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1 Understanding Ethical and Social Issues Related to Systems In the past five years we have witnessed, arguably, one of the most ethically...

Refer to page 413 Figure 12-1 in your text – The Relationship Between Ethical, Social, and Political Issues in an Information Society. “The introduction of new information technology has a ripple effect, raising new ethical, social, and political issues that must be dealt with on individual, social, and political levels. These issues have five moral dimensions: information rights and obligations, property rights and obligations, system quality, quality of life, and accountability and control.” Give a business example of each.

12.1 Understanding Ethical and Social Issues Related to Systems In the past five years we have witnessed, arguably, one of the most ethically challenging periods for U.S. and global business. Table 12.1 provides a small sample of recent cases demonstrating failed ethical judgment by senior and middle managers. These lapses in management ethical and business judgment occurred across a broad spectrum of industries. In today’s new legal environment, managers who violate the law and are convicted will most likely spend time in prison. U.S. Federal Sentencing Guidelines adopted in 1987 mandate that federal judges impose stiff sentences on business executives based on the monetary value of the crime, the presence of a conspiracy to prevent discovery of the crime, the use of structured financial transactions to hide the crime, and failure to cooperate with prosecutors (U.S. Sentencing Commission 2004). Although in the past business firms would often pay for the legal defense of their employees enmeshed in civil charges and criminal investigations, now firms are encouraged to cooperate with prosecutors to reduce charges against the entire firm for obstructing investigations. These developments mean that, more than ever, as a manager or an employee, you will have to decide for yourself what constitutes proper legal and ethical conduct. TABLE 12.1 Recent Examples of Failed Ethical Judgment by Managers Enron Top three executives convicted for misstating earnings using illegal accounting schemes and making false representations to shareholders. Bankruptcy declared in 2001. WorldCom Second-largest U.S. telecommunications firm. Chief executive convicted for improperly inflating revenue by billions using illegal accounting methods. Bankruptcy declared in July 2002 with $41 billion in debts. Brocade Communications CEO convicted for backdating stock options and concealing millions of dollars of compensation expenses from shareholders. Parmalat 10 executives in Italy’s eighth-largest industrial group convicted for misstating more than $5 billion in revenues, earnings, and assets over several years.
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Bristol-Myers Squibb Pharmaceutical firm agreed to pay a fine of $150 million for misstating its revenues by $1.5 billion, and inflating its stock value. Although these major instances of failed ethical and legal judgment were not masterminded by information systems departments, information systems were instrumental in many of these frauds. In many cases, the perpetrators of these crimes artfully used financial reporting information systems to bury their decisions from public scrutiny in the vain hope they would never be caught. We deal with the issue of control in information systems in Chapter 7 . In this chapter we talk about the ethical dimensions of these and other actions based on the use of information systems. Ethics refers to the principles of right and wrong that individuals, acting as free moral agents, use to make choices to guide their behaviors. Information systems raise new ethical questions for both individuals and societies because they create opportunities for intense social change, and thus threaten existing distributions of power, money, rights, and obligations. Like other technologies, such as steam engines, electricity, the telephone, and the radio, information technology can be used to achieve social progress, but it can also be used to commit crimes and threaten cherished social values. The development of information technology will produce benefits for many and costs for others. Ethical issues in information systems have been given new urgency by the rise of the Internet and electronic commerce. Internet and digital firm technologies make it easier than ever to assemble, integrate, and distribute information, unleashing new concerns about the appropriate use of customer information, the protection of personal privacy, and the protection of intellectual property. Other pressing ethical issues raised by information systems include establishing accountability for the consequences of information systems, setting standards to safeguard system quality that protect the safety of the individual and society, and preserving values and institutions considered essential to the quality of life in an information society. When using information systems, it is essential to ask, “What is the ethical and socially responsible course of action?” A MODEL FOR THINKING ABOUT ETHICAL, SOCIAL, AND POLITICAL ISSUES Ethical, social, and political issues are closely linked. The ethical dilemma you may face as a manager of information systems typically is reflected in social and political debate. One way to think about these relationships is given in Figure 12-1 . Imagine society as a more or less calm pond on a summer day, a delicate ecosystem in partial equilibrium with individuals and with social and political institutions. Individuals know how to act in this pond because social institutions (family, education, organizations) have developed well- honed rules of behavior, and these are supported by laws developed in the political sector that prescribe behavior and promise sanctions for violations. Now toss a rock into the
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