ETHICAL ISSUES IN SNAP’S IPO: EVALUATING LEADERSHIP CHARACTER

Introduction
Background information on Snap Inc. and its IPO- Snap Inc., commonly known as Snap, is a technology
company that operates social media platforms, with its flagship product being Snapchat. Founded in 2011 by Evan
Spiegel, Bobby Murphy, and Reggie Brown, Snap initially started as a multimedia messaging app, allowing users
to send self-deleting photos and videos to their friends. Snapchat quickly gained popularity, particularly among
younger demographics, for its unique features such as disappearing messages, augmented reality filters, and stories
that allowed users to share photos and videos that vanish after 24 hours. The platform's emphasis on privacy and
ephemerality appealed to users seeking a more intimate and authentic social media experience.
Snap's initial public offering (IPO) took place on March 2, 2017. An IPO is a process through which a private
company offers its shares to the public for the first time, allowing investors to buy and trade those shares on a
public stock exchange. The IPO is a significant milestone for a company, as it provides an opportunity to raise
capital, increase visibility, and potentially unlock shareholder value. Snap's IPO was highly anticipated and
attracted considerable attention from investors, media, and the general public. around user privacy, shareholder
rights, and decision-making
processes. The evaluation of the leadership character of Evan Spiegel and Bobby Murphy during the process is
essential to understanding and analyzing these ethical issues in detail.
Importance of ethical considerations in IPOs-
IPO involve transitioning from a privately held company to a publicly traded one, which introduces a range of
ethical challenges that can impact various stakeholders. Here are the key reasons why ethical considerations are
important in IPOs:
1. Stakeholder Trust and Reputation: IPOs provide an opportunity for companies to establish trust with investors,
customers, employees, and other stakeholders. Ethical behavior during the IPO process, such as transparent
disclosures, fair valuation, and protection of investor rights, helps build and maintain trust. A company with a
strong ethical reputation is more likely to attract investors and retain customers.
2. Investor Protection: IPOs involve offering shares to the public, which means that companies have a
responsibility to provide accurate and comprehensive information to potential investors. Ethical considerations
include full and transparent disclosure of financial information, risks, and any potential conflicts of interest. Failure
to provide accurate information can lead to investor losses and damage the overall integrity of the IPO market.
3. Fair Valuation: Determining the initial offering price in an IPO is a critical decision. Ethical considerations
require companies to set a fair valuation that reflects the company's true value and prospects. Overvaluing shares
can mislead investors, while undervaluing them may result in existing shareholders not receiving fair compensation
for their ownership stakes.
4. Shareholder Rights: Ethical considerations include protecting the rights of shareholders, including minority
shareholders. Dual-class share structures, where founders or key insiders hold shares with superior voting rights,
can raise concerns about shareholder democracy and accountability. Ensuring that all shareholders have a voice
and fair representation is important for ethical corporate governance.
Ethical Issues in Snap’s IPO
-User Privacy Concerns
Snapchat's success is heavily reliant on its users' trust in the platform's privacy practices. However, there have been
several controversies and concerns regarding user privacy during and after Snap's IPO. This section will delve into
the examination of Snapchat's privacy practices, controversies surrounding data collection and sharing, as well as
user consent and transparency issues.
-Examination of Snapchat's Privacy Practices: Snapchat has positioned itself as a platform that respects user
privacy by offering features such as disappearing messages. However, questions have been raised about the extent
to which user data is collected and how it is used. It is essential to evaluate the following aspects of Snapchat's
privacy practices: a. Data Collection: The paper will examine the types of data Snapchat collects from its users,
including personal information, location data, contacts, and content shared on the platform. b. Data Storage and
Security: An evaluation of Snapchat's data storage and security practices will be conducted to determine if
appropriate measures are in place to protect user data from unauthorized access or breaches.
-Controversies Surrounding Data Collection and Sharing: Snapchat has faced controversies related to data
collection and sharing practices, raising concerns about user privacy and the company's commitment to ethical
behavior. The paper will explore notable controversies, such as: a. Snapchat's Settlement with the FTC: In 2014,
Snapchat settled with the U.S. Federal Trade Commission (FTC) over allegations of misleading users about the
disappearing nature of messages and unauthorized collection of user data. The paper will analyze the implications
of this settlement and its impact on user privacy. b. Third-Party Data Access: The paper will examine instances
where third-party applications or partners had access to user data and whether Snapchat adequately informed users
about such data sharing.
Shareholders Rights
-Analysis of the Dual-Class Share Structure: Snap's IPO featured a dual-class share structure, which granted
founders Evan Spiegel and Bobby Murphy shares with superior voting rights compared to those available to public
shareholders. This structure concentrated decision-making power in the hands of the founders. The analysis will
cover the following aspects: a. Share Class Differentiation: The paper will explore the details of Snap's dual-class
structure, including the specific differences in voting rights between the different share classes. b. Founder Control:
The degree of control exerted by founders due to the dual-class structure will be examined, considering the
influence they retain over corporate decisions.
Arguments for and Against Dual-Class Share Structures: Dual-class share structures have both proponents and
critics. The paper will present and evaluate the arguments supporting and opposing such share structures,
including: a. Founder Autonomy and Long-Term Vision: Proponents argue that dual-class structures enable
founders to maintain control and make long-term strategic decisions without being solely driven by short-term
shareholder interests.
b. Shareholder Rights and Corporate Governance: Critics contend that dual-class structures undermine shareholder
democracy and weaken the checks and balances required for effective corporate governance.
Evaluating Leadership Character
1. Evan Spiegel
Examination of Spiegel's Leadership Style and Decision-Making:
Understanding Spiegel's leadership style and decision-making processes provides insights into his approach to
ethical considerations. The examination will cover the following aspects:
a. Vision and Strategy: The paper will analyze Spiegel's vision for Snap and his strategic decisions during the IPO
process, assessing the ethical considerations inherent in these choices.
b. Communication and Transparency: The evaluation will examine Spiegel's communication practices with
stakeholders, including investors, employees, and users, to determine the level of transparency and ethical
communication.
Evaluation of Ethical Considerations in Spiegel's Actions:
a. User Privacy: The paper will assess Spiegel's approach to user privacy during the IPO, including data collection,
transparency, and protection measures, and the ethical implications of his decisions in this regard
b. Shareholder Rights: The evaluation will analyze Spiegel's stance on shareholder rights, including the decision to
deny voting rights to IPO investors, and the ethical considerations associated with these actions.
Impact of Leadership Character on the Company's Ethical Culture:
a. Tone at the Top: The analysis will examine how Spiegel's leadership character and ethical behavior set the tone
for ethical practices within Snap, influencing the actions and behaviors of employees and stakeholders.

b. Ethical Decision-Making Framework: The evaluation will assess whether Spiegel established and promoted an
ethical decision-making framework within the company, considering factors such as accountability, transparency,
and the consideration of stakeholder interests.
2. Bobby Murphy
Assessment of Murphy's Role in the IPO Process:
a. Leadership Responsibilities: The paper will analyze Murphy's specific leadership responsibilities in the IPO
process, including his involvement in strategic decision-making, stakeholder engagement, and communication.
b. Decision-Making Authority: The assessment will explore the extent of Murphy's decision-making authority and
influence in shaping the ethical considerations and outcomes of Snap's IPO.
Analysis of Murphy's Ethical Decision-Making:
a. Ethical Considerations: The paper will evaluate the ethical considerations that guided Murphy's decisions during
the IPO, including user privacy, shareholder rights, transparency, and accountability.
b. Alignment with Stakeholder Interests: The analysis will assess the extent to which Murphy's decisions aligned
with the interests of various stakeholders, such as users, investors, and employees.
Comparison with Spiegel's Leadership Character:
a. Decision-Making Style: The paper will compare Murphy's decision-making style with that of Spiegel,
considering factors such as transparency, inclusiveness, and ethical considerations in their respective approaches.
b. Ethical Leadership Traits: The analysis will compare Murphy's ethical leadership traits, such as integrity,
accountability, and commitment to stakeholder welfare, with those exhibited by Spiegel.
Impact of the Ethical Issues on Snap’s Reputation and Stakeholders
a. User Trust and Privacy: The ethical concerns related to user privacy and data collection practices can erode user
trust in the platform. The paper will examine the potential impact on user engagement, retention, and perception of
Snap's commitment to user privacy.
b. Investor Confidence: The denial of voting rights to IPO investors and controversies surrounding data practices
can undermine investor confidence in Snap's corporate governance and long-term prospects. The paper will
evaluate the potential impact on investor trust and willingness to invest in future offerings.
c. Employee Morale and Engagement: Ethical considerations, such as transparency, accountability, and decision-
making practices, can influence employee morale and engagement. The analysis will explore the impact of the
IPO's ethical issues on Snap's workforce, including potential effects on talent attraction and retention.
d. Public Perception and Reputation: The ethical issues surrounding Snap's IPO can shape public perception of the
company's values and ethical standards. The paper will assess the potential impact on Snap's reputation in the eyes
of the broader public and the long-term consequences for its brand image.
LESSONS LEARNED FROM SNAP’S IPO FOR FUTURE COMPANIES
a. Importance of Ethical Considerations: The paper will emphasize the significance of ethical considerations in the
IPO process and highlight the potential consequences of overlooking them. It will stress the need for robust ethical
frameworks and practices in IPO planning and execution.
b. Stakeholder-Oriented Approach: The analysis will emphasize the importance of considering the interests and
rights of all stakeholders, including users, investors, and employees, in decision-making during an IPO. It will
highlight the benefits of adopting a stakeholder-oriented approach that goes beyond short-term financial gains.
c. Transparency and Accountability: The paper will underscore the critical role of transparency and accountability
in building trust with stakeholders. It will highlight the need for clear communication, disclosure of information,
and mechanisms for holding decision-makers accountable.

Recommendations for Improving Ethical Practices in IPO’S

1. Ethical Framework and Guidelines: Companies planning an IPO should establish a clear ethical framework and
guidelines that emphasize integrity, transparency, and accountability. These guidelines should outline ethical
principles, decision-making processes, and mechanisms for addressing potential conflicts of interest.
2. Stakeholder Engagement: Companies should prioritize stakeholder engagement throughout the IPO process.
This includes actively seeking input from users, investors, employees, and other relevant stakeholders to ensure
their interests and concerns are considered and addressed transparently.
3. User Privacy Protection: Companies must prioritize user privacy protection during the IPO process. This
involves implementing robust privacy policies, obtaining explicit consent from users for data collection and
sharing, and providing clear and transparent information about how user data will be used.
4. Shareholder Rights and Governance: Companies should ensure fair and equitable shareholder rights. While dual-
class share structures may be adopted, they should be accompanied by mechanisms to protect the interests of all
shareholders, such as sunset provisions, board independence, and regular shareholder engagement.
5. Enhanced Transparency and Disclosure: Companies should provide comprehensive and timely disclosure of
relevant information to investors and the public. This includes financial performance, potential risks, governance
practices, and any material changes that may impact stakeholders' interests.
6. Ethical Leadership and Culture: Companies should foster an ethical leadership culture that starts at the top.
Leaders should exemplify ethical behavior, prioritize stakeholder welfare, and establish mechanisms for ethical
decision-making, accountability, and oversight.
7. Regulatory Compliance: Companies should ensure full compliance with applicable laws, regulations, and
industry standards. They should go beyond minimum legal requirements and adopt best practices to demonstrate
their commitment to ethical conduct and long-term sustainability.
8 .Independent Auditing and Reporting: Companies should engage independent auditors to assess and report on
their ethical practices, including data privacy, shareholder rights, and governance. These audit reports can enhance
transparency and provide assurance to stakeholders.
9. Continuous Ethical Evaluation: Companies should regularly evaluate and reassess their ethical practices
throughout the IPO process and beyond. This includes soliciting feedback from stakeholders, conducting internal
audits, and making necessary adjustments to address any emerging ethical challenges.