Facebook's humbling deal with the FTC is the biggest assault on Mark Zuckerberg's power in the firm's history (FB)

Mark Zuckerberg (Jake Kanter using for post)

Facebook's $5 billion settlement with the Federal Trade Commission over Cambridge Analytica is the biggest erosion of Mark Zuckerberg's power in the firm's 15-year history.
Facebook must establish an independent board on privacy, which will remove Zuckerberg's "unfettered control" over decisions affecting user privacy.
In other words, Zuckerberg was asleep at the wheel during the Cambridge Analytica catastrophe, and now he's having the keys taken away from him.
Activist Facebook shareholders, who have been calling for Zuckerberg to be removed as chairman, said it was a step in the right direction.
"It certainly clips Mark's wings in a pretty significant way," said Michael Connor, who has helped coordinate a Facebook shareholder campaign.
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Mark Zuckerberg may not have been deposed as part of his humbling settlement with the Federal Trade Commission, but never has his dominance been damaged so dramatically.

The company he founded and built was stung with a $5 billion penalty, but it's the concessions he will have to make that may well give Zuckerberg more sleepless nights.

Zuckerberg holds an iron grip on power at Facebook. He is both chairman and CEO, and he controls voting rights under the firm's dual-class share structure. It is why he is sometimes described as a "dictator."

But be in no doubt, the FTC has prized open his grip and for the first time in Facebook's 15-history, Zuckerberg won't be able to call the shots when it comes to protecting user privacy.

Facebook will have to establish a board-level "independent privacy committee," according to the FTC. This new committee must itself be appointed by an "independent nominating committee."

The privacy committee will approve compliance officers, who will be responsible for keeping Facebook's privacy standards high. The committee will also oversee an external assessor, who will produce quarterly reports on how Facebook is protecting user data, which could potentially be made public under FOIA.

It means Zuckerberg won't be hearing about Facebook's next data scandal through the press first, as he did when Cambridge Analytica weaponized the data of 87 million users.

Pointedly in its announcement, the FTC said the changes will result in "removing unfettered control by Facebook's CEO Mark Zuckerberg over decisions affecting user privacy." In other words, Zuckerberg was asleep at the wheel during the Cambridge Analytica catastrophe, and now he's having the keys taken away from him.

Zuckerberg will still have a say in who sits on the committee that eventually selects the privacy board. And whoever is hired to the privacy board can still, theoretically, be fired by Zuckerberg if he can point to evidence of dereliction of duty or illegal activity. Zuckerberg still controls the board, after all.

"The idea wasn't to remove him from any say in the company he owns majority shares in. The idea was to remove him from being able to make all decisions without oversight," Jim Kohm, the FTC's director of enforcement, told Business Insider.

'It certainly clips Mark's wings in a pretty significant way'

The symbolism of the FTC's intervention was not lost on activist Facebook investors, who have been calling for Zuckerberg's power to be radically scaled back since the Cambridge Analytica crisis broke in March 2018. Indeed, some greeted it with a cautious welcome.

"It may not go as far as some people would like, but it certainly clips Mark's wings in a pretty significant way," said Michael Connor, who has helped coordinate Facebook shareholder action through Open MIC, which lobbies for better corporate governance.

Jonas Kron, an activist Facebook investor at Trillium Asset Management, told Business Insider that the FTC's changes are "directionally important corporate governance improvements," but the company "still needs an independent board chair and no more dual-class structure."

As for Zuckerberg himself, he recognized in a blog on Wednesday that the structural changes add up to something more important than a $5 billion fine.

"These changes go beyond anything required under US law today," he said. "The reason I support them is that I believe they will reduce the number of mistakes we make and help us deliver stronger privacy protections for everyone."

If Wednesday's settlement does achieve these aims, it will show that Facebook is capable of being better when Zuckerberg's power is diluted.

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