There’s no question that whatever was plaguing Facebook (NASDAQ:FB) and FB stock in the second half of 2018 has left the building. Facebook is on fire in 2019, up 47% year to date, getting closer to its all-time high of $218.62.
I don’t think there’s any doubt that Facebook is a great stock to own. Investors who bought FB stock during the company’s initial public offering back in May 2012, when it went public at $38 a share, today would have an annualized total return of about 26%.
If Facebook were to keep this up for another 13 years, anyone who was still holding FB stock 20 years after its IPO would have almost $1 million from an initial investment of $10,000.
While FB might be a great stock, I doubt many Environmental, Social and Governance (ESG) investors, who look for sustainable, ethical stocks, are clamoring to own it. Here’s why.
Workplace Tension Continues to Boil
On several occasions in the past, I have been supportive of Facebook stock. Most recently, on May 21, I called it a buy despite the fact that Facebook’s management was being less than transparent with FB’s employees.
But a CNBC article about former Facebook recruiters suggested that top college graduates have been more frequently refusing to work for the company. Not only that, but potential recruits were asking tough questions of the company, many of which were ESG-related.
Young people are starting to recognize that the social media platform enjoyed by billions isn’t the employment Shangrila that everyone thought it was.
Life at Facebook is pretty good for Mark Zuckerberg and Sheryl Sandberg. They’re billionaires who are getting a chance to shape the world we live in.
Poor Treatment of Contracted Employees
Life isn’t as good for many of the contracted employees FB uses to keep a lid on extremist views, advertising scams, and any other materials that might be offensive to its 1.5 billion daily users.
A recent report from the Washington Post suggested that FB contractors working in Austin, TX posted an internal letter complaining about their treatment.
“Low pay, increased monitoring from managers, and strictly enforced production quotas have played a significant role in diminished morale in our workplace,” the letter said, according to the Post. “People have been pushed to a point where they feel that their personhood, as well as their work, has been devalued because they are viewed as interchangeable parts in a machine.”
While the authenticity of this letter hasn’t been determined, it begs the question of why people who are dealing with some ugly materials aren’t receiving more support from FB.
Given what’s happened to shake people’s trust of the platform, Zuckerberg and company should bend over backward to make these employees comfortable in their jobs. Not fire someone for putting Bruce Springsteen and Clash words on their internal corporate profile.
In fairness to Facebook, COO Sheryl Sandberg did say on Workplace, the company’s internal forum, that these contracted employees would soon receive $20 an hour in the Bay Area, while in the rest of the country in places like Austin, they would get a raise to $18 an hour.
$18 an hour to be exposed to PTSD-causing materials? I don’t think that’s fair.
ESG Investors Shouldn’t Buy FB Stock
In mid-June, S&P Dow Jones Indices announced that it was removing Facebook from its S&P 500 ESG Index. Facebook’s ESG score fell due to privacy concerns, knocking it out of the index along with Wells Fargo (NYSE:WFC), Oracle (NASDAQ:ORCL) and IBM (NYSE:IBM).
“The specific issues resulting in these scores had to do with various privacy concerns, including a lack of transparency as to why Facebook collects and shares certain user information,” Reid Steadman, S&P’s global head of ESG, wrote in a release.
While the company’s environmental score was an impressive 82 out of 100, its social and governance ratings both failed miserably, at 22 out of 100 and six out of 100, respectively.
Given the latest news stories about the way FB is treating its contracted employees, I don’t see how any investors concerned about ESG can own Facebook stock.
The Bottom Line on FB Stock
For investors who can turn a blind eye to what Facebook is doing to some of its employees, not to mention its inability to take privacy concerns as seriously as they should be taken, I don’t think there’s any question that FB is a great stock.
But as a company, it’s got a lot of work to do if it wants to get back on the S&P 500 ESG Index.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
