No man is an island, while the same is true of every business. All companies share an inherent degree of insecurity due to their need to protect trade secrets and other sensitive material. The problem is that businesses also require employees. Consequently, a business entity must have a mechanism to offer some degree of security when it comes to protecting information from outside interests bent on causing harm to a particular business entity. One legal aspect of this mechanism is the confidentiality agreement.
Confidentiality agreements exist to help prevent even little slipups that financially hurt a business. In the business world, contracts are law and law is concrete, at least when it comes to employee behavior. As a result, confidentiality agreements serve to reassure business leaders that they are protected. This can be an unfortunate assumption as law is only as concrete as people decide the consequences are relevant enough to consider when about to do something in violation of a contract.
Furthermore, confidentiality agreements are based on the perspective that offering legal penalties for inappropriately sharing or deliberately releasing sensitive data will discourage employees, as well as former employees or consultants, from doing so. As such, these agreements are usually designed to cover a broad range of ways employees could reveal data while offering a very general clause for punitive action. The result is a document that most employees can sign in order to offer a firm minimum protection against poor employee behavior.
Meanwhile, confidentiality agreements also force employees to consider how and what they say or do will impact a business. With identity theft, a majority issue for modern commerce, even the simplest, most nondescript piece of customer information can enable a wrongdoer to cause serious trouble. On the flip side, discussing simple issues like vendor discounts or rates received for company loans can undermine the competitiveness of any given firm. Frankly, even one piece of information may lead someone to a conclusion that can be used to benefit that individual.
Moreover, confidentiality agreements are a first line of defense where businesses are most vulnerable, i.e. their employees. Although confidentiality agreements may not be a particularly foolproof measure, they do discourage employees from engaging in unethical behavior. Certainly, every employer needs to focus on training ethical employees who serve as assets versus liabilities to a business; however, confidentiality agreements are useful for ensuring new hires and seasoned workers understand certain information is not to be shared.