Month: September 2017

Recently, a credit monitoring company, Equifax, is hacked. It is reported that this data breach has affected 143 million U.S. consumers and 100000 Canadians. While this may be one of the biggest data breaches happened these years, the accident could have been prevented beforehand. According to Bloomberg report, this was the second time the company had been hacked this year. Despite knowing that it has security loopholes, Equifax failed to fix them. The senior executives are now facing charges from The Justice Development for selling off shares before disclosing the breach, and Equifax as whole is being investigated by the federal court.

Though companies have the moral obligation to protect their consumers’ information, they tend to invest money in other profit-generating programs rather than in cyber security. First of all, maintaining cyber security requires manpower and more advanced technology, which increases the total costs for the company while providing little profits. Moreover, the costs generated by improving cyber security are higher than the loss companies may face when they are breached. According to an analysis by Benjamin Dean, a fellow at Columbia University’s School of International and Public Affairs, the actual loss caused by information breach amounted to less than 1% of Sony’s annual revenues. Although the data is shocking, it is reasonable since companies can easily get away with their responsibilities when their information is breached.

A blog written by Brenda R. Sharton and David S. Kantrowitz raised questions about why it is so difficult for customers to sue the companies when private information is leaked out. The first reason they gave is that it is hard to prove the company is directly accountable for the breaches. And another one is that plaintiffs are facing a hard time when trying to prove their life has been severely affected by the breach. Because of these two factors, most companies can easily get away with their responsibilities. Therefore, since the costs generated by information breaches are so little for companies, even though customers’ privacy is severely damaged by hackers, the breaches keep happening, with an increasing frequency and a larger extent.

While governments now are investing more money to improve the online security, they don’t really see any progress. From my perspective, I think government should force companies to take on their responsibilities, instead of wasting money. In this way, when companies find that they may lose too much when they ignore the importance of information security, they’d start to pay attention to prevent breaches from happening.

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Nowadays issues regarding whether businesses have social responsibility are hotly discussed. An article written by Milton Friedman claimed that the sole purpose of businesses is to maximize their profits. First, he argued that business is not a moral agent to assume responsibilities. Also, emphasizing too much on social responsibility makes a company be more centrally controlled which ultimately leads to less profits.

 

However, business ethics, including social responsibilities, are beneficial for the development of companies. To begin with, when people are discussing businesses’ behaviors, they are studying the decisions made by the employers in companies. Since employers are moral agents and they need to behave ethically under the social contract, it is reasonable to say that businesses or members in the companies have to take on their social responsibilities. Apart from that, contrary to what Friedman said in his article that earning profits is in conflicts with behaving ethically, companies in fact can raise their reputation by assuming some social responsibilities, a way that could increase profits.

 

Responsible stakeholders now are paying more and more attention to the reputation of the firms they choose to buy product from, or to cooperate with. For example, according to a survey done by Elizabeth H. Creyer, consumers are more willing to pay higher prices when corporate behaves ethically and they punish the unethical act by buying products at lower prices. Same logic applies to the cooperation between companies, which means that an ethical company can get more reliable partners.

Nike, the famous shoe brand, used to be criticized for sweatshops. Though having workers work under relatively bad working conditions is not against the law, Nike still chose to establish an apartment to elevate working conditions to restore the companies’ image. After Nike did that, protests aimed at sweatshops gradually disappeared and sales even jumped higher since the company was acting ethically. Therefore, it is proved that business ethics are positively linked to companies’ brand, an element plays an important role in helping companies earning profits.

 

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