Ask a New Question
Menu

Differentiate between matters of law and matters of ethics in business situations

Scenario
A few years ago Clare Applewood started a small outdoor equipment business called Mountain Top View. The company is a sole proprietorship. The company began as a single storefront and has grown rapidly to include online ordering through the company website. The company’s website includes the statement, “We are committed to keeping customer information secure and protected.” Clare also uses social media sites to market the company.

Carlos Rodriguez has worked for the company since the beginning. He oversees both store and online operations. Clare and Carlos make most decisions together.

Steve, the company’s Information Technology lead, discovered that the company database of customer information was hacked. Customer names, addresses, and phone numbers were accessed for only those customers who placed online orders in the first quarter of the year. Steve was able to correct the code that allowed the hack and is confident that the database is now secure.

When Carlos overhears Steve talking about the database fix in the store break room, he questions Steve about why he did not bring the breach to anyone’s attention. Steve explains that because he was able to quickly correct the code that led to the breach, and because only address and phone number information for a handful of customers was accessed, he didn’t think it was necessary to say anything.

Clare asks Carlos to evaluate whether the company has an ethical and/or legal obligation to report the breach to their customers and to recommend a course of action. She also asks Carlos to select an ethical test or framework that all employees can use in the future to help guide their decisions.

Directions
Report
Evaluate whether the company has an ethical and/or legal obligation to report the breach to its customers. Your evaluation should be framed as a report for the owner, Clare, that includes the following sections and information. Cite your sources using APA style.

1 answer

Report on Ethical and Legal Obligations Concerning Customer Data Breach

To: Clare Applewood, Owner, Mountain Top View
From: [Your Name]
Date: [Today’s Date]
Subject: Evaluation of Obligations Related to Customer Data Breach

Introduction

This report evaluates the ethical and legal obligations of Mountain Top View following the recent customer data breach incident. A thorough analysis of the relevant laws and ethical principles will assist in making informed decisions regarding communication with affected customers.

Legal Obligations

Federal and State Laws

  1. Data Breach Notification Laws:

    • Most states in the U.S. have enacted laws that require businesses to notify customers if their personal information has been compromised. The specific requirements vary by state, but generally, they include informing affected individuals without unreasonable delay.
    • For example, California's data breach law mandates that businesses notify individuals when their unencrypted personal data is compromised (California Civil Code § 1798.82).

  2. Federal Regulations:

    • Depending on the nature of the customer data, various federal regulations may apply (e.g., HIPAA for health information or GLBA for financial institutions). Although Mountain Top View is not a financial or health service provider, it is still subject to general data protection standards under laws like the FTC Act, which prohibits unfair or deceptive acts in commerce.

Conclusion on Legal Obligations

Given that customer names, addresses, and phone numbers were accessed during the breach, Mountain Top View may have a legal obligation to notify the affected customers, especially if the information can be used for identity theft or fraud. A failure to notify could lead to legal repercussions, including fines and damage claims.

Ethical Obligations

Ethical Principles

  1. Transparency:

    • Businesses have an ethical obligation to be transparent about their practices, particularly when personal data is compromised. Customers trust Mountain Top View to keep their information safe, and failing to disclose the breach can undermine this trust.

  2. Responsibility to Protect Customers:

    • Companies should prioritize the well-being of their customers. This involves not only fixing the vulnerabilities in the system but also informing customers so they can monitor their accounts and take protective measures.

  3. Accountability:

    • Ethical leadership involves owning up to mistakes and addressing them openly. This includes acknowledging the breach even if the data accessed appears to be minimal.

Recommended Ethical Framework

To help guide decisions in the future, I recommend using the Three Questions Ethical Test:

  1. Is it legal?

    • Does the action comply with applicable laws and regulations?

  2. Is it balanced?

    • Does it consider the interests of all stakeholders, including customers, employees, and the community?

  3. How does it make me feel?

    • Would I feel comfortable explaining this action to everyone involved?

This framework encourages employees to think critically about their actions and ensure that ethical considerations are part of decision-making processes.

Recommendations

Based on this analysis, it is advisable that Mountain Top View:

  1. Notify Affected Customers: Begin the process of notifying customers whose data was breached. This should include an explanation of what happened, what information was compromised, and the measures taken to enhance security.

  2. Implement Enhanced Security Measures: Conduct a thorough security audit and implement additional measures to prevent future breaches.

  3. Educate Employees: Train team members on ethical decision-making using the recommended framework to ensure they understand their responsibilities regarding customer data.

Conclusion

Mountain Top View faces both legal and ethical obligations to report the database breach and protect customer information. Prompt action will help maintain customer trust and comply with legal requirements. I urge you to consider these recommendations closely.

References

California Civil Code § 1798.82. (n.d.). Retrieved from https://leginfo.legislature.ca.gov/faces/codes_displaySection?lawCode=CIV&sectionNum=1798.82&section=

Federal Trade Commission (FTC). (n.d.). Protecting Personal Information: A Guide for Business. Retrieved from https://www.ftc.gov/system/files/documents/plain-language/bus69-protecting-personal-information-guide-business_0.pdf

Please customize the report with appropriate names, dates, and any additional references before submission.