As business environments become more complex and reliant on information systems, the decisions made by managers affect a growing number of stakeholders.
This paper proposes a framework based on the application of normative theories in business ethics to facilitate the evaluation of IS related ethical dilemmas and arrive at fair and consistent decisions. The framework is applied in the context of an information privacy dilemma to demonstrate the decision making process. The ethical dilemma is analyzed using each one of the three normative theories?? the stockholder theory, stakeholder theory, and social contract theory. The challenges associated with the application of these theories are also discussed.
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Keywords Ethical decision making Normative theories of business ethics ?? Information systems ?? Information privacy Introduction Ethical dilemmas faced by managers when making information systems related decisions have received increased attention as information genealogy continues to become omnipresent in our lives. However, there has been only limited progress in the development of a framework that would facilitate the application of normative theories of business ethics towards resolving ethical problems in the information technology (IT) business environment (Stall U.
Bose (&) Finance, Accounting, and Computer Information Systems Department, University Of Houston Downtown, one Main street, Houston, TX 77002, USA e-mail: [email protected] Dude 2008). Three major theories of normative business ethics, namely, stockholder theory, stakeholder theory, and social entrant theory are particularly relevant in this context (Lauded and Lauded 2009). The stockholder theory posits that managers should resolve ethical problems by taking actions that enhances long-term shareholder value without violating the law or engaging in fraud or deception.
The stakeholder theory, on the other hand, suggests that managers should resolve ethical problems by balancing stakeholder interests without violating the rights of any stakeholder. Finally, the social contract theory argues that managers should strive to increase social welfare above what it would be in the absence of the existence of corporations without allotting the basic principles of justice.
The purpose of this paper is to address the question, “How can IS managers effectively and accurately evaluate potential ethical problems that are often encountered in the new technology based business environment? ‘ In doing so, we discuss the usefulness and application of the above theories to Israelite ethical problems and develop a decisional framework that can be applied to the analysis of ethical problems encountered by information systems (IS) managers in the corporate business environment. In addition, the challenges associated with each of these theories will be explored.
The information systems ethics literature In order to develop a framework to evaluate ethical dilemmas, it is important to consider the values we uphold as a society, the ethical principles that we are guided by, and the role Of IT in the decisions that have to be made in the corporate world. An example of the values that we as a society uphold are found in the Charter of Fundamental Rights of the European Union (2000), and include human 123 18 dignity, freedom, democracy, human rights protection, pluralism, non-discrimination, tolerance, justice, solidarity, and gender equality.
These values are key to the construction of all policies of the European Union. Of particular interest is Article 8 which emphasizes protection of personal data, and thus is of considerable significance in an information technology based business environment. The article defines an individual’s right to the protection of personal data. It says that such data must be processed fairly for specified purposes and on the basis of the consent of the person concerned or some other legitimate basis laid down by law. Everyone has the right of access to data which has been collected concerning him or her, and the right to have t rectified.
The article further stipulates that compliance with these rules shall be subject to control by an independent authority. The Council of Rupee’s convention for the Protection of Human Rights and Fundamental Freedom in its Article 8 as amended by Protocol 1 1 addresses the right to respect for private life, his home, and his correspondence (Council of Europe 2010). The EX.’S Data protection Directive (95/46/CE) identifies a set of fair information practices or principles which are important in any consideration of ethical issues that might arise in matters affecting privacy and data protection.
As such, these values can be viewed as being particularly relevant in the evaluation Of the ethical dimensions of IS decisions. With respect to the ethical principles, a number of studies have examined the role of traditional philosophical theories for the purpose of framing IS related decision making questions (van den Woven and Wicker 2008). Such theories can be broadly classified into two categories ??rule based and consequentiality. The rule-based perspective postulates that an action is “right’ if it follows a rule that guides ethical behavior.
The consequentiality respective, on the other hand, focuses on the consequences that follow from a particular action. The literature on philosophical ethical principles is discussed in greater detail in the following section. It is becoming apparent that the ethical dimensions of Seriated business decisions cannot be safely ignored. Because of this, growing attention is being paid to ethics in IS curricula, and researchers are devoting an increasing amount of attention to deeper analysis of such issues (Bucolically 2008; Little and oz 2008; Matched 2008).
Typically, when IT is involved in a decision, the consequences of which are beatable, there is a tendency to treat the IT as a black box. However, it must be remembered that technologies are neither neutral nor value free (Wright 2010). The actions of a decision maker and the consequences that follow are often shaped by the technologies that played a role in the decision or its implementation. Vermeer (2009) advises that we should pay greater attention to the role of technology when it plays an increasingly important role in our decision making.
U. Bose IT evolves rapidly and the contexts in which the IT artifacts are used also dynamic. Consequently, when researchers assume the IT artifacts as unchanging in studies that examine the impact of those artifacts, it limits our ability to fully understand its implications for individuals, organizations, and society (Rollicks and laconic 2001 As IT evolves and there is convergence with other technologies, the ethical implications also simultaneously become more complex.
Wright (2010) proposes that ethical impact assessment should take into consideration not only the ethics of the technology but its values, how the use of the technology is perceived, how it is being currently used and how it might be used in the future. He further advocates assessing notes the standalone implications of the technology, but also as a component of a larger technological network. A number of research studies have examined ethical implications of decision making in specific situations involving IT.
These have used behavioral models to assess which actions are perceived by the decision maker as ethical or not. For example, the study by Contaminants et al. (2010) investigated the attitudes, behaviors, and reasoning of computer science students towards computer software piracy and found that the students in Greece blamed this behavior on the cost of genuine software, academic environment, coincidental stereotypes, and their student status. Others have developed theoretical frameworks that have guided ethical analysis in either a laboratory or a field setting (Hindu 2007).
Several IS ethicists have used the traditional philosophical theories as a framework for evaluating ethical dilemmas (Bishop 2000; Mason et al. 1 995; Reynolds 2009). While consensus on the efficacy of individual approaches has been lacking, it has generated considerable discussion and analysis. The vast majority of ethical dilemmas that affect segments of the population ether than just individuals exist in corporate decision making, in which the decision maker is constrained to make an ethical choice not just as an individual but as an employee of a corporation (Stevens 2008).
In our study, we choose the same corporate environment to explore how normative theories of business ethics can be applied to resolve ethical quandaries. We next review the traditional ethical theories based in philosophy and present the linkages to normative theories before we apply the normative theories to ethical decision making in IS related issues. The philosophical theories of ethics Moral philosophy provides the basis for ethical theories that guide our ethical decision making.
The commonly referred ethical theories developed by philosophers and ethicists are the utilitarian moral principle (Mill 1965), the rights moral principle (that is, demonology, Cant’s Categorical An ethical framework Imperative) (Kant 1 785/1959), and the distributive justice moral principle (that is, Rawlins principles of distributive justice) (Rails 1971). These approaches have a focus on either the outcome of a situation??a consequentiality view?? or upon the process or means to that outcome??a rule-based IEEE.
In other words, whether an action can be viewed as being “right” depends on whether the action follows a rule for ethical behavior (I. E. , the rule-based perspective) or whether the consequences that follow from the action are viewed as being appropriate (I. Eћ the consequentiality perspective). One example of consequentiality or teleological philosophies is utilitarian ism while rule-based approaches include deontological approaches such as those advocated by Emmanuel Kant.
Kant theory is often associated with the moral rights and duties of an individual in which an individual has the right to expect to be treated according to universal moral laws and is also expected to behave according to such laws. The particular moral law according to which people should behave is known as the “categorical imperative” to which Kant proposed several versions. Cant’s categorical imperative is readily understood by reference to the “Golden Rule”: “Do unto others as you would have them do unto you”.
The utilitarian moral principle says that the moral worth of an action is determined solely by its usefulness in maximizing utility and minimizing negative utility as summed among all beings. It adopts the inconsequential perspective and it emphasizes that the goal Of greater happiness can be achieved only by nurturing the decency of individuals so that all can benefit from the honor of others rather than focusing on just one individual’s happiness.
The Rawlins principle of distributive justice argues that if individuals are unaware of their place in society, their class position or social status, such ignorance will lead to privilege of not any one class of people, but develop a scheme of justice that treats everybody fairly. Being in this state of impartial rationality, individuals would create a social system that would allow them a built-in social impetus to recover from otherwise uncontrollable personal and financial setbacks of various kinds.
Rails then proposes that from this “original position” (a state of ignorance of the current social system, or living under a ‘Ceil of ignorance”), rational persons would adopt a maximum strategy which would maximize the prospects of the least advantaged member of the society. While the philosophical ethical theories have been discussed and referred to extensively in ethics literature, several researchers (e. G. , Savannah et al. 1 995; Hosannas 1998) have argued that the abstract nature of these theories makes it rather difficult for individuals to relate them to the complex details of business decision making.
Hosannas (1998) contends that terms such as “deontological requirements” and “rule utilitarianism” which are used in traditional philosophical 19 ethics do not figure in the vocabulary of an average business professional with little or no philosophical training. Not surprisingly, they find it difficult to extract any guidance from those abstractions. Similarly, Savannah et al. (1995) have argued that the ethical theories, particularly those of Kantian ontology, are too obscure, complex, and vague to be of much use to managers in their decision making role.
They proposed a model in which the ethical theories provide philosophical justifications and rationales for more familiar and more specific action-guiding norms. They invoked Cant’s categorical imperative to explain why certain specific rights are morally justified in business relationships; the Rawlins principles of distributive justice to explain why certain specific rules of justice are morally justified; and Beneath and Mill’s utilitarian moral principle to explain why certain specific efficiency norms are morally justified.
The applicability of Rail’s principles to the real world has been doubted because of the stark difference between pure idealism in the concept of the “original position” and the reality of widespread inequalities in existing society (Velasquez 2006). Others reject Rail’s claim that rational individuals would attempt to protect themselves from major, negative outcomes (Lacking and Murphy 2008). They point to the risk-taking behavior prevalent amongst successful and intelligent business professionals in the context of stock market investments and casino gambling.
Critics have also mound it problematic to apply the difference principle in Rail’s formulations which proposes that social policies be evaluated on the basis that any inequalities in the policies be arranged in a manner that benefits the least well-off. Who exactly are these least well-off? The bottom 10%? Or the bottom quintile? Does it apply to only impoverishment, or also to lack of health care and higher education? Oral himself later observed that the difference principle was designed with a North American, Western European context in mind, and it might not be suitable in the context of developing or underdeveloped economies (Lacking and
Murphy 2008). On the other hand, it can be argued that the Rawlins maximum principle has the underpinning to help create public policy concerning distribution of the primary social goods??liberty and opportunity, income and wealth, and the bases of self-respect??among the members of the society. An example of how some governments are applying the principle is the adoption of a progressive tax policy. Whether such a policy is providing the desired impact is also typically measurable by means of appropriate analysis of data collected from the affected economy.
Normative theories of business ethics It is common knowledge that people, who have been trained in engineering, computer science, and information 20 systems, as well as other business professions, frequently have little training in ethics, philosophy, and moral reasoning. Without a vocabulary with which to think and talk about what makes up an ethical computing issue, it is difficult to have business professionals conduct discussions that lead to the development of ethical decision making norms (Loch and Conger 1996).
Rather than requiring working managers to learn the refinements of formalism and arcane philosophical logic, some researchers (Hosannas 998; Savannah et al. 1995) have proposed ethical constructs based on the principles that are embedded in the philosophical theories of ethics. These theories are considered to be intermediate level principles that mediate between the highly abstract philosophical ethical theories that we introduced in the earlier part of this paper, and the real life ethical dilemmas that managers face in the business context.
While philosophical ethics provides us with guidance in all aspects of our lives, a normative theory of business ethics attempts to target ethical predicaments in business environments (Hosannas 1998). Savannah et al. (1995) used a three-level process to apply ethics to evaluate real-life ethical dilemmas. The first level has the ethical theories with their embedded principles. A second intermediary level is made up of specific and more familiar norms of utilities, rights, justice, and caring that are justified by the ethical theories on the first level.
The third level is comprised of the application of these intermediary and familiar norms to specific situations. By adopting such approaches, business ethicists have developed “normative theories of business ethics” (Notes) (Hosannas 1998). Using an approach similar to that discussed above, these theories attempt to derive intermediate level ethical principles expressed in language accessible to the ordinary business person and which can be applied to the actual problems of the business environment. The Notes focus exclusively on interactions that involve business relationships.
Because they are normative, they outline obligations that managers “should” or “ought” to fulfill, and which didst anguishes them from descriptive statements, which describe how the world “is”. The three leading Notes are the stockholder theory, the stakeholder theory, ND the social contract theory. Next, we briefly discuss these theories including their linkages to traditional ethical principles, comment on their applicability to the ethical dilemma of information privacy and highlight some of the challenges faced by managers in applying these theories.
The stockholder theory Stockholder theory maintains that corporate executives have a fiduciary responsibility to the stockholders of the corporation to maximize shareholder value. That is because the stockholders invest in the corporation by purchasing shares with the intent of maximizing their return on investment ROI). The executives are then obligated as agents of the stockholders to raise the corporation’s profitability within the law and without engaging in fraud or deception. According to Milton Friedman, “…
There is one and only one social responsibility of business??to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud. ” (Friedman 1 962 p. 133). Stockholder theory also expects managers to maximize long-term shareholder value. It dictates that managers should not indulge in actions that boost short-term gains at the expense of the corporation’s long-term financial health (Friedman 2007).
A moral argument of teleological nature in the stockholder theory is that by pursuing profits, individuals will also be promoting the interests of the society (Even and Freeman 1 988; Quinn and Jones 1995). However, critics have argued that externalities and coercive monopolies can and have impacted the operability of free market and contribute to instances of market failure. As such, a simpleminded quest for profit cannot be relied upon to deliver the best interests of society (Even and Freeman 1988).
A second moral argument of the stockholder theory, which is deontological in nature, posits that if executives use stockholders’ investments in the pursuance of goals not authorized by stockholders, then the executives would be spending someone else’s money without their permission, which is wrong no matter what the consequences are (Friedman 1962). However, it can be argued that as long as the money is spent on promoting the interests of the society within which the corporation operates, it is morally justifiable to spend such resources without he investors’ consent (Donaldson 1982).
In reality, when an investor purchases a firm’s stock shares, it is deemed that he has approved the firm’s published vision, mission, and value Statements that may include the firm’s corporate social responsibility to spend money on corporate philanthropy (Bowie and Freeman 1992). In this example, the stockholder theory is not violated when executives decide to spend investors’ money for public good in accordance with their corporate mission. The stakeholder theory The stakeholder theory states that executives have a fiduciary duty not only o the company’s stockholders, but also to its stakeholders.
A stakeholder is anyone or any group with an interest in the company’s success in delivering intended results and in maintaining the viability of the company’s product and service. It also includes those who can be affected by the actions of the firm. Such parties typically include customers, employees, suppliers, community, creditors, and stockholders, with the government and competitors being left out by most normative stakeholder theorists (Smith 1994). It can include other parties, too, who are important to the survival and success of the company. According to the stakeholder theory’ the ethical rights of the stakeholders must be assured.
Moreover, managers must act in the interest of stakeholders as their agent, and they must adopt corporate policies that ensure the survival of the firm while taking care of the long-term stakes of each stakeholder (Even and Freeman 1988). Stakeholder theory is based on the same Kantian principle of respect for persons as the stockholder theory. Managers may not treat their corporation’s stakeholders merely as means to corporate ends but must recognize that all stakeholders are entitled to “agree to and hence participate (or choose not o participate) in the decisions to be used as such” (Even and Freeman 1988).
Proponents of the stakeholder theory have reasoned that this implies that the stakeholders have a right to play a role in the determination of the future direction of the corporation. However, because it is impossible to consult with every stakeholder on every decision to be made, management should take into consideration the interests of all stakeholders in an equitable manner when making business policies.