Corporate Social Responsibility Issues Raised by Cambridge Analytica Scandal at Facebook

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Corporate Social Responsibility
Facebook

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Table of Contents
Introduction............................................................................................................................. 2
Literature Review..................................................................................................................... 3
Case Study Analysis.................................................................................................................. 5
Conclusion and Recommendations..........................................................................................9
References..............................................................................................................................11

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Introduction
A corporate social responsibility (CSR) model assist companies in managing their business
processes to ensure that they produce overall positive impact on the society while being
accountable towards their stakeholders (Bondy, Moon and Matten 2012). This is a
constructive source for a company because it assists in generating a competitive advantage
which sustains the future development of the company. Organisations apply it in the
environment by setting up a code of conduct which promotes transparency in operations
and hold the company accountable towards its stakeholders. In this report, the recent
scandal of Facebook will be evaluated to understand the corporate social responsibility
issues raised in the scenario. This case is significant because the private data of 87 million
Facebook users were violated in this case by Cambridge Analytica (Badshah, 2018).
Facebook launched a program called Open Graph which allowed third-party developers to
collect the private data of its customers along with their friends. In 2013, an application
called ‘thisisyourdigitallife’ was launched collected data of around 300,000 users; however,
due to the Open Graph program, data of their friends were collected by the company as
well (McNamee and Parakilas, 2018). Facebook shut down this program in 2014; in 2017, it
was reported that this data was used to find potential votes for Donald Trump (Meyer,
2018). It was reported that 87 million people were affected by this breach. A fine of
£500,000 was imposed by Information Commissioner’s Office (ICO) in the United Kingdom
on Facebook; however, Facebook continued to collect the private data of its users
(Satariano and Frenkel, 2018). A few months later, login details of 50 million Facebook users
were stolen which shows the failure of the company to protect the privacy of its users
(Wong, 2018). This report will evaluate this case from the perspective of key stakeholders
which include Facebook users, government and society to understand how this incident has
affected them. Ethical theories will be evaluated in this report to analyse this case and
recommendations will be given for Facebook.

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Literature Review
The importance of corporate governance and business ethics principles has increased
significantly in the modern era because the threat relating to breach of privacy of individuals
has increased. The impact of corporations has increased on individuals and society which
raises the importance of ethical conduct by companies. As per Wintoki, Linck and Netter
(2012), corporate governance is referred to a set of policies, rules and procedures which
assist in directing and controlling the operations of a company to ensure that a balance is
maintained between the interests of different stakeholders of the company. Compliance
with these policies assists corporations in ensuring that they conduct their operations in an
ethical manner while fulfilling their duties towards society. Corporate social responsibility
(CSR) model has become a key part of the business structure of companies to ensure that
they comply with corporate governance principles. Bondy, Moon and Matten (2012)
provided that a CSR is referred to a self-regulatory framework which assists companies in
managing their business processes in order to produce an overall positive impact on the
society. Various key elements are covered in the CSR framework of a company which
include social impact, ethics and sustainability. As per Hoi, Wu and Zhang (2013), this
framework changes the way corporations generate profits and ensure that they fulfil their
duties towards society while retaining higher earning. Most corporations focus on
traditional approach while conducting their business which provides that the company
should prioritise the interest of shareholders above other stakeholders because they face
the most risk by investing their capital in the business.
According to Mansell (2013), it is considered that the board of directors owes a duty
towards shareholders to ensure that they receive profits from the operations of the
company. However, this is approach is wrong and highly ineffective in the modern era.
Corporations that solely focus on the interest of their shareholders are less likely to become
successful in the future because they did not have a strong relationship with their
customers, employees and the government. In today’s competitive business world,
companies can generate and maintain a competitive advantage by applying a stakeholder
approach in the business. Erkens, Hung and Matos (2012) argued that this approach is based
on corporate governance principles which provide that the companies should maintain a