Page 141 - Accounting Information Systems

112 PART I Overview of Accounting Information Systems

Ethical Issues in Business

Ethical standards are derived from societal mores and deep-rooted personal beliefs about issues of right
and wrong that are not universally agreed upon. It is quite possible for two individuals, both of whom
consider themselves to be acting ethically, to be on opposite sides of an issue. Often, we confuse ethical
issues with legal issues. When the Honorable Gentleman from the state of——, who is charged with ethi-
cal misconduct, stands before Congress and proclaims that he is ‘‘guilty of no wrongdoing,’’ is he really
saying that he did not break the law?
We have been inundated with scandals in the stock market, stories of computer crimes and viruses,
and almost obscene charges of impropriety and illegalities by corporate executives. Using covert compen-
sation schemes, Enron’s Chief Financial Officer (CFO) Andy Fastow managed to improve his personal
wealth by approximately $40 million. Similarly, Dennis Kozowski of Tyco, Richard Scrushy of Health-
South, and Bernie Ebbers of WorldCom all became wealthy beyond imagination while driving their com-
panies into the ground. Indeed, during the period from early 1999 to May 2002, the executives of 25
companies extracted $25 billion worth of special compensation, stock options, and private loans from
their organizations while their companies’ stock plummeted 75 percent or more. 1
A thorough treatment of ethics issues is impossible within this chapter section. Instead, the objective
of this section is to heighten the reader’s awareness of ethical concerns relating to business, information
systems, and computer technology.

BUSINESS ETHICS
Ethics pertains to the principles of conduct that individuals use in making choices and guiding their
behavior in situations that involve the concepts of right and wrong. More specifically, business ethics
involves finding the answers to two questions: (1) How do managers decide what is right in conducting
their business? and (2) Once managers have recognized what is right, how do they achieve it?
Ethical issues in business can be divided into four areas: equity, rights, honesty, and the exercise of
corporate power. Table 3-1 identifies some of the business practices and decisions in each of these areas
that have ethical implications.

Making Ethical Decisions
Business organizations have conflicting responsibilities to their employees, shareholders, customers, and
the public. Every major decision has consequences that potentially harm or benefit these constituents. For
example, implementing a new computer information system within an organization may cause some
employees to lose their jobs, while those who remain enjoy the benefit of improved working conditions.
Seeking a balance between these consequences is the managers’ ethical responsibility. The following
ethical principles provide some guidance in the discharge of this responsibility. 2

PROPORTIONALITY. The benefit from a decision must outweigh the risks. Furthermore, there must
be no alternative decision that provides the same or greater benefit with less risk.

Justice. The benefits of the decision should be distributed fairly to those who share the risks. Those
who do not benefit should not carry the burden of risk.

Minimize risk. Even if judged acceptable by the principles, the decision should be implemented so as
to minimize all of the risks and avoid any unnecessary risks.

COMPUTER ETHICS
The use of information technology in business has had a major impact on society and thus raises significant
ethical issues regarding computer crime, working conditions, privacy, and more. Computer ethics is ‘‘the

1 Robert Prentice, Student Guide to the Sarbanes-Oxley Act, Thomson Publishing, 2005, p. 23.
2 M. McFarland, ‘‘Ethics and the Safety of Computer System,’’ Computer (February 1991).