How Much Should a Company Pay for Failing to Protect Its Users?

The True Cost of Privacy Failure: How Much Should a Company Pay for Failing to Protect Its Users?

Could a historic fine truly deter a tech titan? When Facebook (now Meta Platforms) was fined $5 billion by the Federal Trade Commission (FTC) in 2019 following the Cambridge Analytica scandal, the number was historic—the largest fine ever imposed for a data privacy violation at the time. Yet, as an $8 billion shareholder lawsuit targeting Mark Zuckerberg and Meta’s board heads to trial in 2025, one question looms even larger: Is that fine actually enough? If past penalties are merely absorbed as a cost of doing business, do regulators lose the power to meaningfully influence behavior, thereby enabling a pervasive culture of compliance over true ethical responsibility?

The answer isn’t just a matter of financial penalty—it's a question of principle, proportionality, and trust. What does it really cost to fail in protecting user privacy? And more importantly, do these punishments deter tech giants from repeating the same violations?

The Financial Price: Does It Deter or Enable?

At first glance, the FTC’s $5 billion penalty against Facebook might appear harsh. But for a company generating tens of billions in annual revenue—Meta reported $134.90 billion in revenue for the twelve months ending March 31, 2024 {1}—it’s debatable whether that amount represented punishment or merely a licensing fee for misbehavior.

Facebook’s stock price notably rose after the penalty was announced {2}. This market reaction was often interpreted as relief that a known cost was now quantified, rather than a punitive blow. That moment raised critical doubts: if markets perceive fines as manageable “costs of doing business,” have regulators lost the power to meaningfully influence behavior?

In this context, the current shareholder lawsuit is pivotal. Plaintiffs argue that Meta’s board failed in their duty of oversight, leading to massive reputational and financial risk. The trial could set precedent by holding board members personally accountable, not just the corporate entity—a major shift in how we evaluate cost and responsibility for privacy breaches. This could fundamentally alter the financial calculus, elevating privacy oversight to a core fiduciary duty—similar to the broader board-level accountability reforms introduced under the Sarbanes-Oxley Act, which reshaped corporate governance in the wake of early 2000s financial scandals.

The Reputational Toll: Invisible But Potent

While fines make headlines, reputation erosion is often the more damaging, long-term cost. Once a company is associated with privacy violations, rebuilding user trust becomes a slow and fragile process. This impact extends beyond user perception, affecting talent acquisition, partnerships, and even heightened regulatory scrutiny. Other companies, like Equifax following its 2017 data breach, have also experienced prolonged reputational struggles that underscored the lasting damage {3}.

In the wake of the Cambridge Analytica revelations, Facebook saw a measurable decline in trust among users, especially in Western markets. According to a 2019 Ponemon Institute study, only 22% of Americans believed Facebook was committed to protecting their privacy, down from 79% in 2017 {4}.

Even years later, lingering skepticism persists. Privacy is now a luxury issue: consumers with means are increasingly willing to pay for services that promise protection and transparency. This is evident in the rise of subscription-based ad-free platforms, secure messaging apps, and widespread adoption of VPNs. For a company whose business model is predicated on collecting and monetizing user data, loss of trust translates directly into competitive risk—driving users to privacy-first platforms and apps.

The Ethical Dimension: What Is User Data Really Worth?

Unlike oil or real estate, personal data lacks a universally accepted price. But it's arguably one of the most valuable commodities of the digital economy—powering advertising, shaping elections, and informing AI models. Companies profiting from this invaluable asset bear a profound ethical responsibility to protect it.

Yet when data is breached or misused, users rarely receive direct compensation. The company may be fined. Executives may issue apologies. But users—the individuals whose trust and privacy were violated—often walk away with nothing but a generic email notification, largely due to the systemic difficulty in proving direct, quantifiable individual harm beyond immediate financial losses like identity theft.

So how do we value what was lost?

Monetary Value: Some estimates suggest the average U.S. internet user’s data is worth between $240 to $1,000 per year to major platforms {5}. In aggregate, that becomes astronomical.
Emotional Value: Data breaches often expose deeply personal information—messages, photos, relationships. These violations are intimate, not just transactional, leading to feelings of betrayal and vulnerability.
Political Value: The Cambridge Analytica case revealed how personal data can be weaponized for political manipulation, raising the societal cost of weak data protection far beyond individual harm.

Ethically, companies profiting from user data should bear proportional responsibility when they fail to protect it—both in fines and in mechanisms that restore what was lost, fostering trust and accountability.

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The Behavioral Question: Do Penalties Change Anything?

One of the strongest critiques of financial penalties is that they rarely change underlying systems. Instead of transforming practices, companies may simply treat fines as operational risk, absorbing them without making meaningful structural changes. This often leads to a compliance-driven culture—doing the bare minimum to avoid penalties—rather than an ethics-driven culture that embeds privacy into core values and design.

Meta says it has invested billions into privacy since 2019. It restructured internal teams, introduced clearer user controls, and limited third-party access to data. But skeptics argue that these steps were reactive, not proactive. They were made after trust had been broken—not before. The challenge of truly embedding data ethics is immense for large organizations, requiring a fundamental shift in mindset.

Real change happens when companies embed data ethics into core leadership, not just compliance teams. That means:

Making privacy a strategic priority at the board level.
Designing products that default to data minimization, a "privacy by design" approach.
Being transparent with users about what’s collected and why.
Tying executive compensation to measurable privacy outcomes.

Without these reforms, penalties are symbolic at best, failing to address the root causes of privacy failures.

What a New Model of Accountability Could Look Like

If the $8 billion shareholder lawsuit against Meta’s leadership succeeds, it could signal a new era of accountability in tech. It raises a radical possibility: that directors and executives can be held financially responsible for privacy failures under corporate law. This shift aligns with global regulatory trends, such as aspects of GDPR that emphasize data protection officers and a "privacy by design" approach {6}, signaling a broader push for greater individual and corporate accountability.

Such a precedent would:

Elevate privacy oversight as a fiduciary duty, directly impacting board responsibilities.
Put pressure on boards to invest proactively in user protection, seeing it as a risk mitigation and value-creation strategy.
Make data ethics central to investor decision-making, influencing capital allocation.

This isn’t just about punishing the past—it’s about protecting the future. As AI grows more powerful and data becomes even more essential to innovation, the stakes of getting privacy wrong will only increase.

Conclusion

So, how much should a company pay for failing to protect its users?

The answer depends on what kind of society we want. If we accept that user data is foundational to modern business—and deeply personal—then we must also accept that violating it carries a cost beyond dollars. Ultimately, the answer hinges on whether we, as consumers and societies, demand that privacy is treated not as a negotiable operational cost, but as a fundamental human right and a core business imperative.

Until fines truly reflect the full spectrum of damage—financial, reputational, emotional, and societal—they will remain insufficient. Real accountability comes not just from penalties, but from reshaping corporate norms around user trust, pushing privacy to the forefront of innovation and executive responsibility. The ongoing Meta trial may not rewrite the rules overnight, but it’s a crucial step toward a world where privacy isn’t just a policy—it’s a price that must be paid when broken.