and Mitsubishi on November 19, 2018 when he was arrested “on allegations that for years he had withheld millions of dollars in income from Nissan’s financial filings.”[1]
In 1999, Ghosn came to Japan “to carry out an American-style restructuring of a failing Nissan. The Japanese carmaker had $35 billion in debt, provided lifetime employment to a bloated work force and produced a fleet of the kind of cars you’d dread getting at the rental counter.”[2] He closed factories, cut suppliers, and laid off 14 percent of the workforce. As a VP at Renault, he “had helped oversee a turnaround at the middling French automaker, which had agreed to spend $5.4 billion to buy a 36.8 percent stake in Nissan Motors.”[3] On both counts, he was successful even though the CEO of General Motors at the time said Nissan was fixable.

In Japan, whose culture generally viewed outsiders with distrust, Ghosn “achieved a status bestowed on only a handful of chief executives. . . . In 2004, Emperor Akihito awarded him a Blue Ribbon Medal for his extraordinary contributions, making him the first foreign business leader to receive the honor.”[4] Ghosn, “a brash Brazilian-born and Lebanese- and French-educated engineer,” had been accepted in one of the most closed societies in the world.[5] Accolades aside, this made him extremely vulnerable should he intentionally or unintentionally violate a major societal norm or value. “From the start, he faced distrust from the Japanese policymaking and business establishment. The very idea of an outsider’s bringing free-market capitalism to Japan’s quasi-socialist corporate culture jabbed at historical wounds” even though Ghosn was not an American.[6] In other words, in “representing” a foreign economic system that a victor in World War II wore like a crown for the world to admire (even where it didn’t), Ghosn inadvertently put himself in a long-simmering wound in Japan. Not that any ethical principle had been violated; rather, his subtle predicament was predicated on a divide between a strongly valued societal norm and him as well as the company he ran. At the firm level, his “splashy—some would say autocratic—presence was out of sync with modest Japanese culture.”[7] As one Nissan employee put it, “No one dared to say anything that would confront [Ghosn’s] opinions.”[8] So a cleft between business and society can affect the degree to which a business leader’s style is accepted organizationally. That he cut 21,000 jobs but spent more than $200 million for Nissan to be a sponsor of the Rio Olympics in 2016, and that he hopped between homes paid by Nissan and flew in company jets would likely put him out in virtually any society in the world only gave the Japanese fetter for distrusting the foreigner in spite of his early contributions to Nissan and thus Japan’s economy.

The triggering incident that brought down Ghosn’s reputational capital in a flash stemmed from a divergence between how he had handled the matter of his compensation (i.e., business) and how CEO’s in Japan were supposed to handle it (i.e., society). “In Japan, salarymen slave away at the kaisha (or company) with a sense of communal pride almost as important as the salary.”[9] In 2017, Ghosn made $16.9 million ($8.4 million from Renault, $6.5 million from Nissan, and $2 million from Mitsubishi), which was nearly 11 times what the chairman of Toyota, the world’s largest automaker at the time, earned.[10] Astonishingly, Ghosn had “made the case to the public that he was underpaid.”[11] Even at the annual meeting in June, 2018, he said the company remained “financially very disciplined” in rewarding senior management.[12] Asked at the time by the Financial Times if he was overpaid, he laughed and replied, “You won’t have any C.E.O. say, ‘I’m overly compensated.”[13] Breaching yet again a valued societal norm in Japan, his “brazenness rankled employees and the public in Japan.”[14]

So when a whistle-blower in Nissan said in October, 2018, that the CEO had been instructing Greg Kelly, a top aide and a board member (which represents a conflict of interest) to split Ghosn’s compensation between that which would be paid in the current year and reported in the annual report and securities filings, and that which would be paid only after the CEO will have left the company. Nissan went to prosecutors to allege that Ghosn had been underreporting his income since 2009. The company added that Ghosn and Kelly had developed future plans to pay Ghosn a further $124 million in cash and other financial instruments—some as compensation for an advisory position after the CEO’s retirement. The issue was that of committed compensation (yet not to be paid in the year committed) not being reported in securities filings (as well as the annual report). Stakeholders, and the Japanese public at large, could be harmed by not knowing the full amount of the company’s long-term liabilities.

While such harm (as well as the economic inequality even in the CEO’s current compensation) could be useful in an ethical analysis, but in this business-and-society analysis, the issue comes down to whether Ghosn’s deviations from valued societal beliefs and norms added to the severity of the government’s response in going after the gilded CEO—a foreigner nonetheless and thus at bottom to be distrusted in Japan. The issue is not whether Japan’s norms are ethical; rather, in this analysis they are taken as given so a qualitative measure of Ghosn’s deviations can be made and related even causally to the outcome (i.e., the arrests without bail, as well as the extent of the blow to the man’s—and perhaps even his company’s reputational capital). It is indeed easy to conflate such an analysis proper in the field of business & society with that of business ethics, for we tend to apply should or should not to valued norms whether in business or society. Whereas existing norms (and cultural beliefs) are descriptive, ethical principles are normative. The two fields do share a border, however, as in asking whether a cleft between the norms (and related policies and conduct) of a business and of societies in which it conducts business is ethical or not. In going from the descriptive to the normative, ethical analysis is necessary, so I would classify this matter to lie within business ethics, drawing on the descriptive in business & society.

To be sure, legal analysis of the acts of Ghosn and Kelly would carry us a considerable distance in getting to bottom of this case study. Just when the Japanese police were going to release the CEO on bail, they rearrested him “on new charges that he shifted personal losses during the 2008 financial crisis temporarily onto Nissan’s books.”[15] The matter of an associated deviation from societal values may not be a material factor due to the crime itself, which rendered it offensive in virtually any civilized society at least at the time. This crime arguably goes beyond the failure to include committed but not paid out compensation in financial reports to the government (and in company annual reports). The impact of business & society as distinct from legal analysis was likely more significant in the failure to disclose committed compensation because Ghosn had at least gone through the company (admittedly via Kelly) in structuring his compensation. It was not as if he would get the total committed compensation in the years committed. In other words, going against valued societal norms can render a person or company particularly vulnerable, other things equal.

Business managers—even CEOs—may not recognize their own vulnerability and that of the company at which they work. For one thing, we humans tend to discount low-probability, high-cost events, especially if they are not expected in the short term. The immediacy of quarterly earnings (whether for their impact on managerial compensation or investors in the stock market) is typically of much greater concern. The design of Capitalist economy systems that emphasizes the short term is likely due in part to the fact that human beings (homo sapiens) have been “hardwired” through almost 2 million years to be oriented to immediate cravings such as hunger and sex (i.e., survival) and threats (i.e., to avoid getting eaten). Almost all of the natural selection, which gradually changes a species, took place during the hunter-gatherer stage of humanity; agriculture has only existed for the last 9,000 years. In other words, immediacy being foremost is a result not just of economic, political, and social systems giving it emphasis, but also of the context (i.e., hunter-gatherer) of human natural selection. As the context today is greatly different, perhaps systems should be designed that emphasize the long-term so as to counter how our species has evolved.

On the impacts of human evolution (and other sciences) on modern management, see William C. Frederick, Natural Corporate Management, available at Amazon.
For cases of unethical business, see Skip Worden, Cases of Unethical Business, available at Amazon.

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1. Amy Chozick and Motoko Rich, “The Rise and Fall of Carlos Ghosn,” The New York Times, December 30, 2018.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid.

6. Ibid.

7. Ibid.

8. Ibid.

9. Ibid.

10. Ibid.

11. Ibid.

12. Ibid.

13. Ibid.

14. Ibid.

15. Ibid.

Business and Religion: Financial Ethics Found Lacking in the Vatican's Institute of Religious Works

In probing corruption leads in the Vatican Bank, Italian financial police stumbled on to a plot back in July 2012 to smuggle €20 million into Italy.[1] The alleged culprits include a monsignor, a financial broker, and a former member of Italy’s secret service. For his part, the cleric is said to have had people pretend to have given him donations of €560,000 so he could furtively pay the financial broker for his role. Crime, Italian politics, and the Vatican Bank—hardly a novel discordant tune. That not just any bank, but that of a Church, could stray so far from what would reasonably be expected from a bank whose formal name is the Institute of Religious Works boggles the mind. Even so, the intersection of ethics, religion and business is fraught with complexity.  A religious verdict from ethical premises is possible nevertheless.

The full essay is at "Business Ethics in the Vatican."

Christmas: A U.S. National Holiday Privatized by Logical Fallacy and Passive Aggression

On December 18, 2018, U.S. President Donald Trump issued an executive order, the first section of which states, “All executive departments and agencies of the Federal Government shall be closed and their employees excused from duty on Monday, December 24, 2018, the day before Christmas Day.” Christmas itself had not been an official federal holiday until an Act of Congress was signed by President Ulysses S. Grant in June, 1870. That Act also declared New Year’s Day and the 4^th of July would be national holidays too, and yet by the 21^st century a significant number of Americans, and especially business managers, were committing a gaping category mistake by treating Christmas as not commensurate with the other two holidays as public holidays. By Christmas in 2018, the self-ingratiating “mistake” was still not transparent. Hence, this essay.

On the federal holiday of Christmas Eve Day before Christmas of 2018, I went grocery shopping at a Bashas’ supermarket. Waiting in the cashier line, an elderly woman at the front and I confronted the cashier, who refused to name the two-day holiday by name. What was behind this rather obvious fit of passive aggression? After the cashier felt the need to inform us that his holiday had been two weeks earlier, I countered that a vital difference exists between private and public holidays. My birthday is a personal holiday to me, and yours is to you, but neither of us would presume that our individual holidays are commensurate with a public holiday; we would not expect and even insist that other people recognize our respective birthdays as holidays. We would not say to strangers, “Happy holiday.” Yet in replying, “My holiday was two weeks ago,” the cashier was treating Christmas, a public, national holiday, as if it too were the private holiday of some people. Herein lies the category mistake! Factually, a public holiday is not a private holiday, so a person errs in putting them into the same category.
Let's pretend that I shop at a Bashas at the end of June, and the cashier facing me says, "Happy Fourth of July!" I reply, "I hope you enjoy your holiday; my holiday was a week ago." I could have been referring to the Summer Solstice, for instance. My holiday is not commensurate with a national holiday, so my use of your and my would be inaccurate, and, frankly, insulting to the public holiday and the people who celebrate it, for it makes no difference to a public holiday how many people celebrate it. The holiday is still a national holiday. The subterranean "game players" either don't understand this, or they reject it without a sound rationale. My response to Independence Day would doubtless be considered very strange; it would also be strange were the cashier to go out of his way to refuse, like a stubborn child, just to say the name of the public holiday (i.e., Independence Day, or "July 4th"). Even so, these dynamics, or games, around Christmastime are accepted as valid on the strange assumption that just because some people might be offended, it is an affront just to with people in public a Merry Christmas. Put another way, the societal dysfunction, which had even become institutionalized thanks to American retailers, has faced a considerable blind-spot (or state of denial). This would not have been the case for Independence Day and New Year's Day in spite of the fact that these two holidays had been made legal public holidays in the same Act of Congress in which Christmas Day was included! 
Lest I be pronounced an ardent rationalist like Kant, who argued that logical contradiction in a maxim being universalized means it is unethical, I supplement my displeasure at the category mistakes with Nietzsche's theory in order to drill deeper, or diagnose the underlying weakness, or sickness. To whit, I submit that resentment and even jealousy, which are manifestations of weakness, are behind the warping of logic. 
To Nietzsche, the weak resent and are jealous of the strong simply because the weak lack it while the strong have a surplus. So the self-confident strong, who are (unlike me) not bothered by the pestilence of the weak not only because it is not a threat, but also because strength resides in itself even as it's benefits overflow to the fishing boats below. “What are those parasites to me!,” the strong say, for the latter are awash in their own strength, which the parasites cannot capture except through “moral” Thou Shalt Nots. This is why Nietzsche was so critical of modern morality; it can be, and has, been used like a club to gain power over the beguiled strong. Ironically, the weak who seek to dominate easily resort to cruelty, whereas the strong have enough of the pleasure of power, especially in mastering a stubborn instinctual urge. 

Speaking to a Bashas’ manager briefly on my way out of the store, I said that the cashier had been rude to another customer and myself by stubbornly staying with the claim that this one national holiday, Christmas, is, in his view, merely a private holiday like his own, thus below New Year’s Day and Independence Day. 

Perhaps part of the explanation of the warping of logic is simply ignorance of the U.S. Constitution, whose first amendment stipulates that the federal government cannot act to establish a religion. Even favoring a religious holiday is out of bounds for the federal (and state) government. So the Act of Congress signed by President Grant must have a non-religious basis; hence, the public holiday of Christmas has survived constitutionally to join Thanksgiving (signed by Lincoln not much before Grant’s Act) and the two other holidays of Grant’s Act as an official public, or national, holiday. So liking Christmas only as akin to the private holidays or individuals or associations thereof cannot merely be a matter of religious jealousy (out of some erroneous sense of equivalence on religious grounds). In other words, the claim that my (personal or associational) religious holiday is equivalent to yours even though yours is associated with a public holiday of the same name is erroneous. Beyond the logic lies resentment and jealousy, which are misplaced.
So saying “Happy Holiday” only for Christmas—a slogan whose passive aggressive core is masked by considerateness in not wanting to offend—is not justified by even the seemingly salubrious mask because the practice has not, at least by 2019, extended to the other public holidays in the United States in spite of the fact that some American Indians may be offended by Thanksgiving greetings, anarchists and other political protesters may be offended by “Happy Fourth of July!” and Quakers and other non-violence groups may be offended by Veterans Day, which is a major public holiday in Arizona. In other words, why is offence so significant only in the case of Christmas?  Because it is an official national holiday in the U.S., and thus a public holiday, Americans are not even ethically bound to omit entire mention of it even on it’s eve just because offence may be taken. The same applies to the other national holidays. My question is the following: why did so many Americans, and virtually all retail businesses, capitulated to Thou shalt not! of the resentful, irrational weak who seek to dominate even the strong. Nietzsche contends that the strong have enough mental strength to overcome their most intractable instinctual urges by mastering rather than repressing them. The weak, in contrast, cannot resist acting on the urge to dominate (even to be cruel if necessary!) even the strong, as if weakness were strength too. Both the cashier and the manager, who, by the way, merely gave me a diplomatic look evinced weakness; without sufficient power internally to change and liking their Thou Shalt Nots, they would no doubt continue even after having their category mistakes revealed. 
Would the American public too simply go on as herd animals once transparency is make possible? Or would Americans, as strong individuals, not be beguiled by mistakened, passive-aggressive false-narratives such as “Christmas is just a religious holiday, and thus equivalent to private religious holy-days, so Christmas is not really a public holiday”?

See On the Arrogance of False Entitlement, available at Amazon. The book applies Friedrich Nietzsche's philosophy to business managers and business ethicists.

Superficial Hospitality in Hospitality Management: A Case of Weak Accountability?

Staying at a motel or in a hotel can involve being at close quarters with people coming with various backgrounds and cultures, and with different lifestyles. A group of teenagers may be in one room, while an elderly couple is trying to sleep next door. It seems to me that hospitality management should take a look at Crowne Plaza's instituting “snore monitors” to patrol corridors in the designated quiet zones in the hotels in London, Leeds and Manchester in the E.U. While the monitors were apparently particularly oriented to detecting particularly loud snorers, such an understanding of the problem may be superficial, for most noise issues, I submit, involve others things, such as people shouting, or loud television or music. In short, the sheer extent of inconsiderateness toward strangers in society generally is doubtlessly reflected in hotels and motels. What may be surprising is the extent to which employees and even managers working in the hotels or motels are inconsiderate themselves in refusing or otherwise failing to enforce their own noise rules. This weakness may have a wider extent within the business sector, at least in the U.S., wherein employees and their supervisors act as individuals (with momentary power over customers) rather than as agents, for significantly less power is involved in the latter than the former role/mentality.
I applaud the management of Crowne Plaza for having instituted floor monitors, but I suspect that limiting them to snorers and only on quiet floors did not go far enough. It would have more optimal had the company had its monitors walk through the non-quiet areas at night so as to be on guard for excessive noise that could be expected to keep other people up. Hotels (and especially motels) should not simply assume that assigning or reassigning customers to particular “zones” is the way of handling the situation of noise. The wider problem is that hotel (and especially motel) employees and even managers too often refuse to enforce their own noise restrictions. Such weakness, whether out of fear of sheer laziness, has come to characterize too many franchisees especially, except on the high end. 

Sometimes weakness can be in the building itself. The building types built by Extended Stay and Studio Plus, for example, have virtually no insulation between floors so customers might get to hear stomping late at night and even into the morning. I once tried to move rooms because of an "all nighter" in the room above mine, but the front desk employee decided to ignore my reserved room change, telling me it had been cancelled and the other room had been given to another customer, or “guest.” Another employee remarked in a matter-of-fact tone, "People can walk in their rooms." Trying to correct for that situation involved even more headaches in dealing with the corporate "customer service" people, who also made promises and went back on them with impunity. Meanwhile, I discovered the local “area” manager had a penchant for eves-dropping on customers, or “guests.”

The true colors of the management mentality at the company really came out after I stopped a huge water-leak from the room above mine from flooding my room and the room below mine (a toilet overflow, which the customer failed to report). Essentially, I began and headed the multiple-pan and towel operation, with the able (and friendly) assistance of the young woman working at the front desk. In spite of the fact that I saved the company thousands of dollars, however, the management was unwilling to compensate me in any way, such as by offering me a discount on my bill (or even promising the same rate should I have extended, which I did not, or potentially stay again at an Extended Stay or Studio Plus—which I would not recommend to anyone). Even the front desk person who had assisted me was astonished that her company’s management had been so niggardly in its response to my generous efforts, which, by the way, had been spontaneous and unconditional even given the noise issue). 

The lesson is perhaps the following: When a sordid (i.e., unreliable) management ensconced in a company as its very culture is combined with a cheap building model, the question is perhaps how such a company could survive bankruptcy and continue operating. This is not to say that the company operating Studio Plus and Extended Stay is the only culprit from which we can assess how far down the hospitality industry goes.

I also had to contend with noise while staying once at a Red Roof Inn. I complained about late night noise (a drunken party) in the room next door only to have the front desk person give up because he "got a busy signal" when he tried to call the room. Couldn't he have knocked on the room's door or at least have called security? One would think that the report of a party going on at 1am on a weeknight would trigger something more than giving up because of a busy signal. Part of the problem, I later learned from a front desk employee, was that the management had instructed the employees to accept virtually anyone of age who wanted a room. “We can’t anticipate what someone might do from how they act when they arrive at the front desk,” the employees were apparently told. The manager of the particular motel was also retaining rather than refunding the accumulated room tax owed by law to customers, or “guests,” staying more than thirty days. Ironically, both the manager and her desk employees were self-described Christians, and had no qualms in expressing their views of sinful “orientations.” Out of the blue, one front desk employee told me that another employee only seems gay, but is actually a “wholesome Bible brotha.” I was still back on how tax fraud jives with being Christian. What stood out for me most during my stay at that motel was that none of the employees seemed capable of recognizing that they could be mistaken, even as they were incompetent (and unethical) in many ways. This fault applies to the management of Extended Stay as well.

Convenient excuses, abuse of discretion, and lack of follow-through may be ubiquitous at badly-managed motels and hotels. It astonishes me that one industry can have such a breadth of quality within it. I'm glad that a hotel chain is instituting hall monitors. Doubtless not every motel and hotel will do so.

It seems to me that hospitality management may ironically be at the bottom end of management practice. Perhaps the existence of bad practice in at least part of the industry has given the entire industry a sense of (or tacit invitation to) shallowness, for even at the best hotels the hospitality is only skin-deep, being conditioned on money and thus utterly contingent and shallow. Indeed, using the word “guest” and conditioning it on paying money not only misuses the term itself, but also renders “hospitality” rather superficial and may even belie its very meaning. This can manifest even as "higher end" hotels, whose employees can be very rude indeed to real guests.

I remember, for example, being invited to the weekday late-afternoon reception at a Staybridge hotel by a "guest" staying at the hotel on business. He told me it was not uncommon for "guests" there on business to invite a friend or coworker from time to time--a practice that the hotel management went along with to please its business "guests." However, because I was not a "real" guest, but, rather, a guest more in keeping with the meaning of the term, the employees involved in the reception (and at the front desk) made it rather obvious to me that they were ignoring me while being nice to my host--their "guest." It occurred to me that the employees had no idea how to treat a real guest--one not conditioned on having paid money for the "privilege." The fraud of the "hospitality" at Staybridge was thus made transparent to me as well as to their "guest." In short, hotels use "guests" too conditionally, as well as in a way contrary to the term's meaning, for no real host would charge a guest. The hospitality industry seems to have decided to use a term at odds with that term's meaning, so as to reap the benefits nonetheless. Such hypocracy, which people can readily sense, is ultimately as counter-productive as it is self-serving, and yet hotel managers are utterly unrepentant in their usurption--as if they have done nothing of the sort.

Considering the hospitality industry's "mindset," or default, it is perhaps not completely unexpected that even some of the companies reputed to be among the best are actually rather superficial with respect to hospitality, while some motels, such as Extended Stay and Red Roof Inn, continue to operate without any hint of salubriousness and yet somehow manage to remain in the industry. Perhaps the industry itself is problematic, at least relative to the standards of management in other industries. The hospitality industry itself may simply be rather inhospitable, or low, as in base, under the subterfuge of hospitality itself.

In such a context, unethical conduct can spread unchecked. For example, while staying at a Best Western hotel, I negotiated with the general manager on a rate on which I would extend my stay. He gave me a counter-offer and a day or two to decide. On the second day, I accepted his rate in deciding to extend, but his assistant told me, "The manager changed his mind. He wants quite a bit more."  I called Best Western's "customer service," but to no avail as there was no accountability. I did not extend my stay. I subsequently heard that the manager was part of a class action lawsuit alleging that he improperly conducted himself with waitresses in the hotel's bar. Hospitality management, it would seem, may be an inferior sort of management under the facade of hospitality.

Source:

Msnbc.com, “Light Sleepers Rejoice: Hotel Chain Drafts ‘Snore Patrols’ as Shuteye Sentries,” July 21, 2011. 

On Nietzsche's moral philosophy applied to business managers and employees, see On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, which is available at Amazon.

Facebook Secretly Shared Users' Friend's Data with Business Partners: A Case of Betrayal

According to The New York Times at the end of 2018, internal documents generated at Facebook in 2017 showed that the company “gave Microsoft, Amazon, Spotify, and others far greater access to people’s data” even after having raised a privacy wall than Facebook had disclosed.[1] That is, Facebook effectively exempted some of its business partners from the company’s privacy rules without notifying users. In many quarters, this would be called lying, which in turn would suggest a sordid management at Facebook. The more subtle astonishment, I submit, is that 2.2 billion users had stayed with Facebook after the hidden use of personal data for political purposes. The partnership between Facebook and Cambridge Analytica had hardly been made in heaven. Why such enduring trust in spite of external data being clear grounds for losing trust and giving up using Facebook? How many betrayals would be necessary? In literal marriages, trust can be lost “like that!” Similarly, when a child even unconsciously loses trust for her parents, the solid basis of trust in a normal parent-child relationship is lost most likely forever. Why has Facebook—a distant business punctuated by lies—get a pass?

The newspaper’s valuable discovery offered the fullest picture yet of the wide extent, or scale, to which personal data was traded through at least 2018 “by some of the most powerful companies in Silicon Valley and beyond.”[2] In fact, The New York Times points in its investigative reporting to the “extraordinary power over the personal information of its 2.2 billion users—control it has wielded with little transparency or outside oversight.”[3] The lack of transparency should be a giant red flag concerning the unethical climate at Facebook’s “upper” management levels. Betrayal drips off the screen in Mark Zuckerberg’s decision to allow “Microsoft’s Bing search engine to see the names of virtually all Facebook users’ friends without consent” and give “Netflix and Spotify the ability to read Facebook users’ private messages.”[4] Facebook also “permitted Amazon to obtain users’ names and contact information through their friends, and [Facebook] let Yahoo view streams of friends’ posts . . . despite public statements that [Facebook] had stopped that kind of sharing years earlier.”[5] Specifically, in the wake of revelations (not from Facebook!) that the company had allowed a political consulting firm, Cambridge Analytica, to use user data to help Donald Trump’s 2016 presidential campaign, Zuckerberg publicly claimed that his company was instituting stricter privacy protections for users. Therein lies a lie, for he said nothing about permitting gaping exemptions.  

Even so, how many of Facebook’s users left because of the Cambridge Analytica scandal?  Astonishing, or maybe not!, because over two billion users remained, which implies that plenty of users behaved as herd animals, going on as usual in spite of having reason to delete their accounts. Many of the users must have sensed, even if unconsciously, that their trust in Facebook no longer had a viable foundation (i.e., a basis in fact). With the subsequent revelations of the New York Times detailed here, would what was by that point a squalid track record register in the minds of the 2.2 billion users? If not, a gap would still exist between users including personal information and pictures and trust that Facebook would not betray those users yet again. In a perfect market, viable competitors to Facebook would exist and consumers would--especially given the low barriers to entry--readily switch over. Perhaps Facebook's practice of buying up potential competitors early (and for a lot of money) had rendered the market oligarchical. Yet even this would not explain why the status quo had been favoring Facebook rather than the naive, oblivious, or neutral users. I submit that this case represents a market failure from the standpoint of competitive, free-market Capitalism. 
Lest it be assumed that the U.S. Government would increase oversight on Facebook (and other social-media companies), would any action really come from government (including regulatory oversight) even as wealthy mega-companies like Facebook (and its “partners”!) could doubtlessly make very substantial political campaign contributions? Given this conflict of interest, at least in the U.S., relying on the users to protect themselves seems naive. On this problem, I submit that the explanation lies in psychology. Are human beings--or most humans--too prone to act on an instinctual urge to act as herd animals rather than as trend-setting individuals? Nietzsche thought so, and he argues in his books that such people are herdish because they are weak. Can 2.2 billion people be weak, or is the problem external, such as a dearth of information or simply a calculation that what comes free in a Facebook account is worth more than the company's betrayals? 

See also the booklet, Taking the Face Off Facebook, available at Amazon. On Nietzsche's moral philosophy applied to business ethicists and managers alike, see On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available at Amazon.

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1. Gabriel Dance, Michael LaForgia, and Nicholas Confessore, “As Facebook Raised a Privacy Wall, It Carved an Opening for Tech Giants,” The New York Times, December 18, 2018.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid., italics added.