Facebook’s Privacy Breach: Challenges of Managing an Information-Based Supply Chain Risk

In June 2018, subsequent to the widespread reporting around a privacy breach, Mark Zuckerberg, Facebook’s 33-year-old founder, Chairman and CEO, was under pressure from the lawmakers to act on protecting the privacy rights of individuals. Facebook’s lax policies allegedly allowed an app developer to sell Facebook users’ data to Cambridge Analytica, a data analysis firm. Cambridge Analytica was accused of using Facebook users’ data to profile and influence the voting intentions of British and American people. The disclosure of this news left Facebook tremendously vulnerable to criticism from the general public, media, and lawmakers. This resulted in an 18% drop in the company’s stock prices. After two rounds of intense testimonies before the U.S. Senate and the House of Representatives, lawmakers were still baffled by how Facebook was planning to address privacy issue given their business model that sacrificed user data for making the profit. Zuckerberg faced the difficult task of deciding how best to protect the privacy of users to prevent similar adverse events in the future, while maintaining profit. His options included (1) making some fundamental, and perhaps philosophical, changes in firm’s value proposition (2) imposing stronger privacy protection measures, and (3) improving ethical decision-making in privacy protection through the governance adjustments.