Bye, $100 billion.
That’s the bitter pill Facebook swallowed Thursday as years of security lapses pulled the company’s market capital down by more than $100 billion. The cliff dive was the largest single-day drop in value in Wall Street history. Founder Mark Zuckerberg lost more than $15 billion of wealth in a single day. Company shares plunged more than 19 percent, and executives from the social media giant said revenue growth would continue to decelerate for the rest of 2018.
Now, Facebook looks to reassure its own workforce, as well and users and investors, of its ability to right former wrongs and recover from its record-shattering loss. That includes firm leadership to boost morale within Facebook’s internal ranks, experts say, all while the company tackles its ongoing challenge of restoring the trust of customers.
“Facebook, its reputation and the people who work in it have been pretty battered over the past year,” said Nell Minow, vice chair of the corporate governance consulting firm ValueEdge Advisors. “And so this is just one more mud pie in the face.”
If you’re still puzzling over what exactly $119 billion looks like, we feel you. First, some context.
The money Facebook lost in one day amounts to more than the entire market capitalizations of some of America’s largest companies. Or another way to look at it, it’s more than the GDP of entire nations.
For comparison’s sake, here’s what some of the biggest corporate names are worth:
And when compared to the GDPs of entire countries:
Experts said part of Facebook’s response requires triage within the company’s own ranks. In the world of corporate governance, Minow said, companies are encouraged to align the interests of their employees, executives and shareholders, including by having employees own stock.
“So the downside of that, quite literally, is that when something like this happens, they start panicking about their net worth rather than paying attention to what’s going on at the office,” she said.
Any efforts to revamp corporate culture stem from the top, said Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management. Companies whose leaders grow increasingly isolated often fall into the trap that “on Earth, one person is truly indispensable, and that’s themselves,” Sonnenfeld said.
Plus, Sonnenfeld said, Facebook risks losing a young, talented and mobile workforce that may not be unflinchingly loyal to the company brand.
“You can’t pound your fist and command a culture — a lot of CEOs are naive about that,” he said. “It doesn’t matter what kind of shirts you wear, the architecture you use in the office. It’s what you actually do. A culture responds from what you do.”
The added scrutiny put on Zuckerberg this week is reason for him to lean on Facebook’s board, Sonnenfeld added, not only for its expertise but also to help loop in some of Facebook’s most prominent critics. Sonnenfeld said companies that learn to immerse themselves in tough criticism — such as privacy experts, for example — are often most equipped to turn the corner out of a crisis.
“When things like this happen, people will take a look at whether the leadership team of Facebook is the right team to have in place,” said Gabrielle Adams, assistant professor of public policy and psychology at the University of Virginia.
On top of Facebook’s internal insecurity, Adams noted its stock market beating also shapes user perceptions of a company already shouldering a record of privacy and security breaches. Some users might take the stance that “you deserve this, and this is justice or punishment,” while others might view the $100 billion drop as “not what Facebook deserves.”
Facebook’s task is to reach both of those groups, Adams said, and show it is taking the blunders of the past few months and Thursday’s stumble seriously.
Minow noted much of the consumer mistrust in Facebook stems not just from Thursday’s stock drop, but also from a longer-term cynicism about the company’s trustworthiness “as a provider of information and as a seller of its own personal information.”
“They’ve begun to address it with some rebranding,” Minow said. “But that’s a big mountain to climb.”