Corporate Social Responsibility and the Equifax Breach

For this assignment, I looked at the article Why the Equifax Breach Stings So Bad by Ron Lieber. In this article, Lieber reveals interviews he has had with people who are customers of Equifax and their reactions to the breach and its aftermath. After the breach, many Equifax customers were enraged or afraid of their stolen and maliciously used data. People had trusted Equifax to protect their data, yet after the breach, the company began charging people in order to let their credit profiles be frozen to prevent identity theft. Equifax was essentially “extorting” its customers and was demanding social security numbers just to let their customers know if their data had been compromised (Lieber, 2017).

In this case analysis, I will argue that Utilitarianism shows us that the Equifax breach harmed its customers by charging them in order to freeze their accounts and that this was morally bad. Utilitarianism is an ethical theory that believes that the consequences of an action are good when the right action is the one that maximizes the amount of happiness and minimizes the amount of suffering.

Friedman

In this article, Milton Friedman explains what the “social” responsibility of businesses is. Friedman has heard businessmen say they believe that they are defending capitalism when they say that business does not concern itself with only profit but also promotes desirable “social” responsibilities, including providing fair employment, avoiding pollution, etc. Friedman had stated that “there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud” (Friedman, 1970).

Friedman’s article goes into detail about what the “social responsibilities of business” are and devises an example of a corporate executive and what their “social responsibilities” include. Following his example, we look at a corporate executive, an employee of the owners of the business. They have direct responsibilities to their employers, which is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of society, those that are embodied in law and ethical customs (Friedman, 1970). The corporate executive has their own responsibilities toward their families, community, country, and their own conscience. Suppose the corporate executive has a “social responsibility” as a businessman. Are they supposed to refrain from increasing product prices to prevent inflation, make expenditures on reducing pollution beyond the scope that the business wants to take, or hire less qualified prospects instead of those that are more qualified? If they choose to follow this route, they spend other people’s money for general social interest. As the corporate executive follows that path, they reduce returns for the company’s stockholders, raise prices to customers, and/or lower employees’ wages are what is spent in favor of their “social responsibilities” (Friedman, 1970).

When looking at this from a Utilitarian perspective, there are two views regarding Friedman’s example. On the one hand, one could say that the corporate executive would be following this ethical theory because they are maximizing happiness by utilizing the company’s assets for their “social responsibilities” to hire more people, reduce pollution to preserve the environment, and keep prices from rising in order to prevent inflation. On the other hand, one could say that the corporate executive would not be following this ethical theory because they are increasing suffering for the stockholders, customers, and employees by utilizing the company’s assets for their “social responsibilities” through lowering returns on stocks, raising prices on products, and lowering employee wages.

Looking at the Equifax breach from a Utilitarian perspective and Friedman’s concepts, one can see that Equifax focused on increasing its profits through its standard practices and charging customers to freeze their accounts. They fail in following the Utilitarian perspective as they choose to maximize the happiness of the few over their customers.

Anshen

In Melvin Anshen’s article, Changing the Social Contract: A Role for Business, he talks about the Social Contract and how it has changed over time. He has his viewers visualize the development of the Social Contract as an emerging demand for a new set of relationships among business, government, non-economic organizations, and individuals (Anshen, 1970).

Philosophers and political theorists have observed the persistence and necessity of this organizing concept and called this concept “the Social Contract.” The contract itself is fundamentally implicit; while men have tried to covert implicit to explicit expression, they were all temporary and limited.

The development of the Social Contract can be traced back to the writing of the Greek philosopher Epictetus. It was a central element of the intellectual system created by Thomas Hobbes, who believed that without this implicit contract, man would descend into anarchy and stated that the natural condition of man is “solitary, short, brutish and nasty.” Hobbes’ concept was to rationalize the state’s power to compel obedience to the terms of the contract. John Locke had converted Hobbes’ concept into one of citizens’ consent to a relationship of reciprocal duties and obligations. Jean Jacques Rousseau expanded on that concept into an intellectual system where every member of society entered into an implicit contract with every other member (Anshen, 1970).  

In order for there to be a balance between the minorities and majorities of a social contract, those who manage must actively participate in the redesign of the contract. As Ashen had explained, “There can be no greater danger than to permit the new rules to be formulated by either the small group of critics armed only with malevolence toward the existing system or the much larger group sincerely motivated by concern for ameliorating social ills but grossly handicapped by their ignorance of the techniques and dynamism of private enterprise.” Managers can make creative contributions to the revision of the terms of the social contract that suggests the complexity of the problems and the abundance of opportunities (Anshen, 1970).

Anshen believes that a good place to begin involves cost estimates. Building a body of reliable information about what the costs are, their complexity, their origin, and their impact. Another area where business competence can make a contribution is the problems associated with poverty among the unemployed or underemployed minorities (Anshen, 1970). 

When looking at the Equifax breach from a Utilitarian perspective and Anshen’s concepts, one can see that Equifax had failed in its part of the social contract that it had with its customers. Equifax failed to protect its customer’s data from being stolen, and charged its customers for account freezing, demanding customers’ social security numbers in order for customers to know if their data was compromised. Equifax cared more about maximizing happiness for those in its company and stockholders than the customer’s data and wellbeing. They had only focused on what their customers could be doing for them after the breach and mostly ignored the duties that they should be doing for their customers.

Conclusion

Equifax had failed its customers by not being able to protect its customer’s data from the data breach, did not provide proper notifications, were not able to ease its customer’s fear or anger, and then decided to “extort” its customers in order to allow their customer’s accounts to be frozen. Friedman spoke of how a business’ social responsibility is to increase its profits, and Equifax had followed that over its customer’s data and wellbeing. Anshen talked about the Social Contract, and how Equifax focused on their part of the contract regarding what their customers can do for them while disregarding what they could be doing for their customers. Equifax had hurt their customers by failing to protect their data and “extorting” their customers in its aftermath. Their actions were morally bad on many levels, and it took some time before they started making any changes to fix them.

References

Anshen, M. (1970). Changing the Social Contract: A Role for Business. Columbia Journal of World Business. https://doi.org/https://odu.voicethread.com/lti-student/1137847/?tok=144197752962127f30a2fbe9.77989373

Friedman, M. (1970). The Social Responsibility of Business is to Increase its Profits. The New York Times Magazine. https://doi.org/https://odu.voicethread.com/lti-student/1113980/

Lieber, R. (2017). Why the Equifax Breach Stings So Bad. The New York Times, 1–9. https://doi.org/https://www.nytimes.com/2017/09/22/your-money/equifax-breach.html