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282 Chapter 10 • Global, Ethics, and Security Management

fraudulent activity using a victim’s name. All of these have made it difficult for organizations to
balance the needs of various stakeholders. The good news is that identity theft in the United States
is declining. According to the third annual survey by Javelin Strategy & Research, a research firm
in Pleasanton, California, the estimated number of victims dropped for the fourth consecutive year
in 2006, by about 500,000, to 8.4 million persons. Researchers attributed the decline to better
consumer education and awareness as well as to the increased use of online banking and financial
sites that allow individuals to monitor their accounts more frequently. 27

Code of Ethics for ERP
With advances in new technology becoming a routine, organizations constantly face ethical chal-
lenges in dealing with information. ERP systems have become key tools for improving opera-
tional efficiency and building strategic alliances and partnerships. In the urge to gain competitive
advantage, these systems also become tools for violating the code of ethics. Due to the newness
of this technology, this area lacks the norms of ethical behavior one would find in established
disciplines. Nonetheless, managers implementing ERP systems in organizations must assess the
implementation in light of such ethical principles as PAPA, discussed earlier. There is a distinct
possibility of an ERP development team in which most members or team leaders with training in
computer sciences and engineering fields may not possess the background in ethics and social
norms to incorporate the code of ethics in ERP system.
There are three normative theories of ethical behavior 28 that can be used by organizations
to influence the ERP implementation. They are as follows:
• Stockholder theory. Protects the interest of the investors or owners of the company at all
costs. This is the ultimate implementation of the free market concept, where the responsi-
bility of management is to maximize profits with legal and nonfraudulent methods.
• Stakeholder theory. Protects the interests of everyone having a stake in the company suc-
cess, namely, owners and stockholders, employees, customers, vendors, and other partners.
Management using this theory has to balance the interest of these various groups while
making organizational decisions.
• Social contract theory. Includes the right of society and social well-being before the inter-
est of the stakeholders or company owners. Management using this theory must think of the
well-being of society first (e.g., protecting the environment or helping the socially challenged
individuals before thinking about profits of the organization).
In context of ERP implementation, the stockholder theory would implement very few
restrictions on using the information from this system to monitor employee performance or to
collect and share consumer information from the system. On the other hand, the stakeholder theory
would put restrictions on using the preceding information because the organization is committed to
protecting employee and consumer rights. Both these theories, however, would implement the ERP
only if the savings are greater than the costs, and they must improve the organization’s efficiency
and effectiveness. In context of the social contract theory, the ERP system would not be allowed to
share or collect consumer information unless the consumers were notified of this plan and only if
this activity would result in a net benefit to the society. These theories, even though not perfect,
provide management with guidelines on developing the code of ethics for their ERP implementa-
tion based on their organization’s culture and moral principles.

27 Mincer, J. (February 7, 2007). Identity-Theft Incidents Declined 12% Last Year. Wall Street Journal.
28 Hasnas, J. (1998). The Normative Theories of Business Ethics for the Perplexed. Business Ethics Quarterly, 8 (1),19–42.