In his 2017 article” Why the Equifax Breach Stings So Bad” (2017) Ron Lieber focuses on the frustration felt by the general public following the Equifax breach that resulted in the loss of private data held by the credit agency. Lieber underlines the disappointments felt by the victims through his interviews. Consumers rightfully felt cheated by the Equifax breach because most people cannot opt out of data collection practices in the first place, those looking to do business are required to have established credit. (Lieber, 2017, pg. 3-4) To add insult to injury, Equifax charged victims for credit freezes (Lieber, 2017, pg.6) and possibly violated trading laws, Lieber noting their CFO possibly committed insider trading by selling stock before the breach was made public. (Lieber, 2017, pg.7) In this Case Analysis, I will argue that virtue ethics shows us that Equifax harmed the American public by failing to safeguard private information resulting in a privacy breach, failing to protect their information was morally bad because of their inadequate response to a problem that they created and situation they imposed to the American public, and that in order to avoid breaches like this in the future we need to lessen our reliance on private credit companies because their virtues do not align with the public virtues.
In his article published in the New York Times “The Social Responsibility of Business Is to Increase Its Profits” (1970) Milton Friedman key points revolve under the idea that social responsibility falls unto the individual and the democratic process of individuals. Friedman argues that a business’ primary goal is to make money. “That responsibility [of the CEO] is to conduct the business in accordance with their desires [stockholders] which generally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those in embodied in ethical custom.” (Friedman, 1970, pg.51 par.4) Friedman argues that it is not the place of a CEO to make decisions of social responsibility, unless they are individual proprietors. To do so would incur unsolicited cost from either their stockholders, customers or employees. (Friedman, 1950, pg.52) Friedman warns that in putting social responsibility in the hands of business, we skirt past the democratic process and encourage abuse such as tax evasion. Friedman encourages keeping business and government separate because a corporation can always abuse its power for its own interest. (Friedman, 1950, pg.53-54) Virtue ethics tells us that morality is about doing the right thing for the right reasons and at the right time. With this in mind, putting the social responsibility on businesses like Equifax is irresponsible because as Friedman warns, a business’ foremost goal is always profit. In the case of the Equifax breach, Equifax should not have had as much reach and control as it did in the first place. Unchecked power at the hands of Equifax opened door for abuses that Friedman warned about. We see this in the possible insider trading conducted by Equifax’s CFO and in the unethical act of Equifax charging the American public to freeze their accounts. The Equifax breach shows us that Equifax and other credit reporting companies have too much power, supporting Friedman’s thesis calling for separation of business and social responsibility. Victims of the breach express feeling “trapped in Equifax’s vast web of data, with no recourse and no ability to opt out.” (Lieber, 2017, pg.2) Credit information is collected often without permission. With permission, credit information is required for almost any major financial transaction. (Lieber, 2017, pg. 3) Though inescapable, the situation the credit companies have put us in, it is still not fair for the public to expect virtuous action or morality from a company like Equifax, because at the core of virtue are habits. Virtues are form from habits and are very characteristic of a person. Therefore it is not realistic to expect a business, who by virtue is centered on making a profit, to have the same societal and individual virtues. To prevent future breaches like the 2017 Equifax breach, Equifax and other credit reporting agencies should be required to conform to government standards of data protection, be subject to external audits and be required to obtain consent before gathering, selling or transferring information to third parties. As a society we should also move away from the universal need of private credit reporting agencies, striking the balance of private and government bureaus in order to make the credit sector less privately controlled and regulated. We should not place an important social responsibility such as determining ones eligibility to buy a house or car to a private company such as Equifax. Credit transactions are a social contract that are dangerous to entrust to private companies alone, as Melvin Anshen shows us.
In his article for the Columbia Journal of World Business “Changing the Social Contract: A Role for Business” (1970) Anshen talks about this implicit social contracts that exists within society. (Anshen, pg. 2-5) For economic growth, mankind had the social contract of business. The implicit social contract of business “was to search for and produce profits. In doing this competitively, business yielded benefits for society in the form of products and services wanted by consumers who earned the purchasing power to supply their wants by working at jobs created by business.” (Anshen, 1970, pg.4 par. 4) Anshen also points out that “Business is key to civilization and its wealth and growth.” (Anshen, 1970, pg. 9 par. 5) The role of business in society is intertwined in the economic life cycle. Anshen points out that we are seeing the effect of business on local communities as a result of this growth, bringing about the question of social responsibility. In the past, business was not held responsible for social issues, no calls for charity or providing retirement for workers or addressing racism. (Anshen, 1970, pg.4-5) Yet as we learned of the effects of business on society came inevitable change, with which Anshen calls on us to consider the effects and dangers. Like Friedman, Anshen raises concern about holding business accountable to social responsibility, arguing that it is about finding a balance between holding business, ourselves and the government responsible. On holding business accountable, Friedman argues that businesses that use their money to avoid damages to the environment or to better communities will be disadvantaged to companies that do not, as they will be less profitable and more expensive to purchase products and goods from. By making those responsible for damage responsible, we incur cost upon the consumer. “Purchases of goods and services will be the ultimate underwriters of the increased expenses.” (Anshen, 1970, pg.6) Equifax and credit reporting are a good example of this. The credit reporting industry are all private and are not government agencies. The workload, research and investigations in creating and maintaining our credit histories and identities fall onto the backs of private credit bureaus. Although overseen by government agencies such as the FTC (Federal Trade Commission) and CFPB (Consumer Financial Protection Bureau), these agencies spend their resources to operate, which in turn comes from the consumer or the American public at cost. Again because Equifax is a business, its virtue is to make profit. Because Equifax’s bottom line is to make a profit, it comes as no surprise that security was not a key investment in their country and that information was sold to second and third parties. Anshen much like Friedman also warns of this danger of having business too intertwined with social responsibility, as they may use it to leverage control of the public, “the most dismal of these alternatives for both economic and social progress is the total substation of public for private goals, strategies and actions.” (Anshen, 1970, pg. 7) Though unethical, it also makes sense that Equifax would charge its customers to freeze their accounts. Leveraging their control of credit history and reporting Equifax offered a solution to problem they created without the public’s permission. Anshen also offers counter points to his argument, arguing that nonetheless it is important to have a balance of social responsibility between business and the government because if business loses too much control we leave it all to the public and government which may pose bureaucratic hurdles and stunt the growth of business inhibiting “experimentation and risk assumption.” (Anshen, 1970, pg. 7) Rules also made by outside public organizations that have specific animosity towards a business can also be harmful, as it disrupts business without addressing or solving problems. (Anshen, 1970, pg. 8) From an ethics standpoint, virtue ethics aligns with Anshen’s points. Moderation is a key element in virtue ethics, and in dealing with events such as the Equifax breach it is important to remember how Equifax and the credit industry got there in the first place: credit is a central piece of our economy and we needed a system set in place to validate and facilitate credit transactions. This system was provided to us by Equifax Transunion and Experian. As Anshen shows us, it would not be virtuous to take the extreme of getting rid of private business and its role in society. It would be dangerous to society if we were to abolish Equifax, Transunion and Experian entirely as it would collapse this system of trading. We need credit. Instead, in the future the US should implement stricter laws for privacy onto the credit bureaus, and more oversight if they are to have as much power in the economic system as they do now. As Friedman notes in his closing statements, “There is nothing that could do more in a brief period to destroy a market system and replace it by a centrally controlled system than effective governmental control of price and wages.” (Friedman, 1970, pg. 55) Another option would be to have a government credit reporting bureau in addition to private bureaus so that citizens could still be able to utilize credit. This way, people have options other than private credit bureaus and it discourages monopolization of the industry and encourages competition.
In conclusion, Business must follow its virtue of seeking profit. Ashen and Friedman both highlight the issues with holding business socially responsible. In the case of the Equifax breaches, we see both cause and effect exemplified in the way that Equifax handled its customer’s information. It is in the greater interest of the public’s welfare and values to realize that business will always follow its own virtue of profit and not of the public virtues of fairness and morality. Knowing this however, we can use business to our advantage by finding balance in the way it is run to benefit our society economically. After reading Friedman’s work I think a concern I have is that their work doesn’t take into consideration that you need some degree of social responsibility in business. Ashen did a better job of pointing this out. Racism and abuses from corporations were bad in the beginning of society and although I agree that holding social responsibility to business is dangerous, I still value the modern changes to the workplace that make things safer and fair for workers and consumers.
Works Cited:
Anshen, M. (1970) Changing the Social Contract: A Role for Business. Columbia Journal of World Business.
Friedman, M. (1970) The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine.
Lieber, R. (2017, September 22) Why the Equifax Breach Stings So Bad. New York Times Website. https://www.nytimes.com/2017/09/22/your-money/equifax-breach.html