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									Ethical Issues:
Managing Knowledge in Virtual Environments
Dr. Andrea Hornett
Penn State

Knowledge Management Group of Philadelphia – October Meeting 2004 AstraZeneca

Show of Hands
It's over! Martha is in „cupcake‟ prison. What‟s next?  What about Lay of Enron? Will he do time? Kumar, CA, indicted BUT…  Will they ever jail technophobe Bernie Ebbers of WorldCom?  Should CBS have run with that story?

Today‟s Format & Flow
1. 2. 3.

4.

Definitions Recent research evidence business scandals & ethical discernment. Trends in ethics & KM Speculations about the future…

Disclaimer:

I‟m no expert – I‟m just a facilitator of the topic. Okay to interrupt as we go…

What is this thing called ethics?

Differing Views:
Ethics: Standards of moral conduct; judgments about whether human behavior is right or wrong. (Hackman & Johnson, 2002, Leadership) Ethics: live a good life, act justly as well as decide and judge rationally our actions and our forms of living and working. (Cane, 1994, Financial Times) Ethics is the rational, systematic analysis of conduct that can cause benefit or harm to other people” (Quinn, 2004 p. 52).

The Dictionary Says “A discipline dealing with good and evil and with moral duty.”

Deconstruct “ethics” for Meaning “A discipline dealing with good and evil and with moral duty.”
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Without training or certification. More often between two goods or two evils Duty to self? Family? Company? Country?

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New Technology Creates New Ethical Dilemmas
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Cellular phones, Portable CD players Laptop computers www. Email Answering machines Word Processing Games E-tail: on-line shopping Networks Accessibility Open Source / Shareware Data Mining

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Overhearing chat Noise & “Free Music” Spoofs 24x7 Stress Pornography & Kids Spam Telephone solicitation No Secretaries! On company time? Identity theft Viruses Loss of Intellectual Property Capitalist bias for ownership? Privacy

KM Tools - More Neutral?
      

Portals Groupware Expert Locators Taxonomies After Action Reviews Passwords Story Telling

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Hierarchies of knowledge and access created to reinforce the “elites” & delineate membership.

Next?
at student interpretations of recent corporate scandals.  Consider how to “teach” ethics in corporations and business schools.  Review the aspects of KM and virtual environments that suggest the situation (lack of ethical discernment) is growing increasingly complex.
 Look

Ethical Reasoning:
Recent Evidence from Corporate Business Students
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Adelphia‟s John Rigas Joseph Berardino of Arthur Andersen who shredded files regarding his client, Enron & Enron‟s CEO Ken Lay Joseph Nacchio of Qwest Global Crossing CEO Gary Winnick ImClone Systems‟ CEO Sam Waksal & Martha Stewart Dennis Kozlowski & Mark Swartz of Tyco AOL-Time Warner: Pittman, Logan & Bewkes Jack Welch, retired CEO from GE WorldCOM‟s Bernard J. Ebbers, former CEO
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& Scott Sullivan, former CFO

Grew Quickly – 36+
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Adelphia‟s John Rigas. Joseph Berardino of Arthur Andersen who shredded files regarding his client, Enron. Enron‟s Ken Lay, former CEO; Rick Causey, former Chief Accounting Officer at Enron & Sherron Watkins. Joseph Nacchio of Qwest. Global Crossing CEO Gary Winnick. ImClone Systems‟ CEO Sam Waksal, his friend Martha Stewart of Martha Stewart Living, OmniMedia, Inc., and their Merrill Lynch broker Peter Bacanovic. Dennis Kozlowski of Tyco. Robert Pittman, formerly head of America On-Line and Time Warner conglomerate; Jeffrey Bewkes of Home Box Office; Don Logan of Time, Inc. Jack Welch, retired CEO from GE. WorldCOM‟s Bernard J. Ebbers, former CEO; Scott Sullivan, former CFO; Cynthia Cooper, vice president of internal audit. Current CEO, John Sidgemore. Jack Grubman telecommunications analyst at Salomon Smith Barney. Max E. Bobbitt, Chairman of the Board‟s Audit Committee on the WorldCom board. Bert C. Robberts, former chairman of MCI. Melvin Dick, currently the Chief Financial Officer at Coldwater Creek, a women‟s apparel retailer, was a partner at accounting firm Arthur Andersen and headed-up the WorldCom audits. David F. Myers, former controller, WorldCom. Richard Scrushy, Health South. Frank Quattrone, Credit Suisse First Boston. Richard (Dick) Grasso New York Stock Exchange. Gregory Parseghian, Freddie Mac. Peter Scannell, Putnam Investments. John Hill, board chief; former CEO Lawrence Lasser The Partners in Alliance Capital Management Holding, LP. Parmalat – Calisto Tanzi, founder Cesare Geronzi, Chairman of Capitalia. Luca Sala consultant & Louis Moncada, banker. Boeing – former CEO Philip Condit. Michael Sears, former CFO.

What we interpreted
comments by students in the classroom when discussing the leaders  Annotated Bibliography assignment and a presentation that followed  Research Papers on the leaders and their leadership styles.  1250 pages grew to 4500  Survey: n=117
 Initial

3 Patterns
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(1) Bad Luck  This was Lay‟s initial defense – too bad!  Students see many (e.g. Welch, Condit at Boeing, Qwest, & AOL-Time Warner) as unlucky. (2) Winner Take All Philosophy (zero-sum game) – Alphas get the toys (e.g. Kozlowski; Welch) (3) Family Values> ethics  Rigas – Adelphia Cable was a family business.  Waksal – father and daughter sold stock.  Kozlowski – ex wife posts bail.  Fastows of Enron trying to coordinate jail time to nurture their young children

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In their own words…..
Welch had bad luck
A student claimed that Jack Welch became part of this study “only because he filed for divorce.” If it was not for that “one unfortunate incident” the amount of his retirement package and his perks would not have been revealed.

Welch is much admired – Winner Take All
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He “increased GE’s rate of growth and created more value than any CEO in history.” One wrote: “Personally, I have gained a great deal of business leadership knowledge reading about Jack Welch’s many leadership styles and techniques. … His compassion [sic] for business leaves one with a sense of awe and respect. He is an inspiration because he is someone who worked hard and got what he wanted, a true American success story. He lived the dream of almost every working class person.”

In their own words…
Rigas = Patriarchy = Family Values
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One student felt sorry for what happened to Rigas, an old man, and focused on his good deeds at home in Coudersport, PA, saying : “Even before Rigases [sic] success with Adelphia Cable Company, Rigas was a giving and compassionate man.” Another student claims that as the company grew, “Rigas focused more on what he could gain and not on what the company would gain almost as if it became an entitlement for him.”

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Two students believed that Rigas became confused about the difference between what was his and what is the company‟s. Both students did not seem to grasp the magnitude of the fraud or the nature of the victims (stockholders). Both felt that Rigas did well in taking care of his family and the people of his small home town. The student‟s explanation for Rigas‟ behavior was simply “Bad luck.” “He was too confused to use judgment and he just got caught.”

In their own words…
Other examples: bad luck & family empathy:
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Joseph Nachio @ Qwest “If the merger between Qwest Communications and US West had not taken place, then the accounting scandal would not been [sic] uncovered.”
AOL-Time Warner – without fulfillment of the expected synergies and valued growth. … “not the fault of Bewkes, Logan and Pittman” but a “string of incidents.” CFO Sullivan @ WorldCom – sole caretaker for toddler son since wife hospitalized with diabetes. “People that he worked with throughout the years and his associates on Wallstreet [sic] all had trust and confidence in him as a fellow businessman and as a family man…Like many influential leaders, he has many good qualities in his personality and the few undesired [sic].

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Patterns Confirmed
 Trustworthiness

techniques employed –

with interpreters  Interpretation of student work and comparison between two courses done 3 times – n= 150 students  Survey conducted with students in other courses n=117 – confirm the patterns.

Implications from student interpretations
No connection of actions to consequences and vice versa.  Lying about it when caught worse than unethical acts (HBR – Miss Manners).  Many values >ethics, especially getting ahead & taking care of family.  Winners (aka Leaders) deserve more than others. The Alphas get the toys.
 Accountability?

Conclusions from Research
theories do NOT enable students to discern aspects of unethical behavior. 4/19 Lship theories incl. ethics.  Lack of ethical discernment does NOT correlate with level of cognitive ability. Critical thinking can be present without ethical judgment (contra Kohlberg).  Corporate and B-school ethical training may not fix the underlying problem.
 Leadership

So what? & Now what?
events planting the seeds for “some” institutionalization of checks & balances (e.g. Sarbanes-Oxley) and ethical training (federal sentencing guidelines).  Business schools & textbooks scrambling: Managerial development should include aspects of ethical discernment and ethical decision-making.
 Recent

New CEO ?
your company have a new CEO? Chief Ethics Officer  Under Federal Sentencing Guidelines, Corporations can reduce their culpability for crimes by having an effective program to prevent and detect violations of law.  Ethics policies can reduce the exposure of corporate officers and directors.
 Does

Effective Ethics Program:
1.

1. 2. 3. 4.

Establish corporate standards & procedures (S & P). Appoint at least one high level individual to oversee compliance. Require all to participate in training or at least read about the S & P. Implement monitoring & auditing systems. Enforce the standards – detect & prevent.

Legal Compliance
 The

tip of iceberg:

Gestalt Principles – Help to explain the phenomena – anesthetized
Principles that Heighten Awareness Perception Principle- data is clearly and sharply focused vs. background state Co-Existence Principle – data that is opposite but counter-balancing (heart vs. mind). Realization Principle – data that is intimately personally perceived vs. present but unrecognized (perhaps foggy) data Present Principle – Data that is dealt with in the “here-an-now” vs. past or future data. Principles that Anesthetize Perception Blind-Faith Principle – uncritical acceptance of another person‟s values Shifting-Responsibility PrincipleMaking another person responsible for your behavior. People-Pleasing Principle – Continuous “buying into” another person‟s value system in order to be identified with that person. Diversion Principle – The “warding off” of the main issue to a peripheral or insignificant issue.

Criteria of Heightened Ethical Awareness & Discernment
Principles that Heighten Awareness Perception Principle- data is clearly and sharply focused vs. background state Co-Existence Principle – data that is opposite but counterbalancing (heart vs. mind). Realization Principle – data that is intimately personally perceived vs. present but unrecognized (perhaps foggy) data Present Principle – Data that is dealt with in the “here-an-now” vs. past or future data. Implications for the Management Aspects of Ethical Decision Making & KM: Question Data – check/recheck Values Clarification

Ask for implications Identify trends

Note: 1st is Six Sigma; Second is McKinsey 7 S; final two are SYSTEMS Thinking.

Necessary but not sufficient
ethical discernment in decision making, not just legal compliance.  Need to create decision making cultures that reduce anesthesia. And….hit a moving target…  Increase in globalization and virtual nature of decision environments increase both the amount and the nature of ethical dilemmas.
 Need

KM lives in Virtual World
Ubiquity of computers and networks raises new issues and increases complexity ->  Copyright infringement  Corporate assets for personal use: email, Internet searches  Privacy & use of data on individuals  Extend company ethics to vendors…?

A Gap
“There is often a gap between ethics in the workplace and the sense of what is right and wrong in the family or with friends.”

At work

vs

at Home

[Source: Hodel-Widmer & Luthi, ETHICOMP.]

Why the Gap? What is Work Like?
5 Factors:

Peer Pressure Conflict Avoidance Market Factors Speed Environments

1. Peer Pressure

 Peer

pressures at work tend to create conforming behaviors, less freedom / liberty than at home. No data on how working from home may change this (or not).

2. Competition
competition generates conflict avoidance.  Competitive pressures both within and outside work environments tend to create behaviors that avoid open conflict (little dialogue around values).  Lack of fully collaborative electronic communications serves to further limit such dialogue.
 Paradoxically,

3. Market Forces

 Market

pressures at work tend to create cultures of action (not reflection, a key ingredient in ethical discernment).

4. Speed

 Increase

in speed of transactions and decrease in personal interactions moves accountability from persons to systems (making accountability more ambiguous).

5. Environments
 Organizational

environments create internal organizational dynamics. These organizing mechanisms respond to the relative variability and instability of the corporation‟s environment.

Organizing Mechanisms derive from environmental factors
^
| V A R I A B I

Networks

Virtual Organizations

L

Markets

Hierarchies

I
T Y |

o ---- ----

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I N S T A B I L I T Y > ----------------------------------

Assumptions:
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Virtual forms will proliferate due to increasing levels of complexity and variability in environments.  Therefore, managing across geographic and organizational boundaries will be critical.  Therefore, knowledge management strategies are also critical.  The temporary, morphing/modulating nature of virtual organizations poses unique ethical issues.

Some Current Scandals & Organizational Type
Network Virtual WorldCom, Qwest, Enron Global Crossing Arthur Anderson Quattrone / First Martha Stewart Boston Market Krispy Kreme Health South Hierarchy TYCO Adelphia Parmalat Boeing

Unique Ethical Issues in Virtual & Network Situations
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Enron created virtual companies to absorb loses while the parent company (a trading company, not an energy company) appeared profitable and growing.  Telecom companies (WorldCom, Global Crossing) booked assets to both partners in swap deals creating virtual trade winners and no losers in a zero sum game.

Prospective Ethical Issues in Virtual Organizations
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A virtual enterprise is created for a specific market opportunity. After the goal is completed, some partners create a new virtual organization with competencies acquired from the joint project. Is that ethical? Is it ethical that one firm works at the same time in two virtual organizations if each of the partners are competitors?

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Who is the responsible / accountable party in a virtual partnership if there is no single legal entity?
Virtual firms can allocate projects to lower cost countries with unregulated working conditions - Off-shoring is essential virtual.
Source: Mario Arias Oliva, The ETHICOMP E-Journal vol.1.

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To the Contrary
organizations actually offer opportunities for a more ethical, more equitable society and corporate environment. e.g. BLOGs - RSS aka XML  And, virtual organizations are more democratic – always a good thing.
 Virtual

Virtual = Team = Ethical Values
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Virtual organizations offer community, excellence, integrity, respect for the individual  Lead to > character, profile, and a positive climate and culture for the company.  Distance is irrelevant therefore a new kind of collaboration is possible. Time is compressed and memory is electronically available.
Source: Thomas B. Hodel-Widmer &Ambros P. Luthi, ETHICOMP Journal

More Benefits
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Because everybody can “speak” at the same time in asynchronous computer meetings, fewer ideas are forgotten and more ideas are born. The participants do not have to follow the meeting permanently without having the time to form their opinion. In computer-supported meetings there is no dominance of team members due to position or other qualities. There is no monopolizing of a discussion by certain team members because of their position, their character or other reasons. Teams with communication–supporting systems recognize errors, problems and dead ends in ideas more quickly. Teams with information supporting system have more information at their disposal than teams without such systems. Therefore, they can make better decisions. Source: Hodel-Widmer & Luthi

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Ethics Needed Now More Than Ever
 Pro

or Con the growth in virtual organizations, it is clear that they are responses to increased complexity. of increased complexity and cultural diversity challenge our moral compass and see us seeking our ethical bearings.

 Times

Different Ethical Orientations
“Me”
Values Clarification Rokeach One‟s Own Values Virtue Ethics (Aristotle)
“Us”
Moral Development Kohlberg / Rest‟s Model Situational Values “Act” Utilitarianism (Hobbes)

“Shoulds”
Normative Kantian Categorical Imperative; Hobbesian Rule Utilitarianism Light of Day

Trends:
Competing Values Of Multiple Obligations / Competing Duties to org & society

Ethical Models
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Kant‟s Categorical Imperative  Individuals ought to do what is morally right, no matter what the consequences. (Hackman & Johnson, p. 324) Utilitarianism  Generate the most benefits compared to disadvantages  Benefit the largest number of people. (Hackman & Johnson) Rule Utilitarianism – The Principle of Utility (Quinn) Virtue Ethics– Aristotle‟s Nicomachean Ethics: happiness results from living a life of virtue  Develop the description of the ideal person  Identify the virtues that make up the character  Outline how individuals can acquire the required virtues (Hackman & Johnson, p. 326)  Can be combined with other approaches

More Ethical Models
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Relativism: no universal moral norms of right and wrong – 2 kinds: Subjective & Cultural Divine Command Social Contract & Rawl‟s Principles of Justice Friedman‟s Stockholder Theory – max. return Servant-Leader (Greenleaf, 1977)  The servant leader is servant first.  Leadership test: Do those served grow as persons? (Greenleaf, 2002, p.1).

Comparison of Four Theories
Theory Motivation
Kantianism Dutifulness

Criteria
Rules

Focus Strategy
Individual Recruiting BEI (Rest)
Corporate Decision Process

Act
Utilitarianism

Consequence

Actions

Group

Rule
Utilitarianism

Consequence / Duty
Rights

Rules

Group

Corporate Decision Rules
Corporate Leadership

Social Contract

Rules

Individual

Rest‟s Model
Moral Sensitivity

Moral Judgment

Moral Action

Moral Motivation

Future?
Foundations of Post-Industrial Society aka the Knowledge Society.  Drucker (1993) identified the new aspects of economy, polity and society of the PostIndustrial Knowledge Era. No one has yet identified the ethical foundations.  In the meantime, in all the confusion, we will think the same as the students: first me and my family.
 Ethical

Thank You!
appreciate the opportunity to explore a wiggly worm that is nowhere near the hook.  Many thanks to AstraZeneca for hosting the Knowledge Mangement Group of Philadelphia region.  Next month: DuPont‟s Taxonomy – one they are using for legal and ethical compliance.
I

Resources:
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Randy Cohen: The Good, The Bad & The Difference {ethicist from NY Times} Ethicomp – a Journal of research on ethical issues affecting computerized functions and communications. Marianne M. Jennings, A Business Tale {Speaking at AstraZeneca today}. Michael J. Quinn, 2004. Ethics for the Information Age, Boston: Pearson: Addison/Wesley Wheeler & Sillanpaa, The Stakeholder Corporation, 1997. http://www.aicpa.org/sarbanes/index.asp newsletter “Ethically Speaking”


								
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