12 months of 2018: Facebook’s annus horribilus

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12 months of 2018: Facebook’s annus horribilus


JANUARY

“Effective January 1, 2018 we will no longer be able to provide the benefit of paid breaks.”

Happy post-holidays. The new year greeted workers at multiple Tim Hortons franchises with the grim realization that the minimum wage increase to $14 an hour introduced by the Kathleen Wynne government would be offset by the cancellation of paid, er, Timmies breaks. Protestors came up with catchy lyrics (“Hold the sugar, hold the cream, Tim Hortons, don’t be mean”), the premier called out a franchisee for being a bully, and consumers lamented that the coffee company, owned by a Brazilian conglomerate, sure didn’t feel very Canadian anymore.

“If we’re successful this year then we’ll end 2018 on a much better trajectory.”

That was a hopeful Mark Zuckerberg in a Jan. 4 Facebook post. The previous year had been unsettling, to say the least. He stood down from his assertion that it was a “pretty crazy idea” to think that fake news on Facebook influenced the U.S. election and acknowledged the propaganda-fuelled, Facebook-abetted hatred against the Rohingya in Myanmar. “The world feels anxious and divided and Facebook has a lot of work to do — whether it’s protecting our community from abuse and hate, defending against interference by nation states, or making sure that time spent on Facebook is time well spent,” the Facebook CEO wrote. “Zuck” loftily announced that he was looking forward to bringing together groups of experts for brainstorming sessions on history, philosophy and physics, once again seeming astrally removed from the need to bring Facebook down to earth.

Queen Victoria was still on the throne when Robert Simpson launched his dry goods emporium, pushing through bankruptcy and a failed partnership before gaining hold in the Toronto market in direct competition with the T. Eaton Co. A 1953 alliance with Sears Roebuck in the U.S. introduced Canadian shoppers to Simpsons-Sears Ltd. and, latterly, Sears Canada, after Simpsons was spun off to the Hudson’s Bay Co. For all the strategic deal making, it was 12,000 Sears employees who lost out as Sears shut the last of its Canadian stores in January.

Loblaw placed restrictions on the $25 gift card offered after the bread price-fixing scheme.The company announced the measure and several other restrictions as it opened registration for the cards after its role in a bread price-fixing scheme.
Loblaw placed restrictions on the $25 gift card offered after the bread price-fixing scheme.The company announced the measure and several other restrictions as it opened registration for the cards after its role in a bread price-fixing scheme.  (Rene Johnston/Toronto Star)

FEBRUARY

“Keep checking the mailroom.”

That was the sharp advice from Sobeys CEO Michael Medline in an interview with The Canadian Press. The still relatively new chief executive was not referring to bountiful gift giving, but rather issuing a veiled legal threat in the developing “Bread Gate” drama. A reprise: George Weston Ltd. and Loblaw Cos. Ltd. were granted immunity by the Competition Bureau for their role in seeking “to fix, maintain, increase or control both the wholesale and retail price for the sale or supply of fresh commercial bread.” In unsealed documents from the Competition Bureau, the allegations swept Sobeys, Metro and other retailers into the collusion net. “I have been in way too many meetings with lawyers,” Medline said, as he advised Weston/Loblaw to keep an eye out for any incoming legal notices.

Setting a new bar for opaque corporate communications, Lululemon Athletica bade a sudden goodbye to CEO Laurent Potdevin in early February, a departure enhanced by a $3.35-million (U.S.) cash payment, and an additional $1.65 million to be paid in instalments. Was this a case of #MeToo? Who knew? Shareholder David Shabbouei filed suit against the company and its directors in late November in Delaware’s Chancery Court, alleging a toxic “boys’ club” culture that resulted in bullying, gender discrimination and sexual favouritism. Shabbouei’s “waste of corporate assets” lawsuit, which additionally seeks corporate governance reform, could be an interesting test case for corporations eager to richly disappear a CEO at the expense of shareholders. Lululemon declined to comment.

“I’m dumping my @facebook stock and deleting my page because @facebook profited from Russian interference in our elections and they’re still not doing enough to stop it. I encourage all other investors who care about our future to do the same. #unfriendfacebook.”

Comedian Jim Carrey’s tweet in early February presaged the 13-person indictment by special counsel Robert Mueller over meddling in the U.S. election. Unravelling the Russian Internet Research Agency’s “information warfare against the United States of America” included “thematic” group pages on Facebook (religion, immigration) that drew hundreds of thousands of followers and the purchase of advertisements on Facebook promoting “Down with Hillary” rallies. Not so funny, in other words.

A shuttered Toys "R" Us store in Brooklyn, N.Y. The two private-equity firms that owned the retail chain are each pitching in $10 million to pay severance to ex-employees.
A shuttered Toys “R” Us store in Brooklyn, N.Y. The two private-equity firms that owned the retail chain are each pitching in $10 million to pay severance to ex-employees.  (Spencer Platt/Getty Images)

MARCH

“We exploited Facebook to harvest millions of people’s profiles. And built models to exploit what we knew about them and target their inner demons.”

Not a month goes by without some fresh drama at Facebook, this one being the culmination of a yearlong investigation by the Observer into Cambridge Analytica and its work on both Brexit and the Trump campaign. The mid-March revelations by whistleblower Christopher Wylie explosively detailed how the personal information of more than 50 million Facebook users had been taken without their knowledge, throwing a grenade into prior Facebook testimony before a U.K. parliamentary inquiry in which the company insisted that user data had not been compromised. The opposite was true. After the story broke, as hours of Zuckerberg silence passed into days, #whereszuck started trending. After four days, the CEO at last issued a tone-deaf promise to create tools allowing users to revoke data permissions.

“I don’t want to grow up, because if I did, I couldn’t be a Toys ‘R’ Us kid.”

Just six months after Toys “R” Us unveiled its strategic plan for reinvention, including interactive spaces and live product demonstrations, the New Jersey-based toy giant announced it would be winding down its U.S. operations, including 735 stores. While the demise of Geoffrey the giraffe’s empire was blamed in part on the so-called “retail apocalypse” that had already claimed Sears and others, the more than $5 billion (U.S.) in debt the toy chain had assumed as the result of a leveraged buyout in 2005 was too great a burden to bear. One hopeful note: the Wayne, N.J.-based company would pursue a going concern sale for international operations, including Canada. And another: in April, Fairfax Financial Holdings Ltd. would make a successful $300-million bid for Toys “R” Us Canada.

Mayo Schmidt, president and chief executive officer of Hydro One Ltd., speaks during an interview on Nov. 16, 2017.
Mayo Schmidt, president and chief executive officer of Hydro One Ltd., speaks during an interview on Nov. 16, 2017.  (Cole Burston/Bloomberg)

APRIL

“Well I was going to terminate NAFTA as of two or three days from now.”

The ever-mercurial U.S. president continued to lob thought bombs into the seemingly never-ending negotiations on the three-way trade deal, with deadlines set possibly for the Summit of the Americas in mid-April or perhaps the end of April or maybe by the time of the Mexican election in July or how about prior to the U.S. mid-terms in November. Or whenever. At the end of April, Trump offered that, come to think of it, he liked the president of Mexico and the Canadian prime minister “very much” and so would withdraw his threatened termination. “Let’s make this a fair deal,” he said, sounding like a contemporary Monty Hall.

“So this is an arm’s race, right? I mean, they’re going to keep on getting better at this, and we need to invest in keeping on getting better at this, too.”

Appearing before the U.S. Senate’s Commerce and Judiciary Committee, Mark Zuckerberg addressed the challenge of blocking foreign actors from interfering in U.S. elections. “There are people in Russia whose job it is to try to exploit our systems,” Zuckerberg said, promising better AI tools for identifying fake accounts. Earlier that month, Facebook chief technology officer Mark Schroepfer revealed that the number of Facebook users whose information had been accessed without their knowledge in the Cambridge Analytica scandal was off by, oh, 40 million or so. In a conference call with journalists the following day, Zuckerberg owned up to a failure to focus on preventing abuse: “That goes for fake news, foreign interference in elections, hate speech, in addition to developers and data privacy. We didn’t take a broad enough view of what our responsibility is, and that was a huge mistake. It was my mistake.” Did he still think he was the best person to run Facebook? Answer: “Yes.”

“The Province does not have a role with the Hydro One board in the processes of appointment, removal, replacement, and compensation relating to executive officers or over related succession planning.”

Appearing before the Washington Utilities and Transportation Commission, Hydro One CEO Mayo Schmidt attempted to assuage the regulator’s concerns about potential political interference from Hydro One’s largest shareholder. In its proposed $5.3-billion (U.S.) takeover of Seattle-based utility Avista Corp., Hydro One under Schmidt was making its first big play in growing its distribution and transmission assets. Asked whether concerns raised about Hydro One’s potential vulnerability to political change were valid, Schmidt offered a confident answer: “No.”

“You can take this to the bank. The CEO is gone and the board is gone.”

Guess who.

Galen G. Weston CEO, chairman and president of Loblaw Companies Limited speaks during the company's annual general meeting in Toronto on May 3.
Galen G. Weston CEO, chairman and president of Loblaw Companies Limited speaks during the company’s annual general meeting in Toronto on May 3.  (Nathan Denette/THE CANADIAN PRESS)

MAY

“If privacy is a human right … then we contend that Facebook’s poor stewardship of customer data is tantamount to a human rights violation.”

Having faced the wrath of political leaders on both sides of the Atlantic, Facebook faced shareholders at the end of May at its annual meeting. Christine Jantz, chief investment officer of NorthStar Asset Management, did not mince words. Decrying the social media company’s failure to protect privacy, she attacked the Zuckerberg-controlled corporate structure, labelling it “an egregious example of when a board is formed by a CEO to meet his needs.” Outside the meeting, the newly formed Freedom From Facebook coalition, which seeks to have Facebook broken up, floated a banner across the sky reading “You Broke Democracy.” The entire Facebook board was re-elected. Zuckerberg remains chairman and CEO. No governance changes were made.

“Is a company a sandbox for the CEO, or is the CEO an employee? If he’s an employee, he needs a boss, and that boss is the board. The chairman runs the board. How can the CEO be his own boss?”

Not for the first time, Andrew Grove’s advocacy for the separation of the CEO’s role from that of chairman made its way into a shareholder resolution, this one promoted by the advocacy group SumOfUs on behalf of the B.C. Government and Service Employees’ Union General Fund. The target: Loblaw Cos., where Galen Weston the Younger commands both duties. In its supporting statement, SumOfUs cited the bread price-fixing scheme as reason for more robust oversight. The resolution was soundly defeated, in favour, said the chairman/CEO, of the “continuity of family leadership.”

“I can assure you we would not have done this deal unless we thought there were hellacious opportunities for the upside over the next several years.”

That was Texas oilman Richard Kinder trumpeting his 2005 acquisition of Terasen Inc., or as we know it today, the Trans Mountain pipeline. Kinder Morgan promised “hundreds” of new jobs in British Columbia and Alberta tied to infrastructure expansion. Fast forward a dozen years to see Finance Minister Bill Morneau, flanked by then-natural resources minister Jim Carr, breaking the news that an agreement had been reached to purchase the pipeline and the expansion infrastructure from Kinder Morgan. For $4.5 billion, the citizens of Canada suddenly owned a pipeline.

In June 2018, McDonald's saidit will switch to paper straws at all its locations in the United Kingdom and Ireland, and test an alternative to plastic ones in some of its U.S. restaurants.
In June 2018, McDonald’s saidit will switch to paper straws at all its locations in the United Kingdom and Ireland, and test an alternative to plastic ones in some of its U.S. restaurants.  (Wilfredo Lee/Associated Press)

JUNE

“Very dishonest & weak. Our tariffs are in response to his of 270% on dairy.”

President Donald Trump tweeted with speed in response to Prime Minister Justin Trudeau’s promise of retaliatory tariffs against those imposed by the U.S. on Canadian steel and aluminum. The unprecedented post-G7 spat marshaled Trump reinforcements, including economic adviser Larry Kudlow. “He really kind of stabbed us in the back,” Kudlow told CNN, only to be, well, trumped by trade adviser Peter Navarro. “There’s a special place in hell for any foreign leader that engages in bad faith diplomacy with President Donald J. Trump and then tries to stab him in the back on the way out the door,” Navarro told Fox News.

“Small, light, and hard to avoid, it’s no wonder plastic straws dumped into the sea get stuck in sea turtles’ nostrils, lodged in the stomachs of baby seabirds, and end up in our food chain after being eaten by fish.”

The aforementioned activist group SumOfUs demonstrated the power of the people when close to half a million consumers responded to their petition calling for McDonald’s in the U.K. and Ireland to end the use of plastic straws. After a two-month paper straw trial the fast-food chain announced in June that it would commit fully to the paper alternative in its 1,361 restaurants in those markets, with the rollout starting in September and completion targeted for 2019.

“We had a choice. We decided that our goal was transparency. We’re just erring on the side of being more transparent.”

Beleaguered Facebook chief operating officer Sheryl Sandberg was front and centre for the company’s “Info and Ads” announcement. The new tab allows anyone on Facebook to see the active ads that page is running. The goal: increased accountability and a ferreting out of “bad actors.”

New Ontario Premier Doug Ford wasted little time firing "Six-Million-Dollar Man" Mayo Schmidt at Hydro One, along with the entire slate of directors in July.
New Ontario Premier Doug Ford wasted little time firing “Six-Million-Dollar Man” Mayo Schmidt at Hydro One, along with the entire slate of directors in July.  (Steve Russell/Toronto Star)

JULY

“I’m happy to say we kept our promise. The CEO and the board of Hydro One, they’re done, they’re gone.”

Doug Ford was just days into his new job as premier when he ushered “Six-Million-Dollar Man” Mayo Schmidt out the door at Hydro One along with the entire slate of directors. What timing. The Washington Utilities and Transportation Commission was just days from releasing its decision on Hydro One’s takeover of Seattle-based Avista Corp. “It is unclear how these developments may bear on our ongoing consideration of the proposed transaction,” the commission announced, delaying its decision until Dec. 14 and opening the door to a new round of testimony.

“I find that deeply offensive. But at the end of the day, I don’t believe that our platform should take that down because I think there are things that different people get wrong. I don’t think that they’re intentionally getting it wrong, but I think …”

It was a cumbersome answer, and one that he has since amended, but in an interview with Kara Swisher in Recode, Mark Zuckerberg had a hard time explaining when abhorrent content should be pulled from Facebook. “There was a set of people who denied the Holocaust happened,” Zuckerberg said, before adding what sounded like a defence of giving Holocaust deniers the freedom of public comment on his platform.

“An important issue we face is how the economy reacts to higher interest rates given the high debt loads being carried by Canadian households.”

In announcing a 25-basis-point increase in its benchmark rate to 1.5 per cent, Bank of Canada Governor Stephen Poloz maintained his trademark poker faced demeanour. The Canadian economy, having been fuelled by housing and consumption, looked to be headed toward serial rate hikes, a view endorsed by those who listened very carefully to Poloz’s observation that five-year mortgage holders due for renewal in 2019 and 2020 would experience only a very modest increase in debt service.

U.S. President Donald Trump speaks during a signing ceremony for criminal justice reform legislation in the Oval Office on Dec. 21.
U.S. President Donald Trump speaks during a signing ceremony for criminal justice reform legislation in the Oval Office on Dec. 21.  (Evan Vucci/Associated Press)

AUGUST

“Hi @Facebook, you removed our post promoting the need for Holocaust Education for apparently violating community standards. You haven’t given us a reason, yet allow Holocaust Denial pages to still exist. Seems a little hypocritical?”

The heart-crushing image of starving children posted by the Anne Frank Center for Mutual Respect was swiftly removed by Facebook moderators. Where the educated world sees heart-crushing history, Facebook saw only nudity. Chastened, Facebook restored the image.

“Every time we have a problem with a point, I just put up a picture of a Chevrolet Impala.”

President Donald Trump’s true colours shone through in off-the-record comments made to Bloomberg and reported by the Star’s Daniel Dale. The auto trade threat, made on the eve of yet another hoped-for NAFTA deadline, struck right to the heart of Trump’s character, not to mention the General Motors assembly plant in Oshawa.

Tesla’s Elon Musk was filmed in an interview appearing to smoke marijuana.
Tesla’s Elon Musk was filmed in an interview appearing to smoke marijuana.  (The Joe Rogan Experience)

SEPTEMBER

“I mean, it’s legal, right?”

Right, but … Tesla founder Elon Musk stayed true to his idiosyncratic nature when he smoked up on comedian Joe Rogan’s show, appearing very “meh” about the whole experience. Was this appropriate public comportment for a CEO? Days later, Musk would agree to a $20-million (U.S.) fine from the Securities and Exchange Commission for inaccurately tweeting that he had lined up financing to take Tesla private. As part of the settlement, he would step aside as chairman of the company. Lesson learned? Thankfully, no. Days after the SEC deal, Musk renamed the SEC the Shortseller Enrichment Commission. In a tweet, of course.

“I’m afraid that Facebook has now turned into a beast, and not what it was originally intended.”

Yanghee Lee, the UN’s special rapporteur on Myanmar, was concise in her assessment of the role played by Facebook in the genocide of the Rohingya. In a comprehensive story for the New Yorker entitled “Is Facebook Breaking Democracy?” writer Evan Osnos shone a light on Mark Zuckerberg’s attempts to tamp down the incitement to violence by hiring more Burmese speakers to vet content. The result? “The situation is getting worse and worse here,” a Myanmar-based executive told Osnos.

Cannabis seedlings at the new Aurora Cannabis facility in Montreal, Que.
Cannabis seedlings at the new Aurora Cannabis facility in Montreal, Que.  (Ryan Remiorz/THE CANADIAN PRESS)

OCTOBER

“We’re trying. Right now, I’m stuck here. I lost my passport, so we’re going through the dance of a celebrity trying to get a passport fast.”

Comedian Tommy Chong was supposed to fly from California to Kelowna, B.C., to help celebrate the legalization of recreational marijuana — because who else, right? After explaining the dilemma of the misplaced passport to the Star, Chong did, eventually, make it, if a couple days late — but chill, right? Economists, meanwhile, crunched the numbers on the potential impact of legalization. The Toronto-Dominion Bank estimated a potential boost to Canada’s GDP of between $7 billion and $8 billion. But given the degree to which cannabis activity already existed, unreported, in the economy, the bank cautioned this was a bit of illusion. Appropriately, the bank called it an “amplified high” in the growth outlook.

“Facebook plays an outsized role in our society and our economy. They have a social and financial responsibility to be transparent — that’s why we’re demanding independence and accountability in the company’s boardroom.”

New York City Comptroller Scott Stringer, custodian of the New York City Pension Funds, pulled no punches in announcing a shareholder proposal co-filed with four other fund managers calling on Facebook to make the board chair an independent position. Stringer’s language was stark: “An independent board chair is essential to moving Facebook forward from this mess, and to re-establish trust with Americans and investors alike.”

“Don’t you agree that it shows that there’s a risk of political intervention by the province in Hydro One’s corporate affairs?”

Ann Rendahl of the Washington Utilities and Transportation Commission expressed the obvious back-to-square-one concerns about the Hydro One/Avista transaction. How could Washington ratepayers be reassured that there won’t be any more surprises? And how to calm the jitters of those consumers who remain unconvinced that the takeover is in their long-term interest? As Rendahl phrased it, “How can we un-ring a bell?”

A press conference was held by Unifor Local 222 Nov. 26 in reaction to news that GM will cease vehicle production in Oshawa in 2019.
A press conference was held by Unifor Local 222 Nov. 26 in reaction to news that GM will cease vehicle production in Oshawa in 2019.  (Ryan Pfeiffer/Metroland/Toronto Star)

NOVEMBER

“They are not closing our damned plant without one helluva fight.”

An enraged Unifor president Jerry Dias shot back at General Motors after the Detroit-based carmaker laid out its plan to accelerate its “transformation for the future.” The Oshawa assembly plant would be “unallocated” in 2019, meaning that no product would be allocated for production beyond December 2019, putting 2,500 people out of work. GM’s car-making history in Oshawa, Dias vowed, would not end there.

“The USMCA will be fantastic for all!”

The what? Naturally, President Donald Trump emphasized the primacy of the U.S. in signing the “new” trilateral trade deal with Canada and Mexico. The down-to-the-wire agreement, signed on Enrique Pena Nieto’s last day in office as president of Mexico, leaves much to be resolved. Trump’s tariffs on steel and aluminum for starters. And oh, politics. Nancy Pelosi, the front-runner to be elected speaker of the House of Representatives when the Democrats formally take control in January, prefigured the fight ahead. “The trade agreement formerly known as Prince — no, I mean, formerly known … as NAFTA is a work in progress,” she said.

“It was never anyone’s intention to play into an anti-Semitic narrative against Mr. Soros or anyone else.”

Sheryl Sandberg said she knew nothing of Facebook’s hiring of Definers Public Affairs. Then she read an eye-popping investigation in the New York Times. Then she said she still did not recall. Then she admitted she was the recipient of “a small number of emails” that referenced the Definers, hired by Facebook to do opposition research into an anti-Facebook organization and George Soros’s alleged connection to it. Before the month was out she admitted that she personally requested information from staff on whether Soros had shorted Facebook stock.

“A mess inside and out!!!!!!!!”

In a brief moment of madness, Martha Stewart littered her popular Instagram account (she has more than two million followers) with pictures of her very first Uber ride, which was not a success. Car Number 1 failed to show. Car Number 2 parked “halfway down” the street (she was outside Tiffany’s) and was a grungy disgrace with old water bottles and general fifth. Stewart deleted the images, but not before followers admired the very pointy snakeskin pumps sported by the 77-year-old entrepreneur.

Cardboard cutouts of Mark Zuckerberg, the chief executive of Facebook, on display outside the Capitol as he testifies at a Senate hearing about the company's practices on April 10.
Cardboard cutouts of Mark Zuckerberg, the chief executive of Facebook, on display outside the Capitol as he testifies at a Senate hearing about the company’s practices on April 10.  (GABRIELLA DEMCZUK/The New York Times)

DECEMBER

“It no longer is clear that Hydro One can be regarded as a private, publicly traded corporation.”

In a scathing smackdown of the proposed takeover of Avista Corp. by Hydro One, the Washington Utilities and Transportation Commission found that the “marginal” benefits of the deal were outweighed by political risk, concluding there was nothing to prevent governmental interference in the future. Hydro One and Avista have petitioned the commission to reconsider its decision, arguing, in part, that the commission “misapprehended” the political risks and failed to properly evaluate the benefits of the transaction for Avista customers.

“I don’t want to grow up. I’m a Toys ‘R’ Us kid.”

Just in time for Christmas, Toys “R” Us Canada brought back the famous ’80s jingle, reminding consumers that while the U.S. operations are gone for good, the toy chain north of the border is determined to be a survivor.

“They were experimental and have now been shut down for nearly three years.”

So we’re all good then? No. A Facebook executive’s attempted reassurances over the latest New York Times revelations fell flat. In building “messaging integrations” with such third parties as Spotify and Netflix, Facebook allowed these partners so-called “write access.” As Ime Archibong explained it in a post: “In order for you to write a message to a Facebook friend from within Spotify, for instance, we needed to give Spotify ‘write access.’ For you to be able to read messages back, we needed Spotify to have ‘read access.’” But that didn’t translate into users having their private messages read, Archibong insisted and, hey, that was years ago. This latest peek into possible privacy violations held the news cycle for a day, until Washington D.C. Attorney General Karl Racine sued Facebook for failing to protect the privacy of millions in connection with the Cambridge Analytica scandal. Remember that “better trajectory” Mark Zuckerberg hoped for in January? Annus horribilis was more like it.

Jennifer Wells is a business columnist based in Toronto. Reach her on email: jenwells@thestar.ca





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