Privacy: What Every Manager Should Know: Companies Can't Afford to Ignore the Fact That Consumers Are Increasingly Concerned about How Businesses Use Their Personal Information

Article excerpt

At the Core

This article:

* Lists consumer concerns about privacy issues

* Discusses how privacy has become a competitive issue

* Gives key components of effective privacy policies

Just a few years ago, information privacy issues were not even on the radar screen for most companies. More recently, however, consumers have become more aware of the issue and more concerned about the potential misuse of information about them by both government and business. Other developments that have pushed privacy issues to the forefront include technological advances, increased media coverage of companies' privacy missteps, privacy-related litigation, and an increased focus on privacy in Congress and federal regulatory agencies, as well as in state legislatures and regulatory agencies.

The business community, recognizing privacy as a competitive issue and responding to the increased consumer awareness of the issue, has made privacy a top-level issue. Many companies that obtain, maintain, use, and disclose personally identifiable information about consumers (e.g., name, address, e-mail address, telephone number, Social Security number) have:

* posted privacy policies on their Web sites

* created chief privacy officer (CPO) positions

* increased employee awareness and training about the issues

* established self-regulatory initiatives

* taken other noticeable measures to shore up their privacy policies and practices

Without a doubt, privacy is now an issue about which every company that collects and uses personally identifiable information about consumers should be concerned. Public and consumer concerns, as well as the rising volume of legislation and regulations, are such that all managers would be well advised to consider them.

What the Public Thinks

Consumers' interest in and concern about potential threats to their privacy have been measured in numerous polls and surveys. These indicate that consumers' privacy concerns have increased, especially over the past decade. In a 1999 survey conducted by the Wall Street Journal and NBC News, individuals were asked to identify the issue(s) that concern them the most about the 21st century. Remarkably, 29 percent of those participating in the poll responded that they were more concerned about threats to personal privacy than about other social issues, including overpopulation, war, and global warming.

Increased public concern about privacy has affected consumer decisions about which companies they are willing to do business with and what personal information they are willing to provide. The increased levels of concern about privacy have been attributed to two factors: distrust of institutions and fears about the misuse of technology.

Undoubtedly, the events of September 11, 2001, have had a profound effect on the public's concerns about social issues, including privacy. Since then, Americans have expressed greater support for expanded law enforcement programs (e.g., increased surveillance)--a marked change in public opinion--even if the increased law enforcement powers would affect individuals' civil liberties.

In the online world, consumer concern about privacy has had a profound impact on e-commerce. For example, an October 2001 report by Forrester Research found that $15 billion of projected 2001 e-commerce revenues could be unrealized because of consumers' concerns about their privacy. Among the key issues about online shopping identified by consumers are credit card number theft and the misuse of their personal information.

These figures demonstrate that companies cannot ignore the importance of privacy to consumers. Companies that fail to address privacy issues are likely to see an impact on their business.

The Role of the Media

Media reports about companies' privacy missteps have become not only front-page business section stories but true front-page stories as well. …