Victoria Schwartz, ‘Corporate Privacy Failures Start at the Top’

With the rise of big data, numerous corporations are in the invasion of privacy business. Yet corporations not directly in the invasion of privacy business must also inevitably make important decisions potentially impacting the privacy of their employees, consumers and shareholders.

The prevailing view among scholars and commentators concludes that corporations do not adequately protect privacy. To date, scholars have largely focused on consumer-centered market failures to explain this phenomenon. Under the conventional explanation, corporations respond to consumer demand, and as consumers ignored privacy policies and failed to price their privacy preferences, corporations responded accordingly.

This paper contributes to the existing literature by adding an additional corporation-side market distortion theory to help explain corporate privacy failures. Under this theory, extensive corporate disclosure requirements, including the potential for disclosure of executives’ personal information, as well as legally unchecked media interest in the personal lives of corporate executives combine to sort the pool of corporate executive candidates towards individuals who do not themselves highly value privacy. This sorting effect within the executive suite then impacts the corporation’s ability to recognize when seemingly neutral decisions may impact privacy.

Recognition of this corporation-side market distortion theory allows a shift away from a singular view of the corporate privacy problem as solely a consumer-driven market failure. This enables identifying counterbalancing steps that can help offset the sorting effect such as allowing corporate executives to negotiate disclosure policies, and adding chief privacy officers to conceptions of good corporate governance in order to ensure there is someone in the corporate leadership tasked with raising privacy concerns.

Schwartz, Victoria L, Corporate Privacy Failures Start at the Top (March 21, 2016). Boston College Law Review, forthcoming.

First posted 2016-03-23 06:59:14

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