Facebook Penalty Sends Message to Big Tech $5 billion fine alerts industry to greater liabilities for privacy missteps as some policy makers call for tougher oversight Under Facebooks settlement with the FTC, Mark Zuckerberg will be required to personally certify privacy compliance. WASHINGTONThe record $5 billion fine and oversight conditions federal regulators imposed on Facebook Inc. for privacy violations put Big Tech on notice that any company failing to protect consumer information may now face greater legal risks than previously. The penalty against Facebook, approved on a 3-2 vote by the Federal Trade Commission, expands potential liability for the social-media giants chief executive, Mark Zuckerberg, and restructures the companys board of directors to boost its oversight of privacy practices. While critics dismissed the financial penalty as a wrist-slap for Facebookwhich reported second-quarter revenue of $16.9 billion Wednesdaythe structural changes imposed by the commission are now likely to be seen as a measuring stick for other companies. I expect a lot of board members and CEOs are chatting and texting today about what exactly they need to do to ensure they are within spitting distance of these new best practices, said Trevor Hughes, president of the International Association of Privacy Professionals. Mr. Zuckerberg said he hopes the FTC-imposed mandates on Facebook would set a completely new standard for our industry. Facebook agreed to the settlement after a year-long FTC investigation found the company had repeatedly used deceptive disclosures and account settings to lure users into sharing personal information, undermining their actual privacy preferences. The companys actions misled tens of millions of people about the use of their phone numbers, photos of their faces and morewhile allowing app developers that were paying Facebook for ads to gain special access to user information, the FTC said. The Facebook penalties are a message to [other companies] that if you get yourself in Facebooks position, this is what youll get, FTC Chairman Joe Simons told reporters following the announcement. a Big Tech critic, said on Twitter that the settlement does nothing to change Facebooks creepy surveillance of its own users & the misuse of user data. Facebook paid the FTC $5B for a letter that says You never again have to create mechanisms that could facilitate competition, former Facebook security chief Alex Stamos said on Twitter. If anything, however, scrutiny of Big Tech is increasing in Washington. The Justice Departmentwhich shares antitrust enforcement authority with the FTCsaid this week it is opening a broad new review examining whether dominant technology firms are unlawfully stifling competition. That is adding to risks for Facebook as well as Google parent Alphabet Inc., Amazon.com Inc. and Apple Inc. In its second-quarter earnings report later Wednesday, Facebook warned that the FTC had launched an antitrust investigation into the company in June. Facebook is also facing privacy probes in other countries, and confirmed another mistake this week that allowed children to interact with unapproved users on its Messenger Kids app. Under the settlement, Mr. Zuckerberg will be required to certify that the company is complying with new privacy strictures, and face civil and criminal penalties for false statements. An independent privacy auditor will be granted access inside Facebook, and the company said it would assign more than 1,000 people to work on the matter. Facebooks board will create a new committee to more closely monitor the companys privacy practices, and independent directors will have more say over new members. At the same time, Mr. Zuckerberg controls most of the companys voting shares. Marc Rotenberg, president of the Electronic Privacy Information Center advocacy group, said the internal changes at Facebook wont give the public a way to check their effectiveness. This is internal reporting, not subject to public review, he said. Users experience on Facebook may not change much, but the settlement should boost consumers confidence that the company is keeping its privacy promises, the FTC and Facebook said. It will be up to other companies whether to follow Facebooks lead. While FTC officials wanted to use the case to set an example, they also made clear they saw Facebooks actions as distinctly unacceptable. The Securities and Exchange Commission announced separately on Wednesday a settlement with Facebookincluding a $100 million fineover claims it misled investors about the misuse of customer data. The federal probes began more than a year ago after disclosures that data on tens of millions of Facebook users had been improperly transferred to a political data analytics firm, Cambridge Analytica, that did work for Donald Trumps 2016 presidential campaign. The FTC and SEC both filed complaints in federal court detailing the results of their investigations, which Facebook agreed to settle without admitting or denying. Cambridge Analyticas data on Facebook users originated with a University of Cambridge professors app, this is your digital life, that quizzed users on their personalities and harvested other information from them and their friends. The firm and professor used the information to target U.S. voters, the FTC said in a separate action announcing orders restricting future business activities by the professor and Cambridge Analyticas former CEO. The FTC said that incident was part of a pattern: Facebook let users think they had turned off certain types of data sharing, when in fact the data was shared anywayin many cases because their friends had allowed it. Even after Facebook said in 2015 it had closed that loophole, it only did so partially, still granting access to whitelisted developers, the FTC said. Facebook separately told users it wanted their phone numbers for security purposes, without making it clear that information would be used for advertising. It also told users they would have to opt into the use of facial-recognition technology on their photos, when in fact approximately 60 million users were subjected to it by default, the FTC said. The problems werent a secret inside Facebook, regulators said. As early as September 2015, some employees raised alarms about Cambridge Analyticas practices and asked for an internal investigation into whether it was scraping user data, the SEC said. Over time, more than 30 employees became aware of the data firms actions, yet Facebook made only generic disclosures to investors in 2016 and 2017 about theoretical data-privacy risks, and told journalists it hadnt uncovered any indications of wrongdoing, the SEC said.

QUESTION: How would you describe the organizational culture at Facebook, AND what organizational challenges do they face? Respond in at least 200 words.