Ethics and Information Systems: Resolving the Quandaries H. Jeff Smith Wake Forest University

Acknowledgements I am grateful to the associate editor, to three anonymous reviewers, and to Karen Loch for their helpful comments on earlier versions of this manuscript.

Abstract The information systems (I/S) community is becoming concerned with questions of ethical behavior in many realms. But those who attempt to resolve the quandaries may find themselves confused by differing approaches and theoretical assumptions that are often proffered. This paper provides a meta-framework that identifies the areas of convergence and divergence in these approaches and assumptions. An illustrative example (America Online’s plans to share subscriber information with telemarketers) is examined through several sets of lenses. Special attention is paid to the linkages between the theories, with fertile areas for future research identified. ACM Categories: K.4.0, K.7.m Keywords: Computers and Society, Ethics

Introduction “Ethical issues rarely pop up on meeting agendas and in hallway conversations, but they’re always present in information systems” (Saia, 1998, pp. 64-65).

No doubt many who follow the popular publications about information systems (I/S) have been struck by the increasing attention being paid to I/S ethical concerns. For example, Beyond Computing magazine, published by IBM and the New York Times, ran a regular column titled “Code of Ethics” from 1993 through 2000, in which a different I/S ethical quandary was examined in each issue. Computerworld publishes short articles about ethical quandaries on a regular basis, and it occasionally devotes an extended section to the exploration of specific ethical quandaries, as in the “What Would You Do?” series in March 1998 (Saia, 1998). CIO magazine has also embraced the topic on several occasions, with articles such as “Do the Right Thing” (Gotterbarn, 1992) and “Ethical Gray Matters” (Pastore, 1993). The general theme of these articles is that there are many ethical quandaries in I/S, and there is not always a single “right” answer. Indeed, it does appear that the I/S community is operating in an ambiguous ethical space, in which clear definitions of right and wrong are often elusive ones.1

Such ambiguity is often rebounding against strategic initiatives. Consider this Associated Press story from July 1997:

NEW YORK (AP) — With its stock plummeting and angry customers revolting, America Online backed off its plan to provide subscribers' phone numbers to telemarketers...

It came to light Thursday morning, with AOL saying its members would benefit because they would get discounts on popular products.

But during the day, privacy advocates called the plan an invasion...[, m]embers swamped AOL's toll-free lines to complain, and New York Attorney General Dennis Vacco blasted the plan. Wall Street also blanched, pushing down AOL's stock more than 4 percent...(Kalish, 1997)

AOL's executives were apparently surprised when subscribers, the media, some in the judicial community, and even Wall Street responded negatively to its plans to enable some telemarketing initiatives. They entered the space of ambiguity with an assumption about ethical rules for database management: that it would be seen as ethically acceptable to share subscriber information with outside parties, as long as the offers were seen as being of potential benefit to the subscribers, and as long as they had disclosed their policy to subscribers in a legalistic sense. However, consumer advocates and others gave AOL an immediate rebuke, not on legal grounds but on what appeared to be ethical ones. It was argued that AOL had “tucked its only notice of the proposed policy shift in an obscure corner of the service” (Schisel, 1997). One operator of an online AOL-oriented mailing list said “People thought it was exploitative, deceptive and intrusive. People were outraged” (Schisel, 1997). Within 48 hours, AOL reversed itself, and there seems to have been no long-term damage to its stock price or reputation. However, the incident stands as a stark reminder of the dangers lurking in this ambiguous ethical space.

This situation is not a unique one. Although the specifics of the situations differ, many other firms faced significant public backlashes due to I/S-related ethical disputes during the 1990s. For example, in early 1991, Blockbuster Entertainment Corporation had to issue a clarification that a vice president “misspoke” after the Wall Street Journal reported that Blockbuster had a plan to classify customers based on their rentals and to rent lists to direct marketers (Miller, 1990; 1991). In 1994, Intel was forced to deal with allegations that it had hidden a flaw in its Pentium microprocessor chips, although it claimed the error was an insignificant one. After much negative publicity about the problem and widespread boycott threats, IBM halted its shipments of Pentium-based personal computers, and trading in Intel’s stock was halted after a precipitous drop. About ten days later, Intel reversed its position (Useem, 1995). In 1999, Amazon.com faced a significant backlash when it was revealed that its “Purchase Circles” could be used to identify which books were being bought by employees of various corporations, leading IBM’s CEO to write Amazon’s CEO, “I’m certainly not going to tell you how to run

your business, but I do urge you to view this as an enormously important issue” (Plain Dealer, 1999). Shortly thereafter, Amazon adjusted the program to allow customers and firms to “opt out” of the “circles” (Gallagher, 1999). These are but a few examples from a long list of firms that unintentionally fell into the ambiguous ethical space during the last decade without, it appears, realizing that the space existed.

Such examples make it obvious that the I/S community and managers in general ignore the ethical dimensions of information-related endeavors at their own peril. And, against this backdrop, calls are increasingly being made for ethical leadership among I/S professionals and general managers.2 Some professional organizations, such as the Association for Computing Machinery (ACM), have updated their ethical codes in accordance with this new environment (ACM, 1993). At the same time, growing attention is being paid to ethics in I/S curricula, and major I/S journals are devoting an increasing amount of space to deeper analysis of such quandaries.

For managers to adequately fulfill their ethical obligations as they are being prescribed by most of these observers, two important factors must be addressed. First, managers must be aware of the ethical quandaries — “moral bind[s] between competing goods and competing evils” (Mason, et al., 1995, p. 100) — they are facing.3 It was recently observed that “…many I/S people get swamped with the fires they have to douse and don’t have time to wrestle with ethics” (Saia, 1998, p. 64). In such an environment, it is quite likely that many ethical quandaries will not even be recognized as such unless the domain of quandaries has been clearly defined. Fortunately, several authors have offered frameworks that classify I/S ethical quandaries in one form or another. Most often quoted is Mason’s 1986 “PAPA” nomenclature, which sorts the quandaries into categories of privacy, accuracy, property, and accessibility (Mason, 1986). As the years have passed, some other authors (e.g., Johnson, 1994; Kallman & Grillo, 1996) have honed in on a similar set of categories. Still others have identified a few quandaries that were not highlighted by Mason’s original grouping: for example, Spinello (1995) devotes substantial attention to anti-competitive practices and to vendor-client relations, and Oz (1994) focuses on some workplace issues. But, even after fifteen years, Mason’s nomenclature remains remarkably robust in illuminating the I/S ethical quandaries that we face.

Second, and more challenging, once aware of an ethical quandary, a manager must have the frameworks and tools to reach a conclusion about which answer is “right.” Mason (1995) and Mason, Mason, and Culnan (1995) have described the “moments of truth” in which managers face ethical

quandaries. At one of these “moments,” the manager must go through a process to determine which, if any, of the available alternatives provides the “right” ethical answer. As one might expect, however, a number of different theories can prescribe different “right” answers to the same quandary. One can appeal to “codes of ethics,” one can turn to theories of traditional philosophy, or one can sort among the theories of business ethics. However, the codes and theories are often at odds with one another in their prescription of the “right” answer—making the “moments of truth” all that much more frustrating.

These two factors—awareness of the quandaries and reaching a conclusion about the “right” answer—map crudely to an important philosophical distinction between descriptive and normative statements. Descriptive statements tell us something about the state of the world and thus are often called “is” statements. They can either be conditional (e.g., “If it rains, the streets will become slick”) or unconditional (e.g., “It is raining”). To say that there are ethical quandaries in a certain domain is to make a descriptive statement. On the other hand, normative statements are assertions about how the world ought to be or how one should behave; for that reason, they are often called “ought” statements. A common philosophical rejoinder is that there is “no ought from is,” meaning that descriptive statements do not automatically lead to a normative obligation or conclusion. To reach a normative answer (that is, to say what is ethically “right”) requires a rigorous normative argument. It may include some reference to descriptive facts, but those facts themselves do not substitute for a normative argument, which must have clear assumptions, logical linkages, and direct conclusions. The “right” ethical answer may or may not be the answer that is prescribed by law; in fact, depending on the ethical assumptions that are made, the two may on occasion be in direct conflict. At the most rudimentary level, only an individual can determine what is, in an ethical sense, “right” for himself or herself.

This paper addresses the second of these two factors (normative methods for discerning the “right” answer when one reaches a “moment of truth”) and proceeds as follows. First, in a background section, I will review the major efforts in the I/S literature stream to provide normative guidance in resolving these quandaries. I will show that previous work has provided a solid explanation of most of these approaches; however, the convergence and divergence between the approaches has not been fully explored. Second, I will discuss each of the major approaches in greater depth. I will examine the theories of traditional philosophical ethics (categorical, consequentialist), the normative theories of business ethics, and the sets of

codified rules that are embraced by many entities. I will show how they build on one another, and I will apply the relevant theories to the AOL example. Finally, I will offer some concluding thoughts.

This paper makes two contributions to the I/S ethics literature stream. First, it provides a synthesis and “ready reference” for the normative frameworks that have been presented in other venues but have not been consolidated. Second, it outlines the linkages between these frameworks, which have received muted attention in the past. Background Several entries within the I/S literature stream have provided useful normative frameworks for evaluation of ethical quandaries, as are shown in Figure 1. The frameworks can be described generally as traditional philosophical ethics, business ethics, and codified rules. Each could be used, on its on, to address the quandaries that are observed at the “moments of truth” in its domain. As will be seen later, some are more difficult to apply in certain contexts than in others (for example, some theories in traditional philosophical ethics become tricky when applied to quandaries in the corporate world). Even so, each framework purports, within its specified domain, to provide guidance to those who are struggling with ethical quandaries.

Each is examined in greater detail later in this paper, but I will provide some background by discussing each briefly and then describing the missing link — connectivity between the different approaches. Some frameworks rely on traditional philosophical ethics as the guidepost for normative decision-making. For example, Laudon (1995) described the fundamental camps as being either rule-based (often called “deontological” or “categorical”) or consequentialist (often called “teleological”). Many textbooks on I/S ethics have also appealed to these traditional theories in laying a foundation for students’ normative arguments (see, for example, Johnson, 1994; Johnson & Nissenbaum, 1995; Kallman & Grillo, 1996; Oz, 1994). The basic– and essentially irreconcilable — tension among these theories is this: whether an action is “right” depends either on the consequences that follow from it (the consequentialist perspective) or on whether the action follows a rule for ethical behavior (the rule-based perspective). It is noteworthy that this framework is an overtly general one, since the theories purport to provide guidance for any and all ethical quandaries that one may encounter in life — whether in a corporation, in a professional context, or in a social setting.

The normative theories of business ethics (NTBEs) are, by their definition, narrower in their domain of applicability than the traditional philosophical theories.

Introduced to the I/S community largely through the work of Smith and Hasnas (1999), this framework includes three competing theories that contain differing obligations for corporate managers and staff. The stockholder theory demands that managers act so as to maximize long-term returns to the stockholders. The stakeholder theory prescribes that managers instead balance the interests of several “stakeholders” in the firm (usually stockholders, customers, employees, suppliers, and the local community). The social contract theory suggests that a broader mandate applies, with corporations having substantial responsibilities to society as a whole — and their managers having a duty to fulfill those responsibilities. 4 As with the theories of traditional philosophical ethics, of course, the viewpoints of the theories are in large part irreconcilable.

Finally, the use of codified rules has also received attention in the I/S literature. Notable are calls by Oz (1992; 1993; 1994) for a consolidated code that extends across all I/S professional organizations. However, a competing argument by Conger and Loch (2001) holds that it will be impossible to craft an all-encompassing code that applies in all contexts and across all cultures. Although much of the writing in the I/S literature focuses on professional codes (e.g., the code of the Association for Computing Machinery (ACM, 1993)), one could conceivably encounter corporate or industry codes that purport to provide similar guidance. And, in fact, one could even view a society’s laws as representing a “code” for behavior in that society. Obviously, the domain of a code could be either wide (all of society) or rather narrow (a specific firm or industry group). But, even in its most expansive version, a code is still narrower in its domain than a traditional philosophical theory, which cuts across geographic and political boundaries.

What has been largely missing from the I/S literature is a clear explanation of the linkages between the frameworks, as is shown in the dotted lines of Figure 1. It can be argued that all of the theories at the top of Figure 1 are, in essence, extensions of the traditional philosophical theories at the bottom, with some connectivity between the intermediate theories. This connectivity has been given little attention in previous writings. One small exception is Smith and Hasnas (1999), who did explain that the normative theories of business ethics are grounded in traditional ethical theories (dotted-line A in Figure 1), although this was not the fundamental thrust of their argument. Perhaps a more notable exception is Conger and Loch (2001), who have recently provided a deontological grounding, using some intermediate concepts from business ethics (Donaldson & Dunfee, 1994), to argue for a new perspective on I/S professional codes of conduct (dotted-lines C and D in Figure 1). This work by

Conger and Loch is distinct, in that it is one of the few offerings in the I/S literature stream that provides linkage back to a fundamental theoretical base.

Thus, in an attempt to provide a cohesive synthesis of the various normative theories and the linkages between them, I first examine the traditional philosophical theories and apply them to the AOL example. It will become apparent that they have some limitations when used in this manner. Next, I will consider the normative theories of business ethics, and I will apply each to the AOL example. I will also explore the linkages to the traditional philosophical theories (dotted-line A in Figure 1). Then, I will discuss codified rules for firms, professional groups, industries, and society. As an illustration, I will apply one code of ethics (that of the Association for Computing Machinery (ACM, 1993)) to the AOL example, and the difficulties caused by the muted linkages to the other theories (dotted-lines B, C, and D in Figure 1) will become apparent. I will outline the necessary work for solidifying these linkages. Traditional Philosophical Ethics The theories of traditional philosophical ethics can be sorted into two predominant streams — consequen tialist and categorical — although many divisions do exist in each. While it is beyond the scope of the present endeavor to consider all the nooks and crannies, a brief assessment of the two streams and the major divisions will be helpful.5 I will then apply each to the AOL example.

Sometimes also known as “teleological” theories, the consequentialist theories hold that the right answer to an ethical quandary depends on the consequences that follow from the action; one should choose the alternative with consequences that produce the most “good” for some group. Through the years, there have been debates over what constitutes the “good” to be maximized, with some claiming a Hedonistic definition (simple pleasure), some arguing that there are higher and lower orders of “good” (with intellectual pursuits often being claimed as a higher order of “good”), and some holding that anything that provides utility to someone (in any form) is a “good” in itself. There have also been debates as to which group should serve as the referent, with some arguing that the individual making the assessment should maximize his or her own good (ethical egoism) and some claiming that the individual should maximize the good for everyone except himself or herself (ethical altruism). The most prominent assumption regarding the referent group, however, is that the good should be maximized for the total universe of people. This strain of consequentialism is known as ethical universalism or, more commonly, utilitarianism.

Even within utilitarianism, there are areas of dispute. Most prominent is the breakage between “act” and “rule” utilitarianism. Act utilitarians claim that, each time one is faced with an ethical quandary, one should perform an assessment of the good and bad consequences that will accrue to each party and should choose the alternative with the most positive sum. On the other hand, rule utilitarians eschew such calculus on a case-by-case basis and prefer to deduce overarching rules that are based on general utilitarian calculus but can be applied to all the quandaries one encounters.

The consequentialist theories are criticized for several reasons, particularly in their “act” form. One important criticism is that a minority’s interests can be swamped by benefits to a majority group, so that the individuals in the minority can be harmed greatly by an act that provides many positive benefits to a large group of people (slavery is often cited as an example). The theories are also criticized because they can require a large amount of guesswork, in advance, as to what the consequences of a particular action may or may not be. Further, they can be criticized because they look only to the future and never to the past. The theories are not well equipped to deal with factors like past friendships, familial obligations, or business histories.

Those who subscribe to the “rule” view of consequentialism can answer many of these criticisms by factoring long-term views into their rule-making process. However, to those who believe that consequences are irrelevant in normative ethical debates, these “rule” responses are not very convincing, since they do still assume that consequences are what matter.

Assuming that one embraced these consequentialist theories, how would one use them to deduce the “right” answer for an ethical quandary? Suppose that an act utilitarian defined the “good” as a financial one.6 Although several secondary and tertiary interpretations are possible, a primary evaluation of the AOL quandary would proceed as follows: If we provide the lists to telemarketers, our subscribers will benefit from discounts on popular products, and any annoyance they have towards telemarketing intrusions will be short-lived. And this annoyance, if it exists, will not have any financial consequences, since the time devoted to the calls will be so short that the subscribers could hardly have used it for other tasks that were financially profitable. The telemarketers will benefit, so long as they achieve a reasonably high acceptance rate for their offers from the called subscribers. The AOL shareholders will likely benefit

Figure 1. Frameworks

TRADITIONAL PHILOSOPHICAL ETHICS

Consequentialist/Teleological

Categorical/Deontological

NORMATIVE THEORIESOF BUSINESS ETHICS CODIFIED RULES

Stockholder

Stakeholder

Social Contract

Corporate

Professional/Industry

Law

A B

C

D

due to the increased revenues from the rental of the lists, unless there is a major backlash that leads to subscriber defections or such damage to the AOL reputation that it reduces future profit streams.7

The only parties who might suffer substantive negative consequences would be competitors of the telemarketers, who would presumably not have the same access to AOL subscribers. However, nothing prevents these competitors from continuing to call Americans based on other lists. So their negative financial consequences seem to be limited to those occasions on which they happen to phone an AOL subscriber, who is perhaps less responsive to their offer than he or she might have been otherwise. Given that AOL subscribers comprise a reasonably small (though demographically attractive) proportion of the population, these negative consequences seem to be far outweighed by the positive ones that accrue to other parties. Therefore, the act utilitarian would likely conclude that AOL should indeed enter into these arrangements with telemarketers. (Note that the pure forms of utilitarianism demand that competitors’ interests also be considered in the calculus. In the discussion of business ethics [below], we will see that this demand is not present in most of those theories.) Again assuming that the “good” is a financial one, a rule utilitarian would reach the same conclusion in a primary level analysis. A rule such as “embrace all external marketing arrangements that will provide benefits to AOL subscribers and AOL shareholders, without causing substantial harm to any other parties” could be adopted. To defend this, the rule utilitarian would have to conclude that always following this rule would, in the end, provide the greatest good to the universe, even if it did appear that some parties would suffer. Once the rule utilitarian reaches this conclusion, the same rule should be applied to any other external marketing arrangement that comes along.

Almost an antithesis of the consequentialist stream, the categorical theories (sometimes called “deontological”) hold that the ethical “rightness” or “wrongness” of an action can never be determined solely by the consequences that flow from it. Instead, what is “right” is determined by some set of general principles. Often, the focus is on the intent behind an action. Even if things turned out badly, a categorical thinker could claim that an action was ethically right if the actor’s underlying intent had been right.

There have been numerous attempts to derive sets of categorical principles. The most famous attempt was Kant’s, which resulted in his “categorical imperative.” This imperative was stated in several forms; a commonly quoted version is that “one should act so as to treat each person as an end in himself or herself, and never merely as a means to some other end” (Kant, 1804/1981). From this premise, Kant and others

have crafted principles in a number of domains; for example, “you should never lie” is often quoted.

As with consequentialism, categorical theories are often criticized on several levels. There can be a problem with rigidity, and Kant’s perspective is particularly problematic in this regard. It has been said that “utilitarians don’t worry about justice, and Kant doesn’t worry about mercy.” For example, the Kantian prohibition against lying is absolute and cannot be tempered with any consideration of conflicting obligations, such as if Nazis arrive at a doorstep and ask “are you hiding any Jews here?” A related concern is associated with conflicts that can emerge between different principles: what if two principles tell you to do different things? This has led to a revisionist school, which holds that there are higher and lower order obligations, and the lower order obligations can be trumped.

If we accept the above version of the categorical imperative as the general principle of “rightness,” what should the AOL executives do? A primary-level analysis suggests that protecting the privacy of the subscribers would be of paramount importance. To violate that privacy by transferring information about them to a telemarketer (giving the subscribers little advance notice and no opportunity to provide input into the decision) seems counter to the precept that they should be treated as ends in themselves. Since the objective of the data transfer is likely an increase in profits for AOL, it appears that the subscribers are being used as means to that end. However, that is not—in and of itself—a violation of the imperative, which prohibits using individuals merely as means. There is some evidence that the subscribers might receive discounts on purchases as a result of the data transfer, so the deal is not completely one-sided. The problem is that the imperative would seem to demand that it be each subscriber, and not an AOL executive, who weighs the costs and benefits and makes the decision. One might also assert that the imperative applies equally well to other parties in the equation, like the stockholders, and that one is using them merely as a means if the deal with the telemarketers is not consummated. (As we will see below in the business ethics discussion, such a perspective maps nicely to one of the theories of business ethics.) Putting such an assertion aside, though, the most reasonable analysis from a purely categorical perspective would focus on the subscribers and would hold that it is wrong to share information about a subscriber with the telemarketers without express agreement from the subscriber.

This analysis and those from consequentialist perspectives (above) proceeded from traditional philosophical premises, which are rather bereft of any overtly competitive context. The traditional

philosophical theories, it will be recalled, are designed to apply to all ethical quandaries in all contexts. They are expected to work for quandaries in dyadic interchanges, in small groups, in both profit-seeking and non-profit organizations, and so forth. But, of course, quandaries in the corporate setting carry with them a number of special components, and it is for that reason that executives in profit-seeking firms often view the normative dictates of the traditional theories as somewhat naïve when applied at their primary levels. As we saw above in the act utilitarian analysis, for example, calculus for the “universe” appeared to demand consideration of effects on competitors. And, as we saw in the categorical analysis, invoking the imperative for others in the equation could yield a different prescription. It is apparent, therefore, that more targeted theories can be helpful when considering I/S ethical quandaries in the corporate sector. We therefore turn to the major theories in that domain. Business Ethics The NTBEs provide interpretations that are probably more useful to managers and professionals who are grappling with I/S ethical quandaries in a corporate context.8 Just as with the traditional theories, however, the NTBE often provide different prescriptions as to what is ethically “right.” The three major NTBE are the stockholder, stakeholder, and social contract theories. I will discuss each briefly and apply it to the AOL example. Then, I will consider the linkages to the theories of traditional philosophical ethics.

The stockholder theory holds that managers in a corporation have a normative obligation to maximize profits, since this provides the greatest long-term value to the stockholders. The managers are obligated to do this within the law and without engaging in fraud or deception. This is not to say that managers should not devote corporate funds to charitable projects or to improve employee morale, but the stockholder theory supports those efforts only insofar as they return, in the long run, more value to the stockholders than other investments would have. Managers are ethically prohibited from investing in initiatives that benefit parties other than the stockholders unless those initiatives are, in the end, the best investments of capital that are available (Bowie & Freeman, 1992, pp. 3-21; Friedman, 1997).

If we apply the stockholder theory to the AOL quandary, the best advice to the executives would be “do the deal with the telemarketers, and focus a bit more on managing the subscriber base.” It certainly appears that the initiative offers the opportunity to leverage the existing subscriber base in a manner that will increase corporate profits. The executives have no

normative obligation to protect the subscribers’ privacy, as long as AOL operates within the law and avoids fraud and deception. While one might claim that AOL has been somewhat deceptive in its approach to notifying subscribers of changes in the terms and conditions, the approach was certainly legal. The only real concern would be the possibility of a backlash, which might lead to defections of current subscribers and/or greater difficulty in attracting new subscribers. Ultimately, such a backlash might lead to a reduction in AOL profits. However, despite the evidence of discord (Kalish, 1997), AOL executives might very reasonably conclude that only a small minority of subscribers would actually defect and that the implications for future marketing would be minimal. This would be especially so if they invested (preferably, proactively) a modest amount of resources in mollifying those subscribers who are most concerned about their privacy. Since they have no obligation to protect subscriber privacy, per se, the balance of the calculus would probably tip towards doing the deal.

The normative stakeholder theory9 asserts that interests of parties other than the stockholders should also be considered when corporate decisions are made. In general, these parties will be the customers, employees, suppliers, and the local community. However, the obligation is also extended to others who are vital to the survival and success of the corporation or whose interests are vitally affected by the corporation. (Most normative stakeholder theorists do not extend the obligation to competitors or to the government.) Managers are seen as agents for all of the stakeholders, including the stockholders, and their job is, first, to ensure that the ethical rights of no stakeholder are violated10 and, second and only after the first condition is met, to balance the legitimate interests of the stakeholders when making decisions. The interests could be financial ones, but they are not defined exclusively as such. Further, the objective is no longer profit maximization, per se, but instead the long-term ability of the corporation to remain a going concern and keep this balance. The distinction between the normative stakeholder theory and the stockholder theory is fundamentally this: stakeholder theory demands that interests of stakeholders other than stockholders be considered along with those of the stockholders even if it reduces firm profitability.

If the normative stakeholder theory is applied to the AOL example, it most likely would yield a conclusion that no deal should be made with the telemarketers. The executives would first be expected to ensure that the rights of all stakeholders had been preserved. The subscribers (AOL customers) can be viewed as having two basic rights that are relevant and interwoven: a right to privacy and a right to be informed of, and have

a voice in, any changes that affect them. It is reasonably clear that this plan would violate subscribers’ right to privacy (“the right to control information about oneself” (Westin, 1967, p. 2)), since AOL and the telemarketers would be taking control of the subscriber information away from the subscribers themselves. Even if one rejects the premise that the subscribers have a right to privacy, however, one is still faced with the right to be overtly informed of (and, arguably, to have a voice in) changes that affect oneself. Such an assertion underlies much of the premise of stakeholder theory. For AOL to unilaterally change the terms of the subscriber agreement without consulting the subscribers—and, especially, without any clear and overt notification to them—would violate this right. Since the deal with telemarketers would violate at least one (and perhaps two) of the subscribers’ rights, the normative stakeholder theory would demand that it be rejected. The troubling process of balancing interests need not be considered, since violation of any stakeholder right is considered a “show stopper” under the theory.

Finally, I consider the social contract theory of business ethics. This theory demands that managers act so that consumer and worker interests be satisfied in a manner that maximizes advantages and minimizes disadvantages. They also demand that corporate executives respect the general canons of justice. It is asserted that these canons include avoiding fraud and deception, showing respect for workers as human beings, and avoiding any practice that systematically worsens the situation of a given group in society (for example, by discriminating against a group that is already disadvantaged). (The specific terms of the contract will be discussed in greater detail in a later section.)

Applying the social contract theory to the AOL situation yields a “don’t do it” answer. This is primarily due to the fact that the deal does not maximize advantages to subscribers while minimizing disadvantages. In particular, viewed strictly from a subscriber’s perspective, a reasonable observer would likely conclude that the negatives outweigh the positives in the arrangement. This could be claimed either in tangible terms (interruptions from telemarketing calls) or intangible ones (concerns that one’s privacy has been invaded through the loss of control over personal information). Of course, if the discounts or information about new products were viewed as sufficiently beneficial, a subscriber might conclude that the tradeoff is a good one. But it might also be argued that the truest advantage to a subscriber would be to pay them for the use of the personal information, as has recently been suggested as a new model for online commerce (Hagel & Rayport, 1997; Hagel & Singer, 1999; Laudon, 1996). Since no such remuneration is

apparently forthcoming in the AOL scenario, it is reasonable to conclude that the deal would not maximize the benefits to the subscribers. Hence, it should be avoided. Linkage to Traditional Philosophical Ethics The NTBE were introduced into the I/S literature by Smith and Hasnas (1999), and that article continues to stand as the primary I/S-oriented treatise on their application. Unfortunately, Smith and Hasnas provided only muted coverage of the linkage between the NTBE and the theories of traditional philosophical ethics (that is, dotted-line A in Figure 1). Indeed, a full exploration of those linkages cannot be included here, but I will outline the fundamental arguments and objections thereto.11 Stockholder Theory

The stockholder theory can be grounded in the traditional philosophical theories in one of two ways. A rule utilitarian grounding, commonly cited as the firmament of the stockholder theory (Evan & Freeman, 1988; Quinn & Jones, 1995), relies on economic theory by asserting that the universe of affected individuals is best off, in the long run, if returns to stockholders are maximized. The marketplace provides signals regarding the goods and services that are most valuable to society by rewarding the firms that provide those valuable goods and services with higher profits. In the long run, these profits are returned to stockholders. Therefore, all of society is best off if managers take actions that maximize returns to stockholders, since this means that the firm is providing what society most desires.

The most common objection to this rule utilitarian grounding is to point to what economists call “market failures,” such as the development of monopolies or the problems of “free riders” and public goods. Included in this latter category are phenomena like pollution: it is claimed that it might be perfectly rational for a particular firm to emit toxins (and, in fact, might help it to maximize returns to shareholders), but it would cause societal problems if all firms did it (Donaldson & Preston, 1995; Evan & Freeman, 1988). Although it is called out less frequently, one could also challenge the unit of analysis under the rule utilitarian grounding, by arguing that even if the stockholder theory leads to the most utility for society as a whole, some individuals might be worse off under such a system than under others.

A categorical grounding dodges many of the debates associated with the rule utilitarian grounding by simply asserting that the imperative to treat each individual as an end is violated if a manager does anything other than maximize returns to the stockholders (Friedman

(1997), as interpreted by Hasnas (1998)). Lacking any directions from the stockholders to the contrary, it is assumed that the reason they invest in the firm is to maximize their financial returns. Therefore, if a manager (an employee of the stockholders) takes stockholders’ money and uses it for purposes other than maximizing their returns, the manager has used those stockholders as a means to his or her own ends—a violation of the categorical imperative.12 To accept this defense of the stockholder theory does not require one to make any assertion whatsoever about the validity of the theory’s economic assumptions. In fact, even if society were not better off due to the maximization of returns to stockholders, the categorical argument could still hold.

But two objections to this categorical defense of the stockholder theory have been raised. In the first, it is argued that, even if managers do take actions that benefit society but do not maximize returns to stockholders, this is not wrong. While this may constitute spending the stockholders’ money without their consent, this argument goes, it is appropriate as long as it is done to promote the public interest (Donaldson, 1982; Donaldson, 1989). In the second, it is argued that many parties other than stockholders contribute to a firm’s success, and to take actions that affect them without considering their interests uses them as a means to someone else’s (the stockholders’) ends (Evan & Freeman, 1988). But at least one proponent of the stockholder theory (Hasnas, 1998) has countered the first objection by saying that it misses the point of the categorical imperative — if it is wrong to use the stockholders’ money for other purposes, then it is still wrong if the purpose is in the public interest. Stakeholder Theory Ironically, the most oft-quoted defense of the stakeholder theory is also grounded in the categorical imperative. However, the imperative is interpreted differently under the stakeholder theory. Evan and Freeman (1988, p. 76) assert that, if stakeholders are to be seen as ends in themselves, they are entitled to “participate in determining the future direction of the firm in which they have a stake.” The managers of the firm are therefore obligated to act as agents of all the stakeholders and not merely the stockholders. It is argued that the other stakeholders (e.g., employees) are also contributing to the firm’s success and are impacted by its actions. To ignore these contributions and impacts would, according to this argument, equate to treating these stakeholders as means to the stockholders’ end of financial returns.

Of course, as has been voiced by Hasnas (1998), there is a fundamental objection to this interpretation of the categorical imperative. Treating stakeholders

(other than stockholders) as ends may not dictate that their interests be considered in all decisions. Perhaps, it is argued, these stakeholders could be treated as ends in a simpler way: by not demanding that they deal with the firm if they do not want to, by not selling raw inputs, by not buying the products, or by refusing employment there. Beyond this objection, others argue not with the basic premise but with the lack of clarity in implementation. To use the theory requires one to establish which “rights” each stakeholder possesses, which interests are “legitimate” ones, and, perhaps most importantly, how those interests should be balanced. None of these issues is fully clarified by the original proponents of normative stakeholder theory, although some later theorists have attempted to offer some guidance (Clarkson, 1995). Social Contract Theory

The NTBE version of social contract theory is derived from a process of normative argumentation. It is grounded in deontological reasoning; unlike the categorical stockholder and stakeholder defenses, however, it does not require that the categorical imperative be invoked. This process asks us to consider a state of “individual production” in which there are no corporations. We are then asked to envision a hypothetical contract between society and some individuals who wish to form a firm. What do they need from society? It is argued that they would ask for two things: first, to have legal recognition as a single agent (to be able to sign contracts, etc.) and, second, to be allowed to own and use land and natural resources and to hire employees.

What would society ask in return? The imputed “terms” of the contract are detailed, and these terms specify the obligations outlined earlier. The “social welfare” term has three components. First, firms’ managers should act so as to benefit consumers by increasing economic efficiency, stabilizing channels of distribution, and increasing liability resources. Second, firms’ managers should act so as to benefit employees by increasing their income potential, diffusing their personal liability, and facilitating their income allocation. Third, firms’ managers should do these things while minimizing pollution and depletion of natural resources, the destruction of personal accountability, the misuse of political power, worker alienation, lack of control over working conditions, and dehumanization.

Additionally, firms’ managers are expected to adhere to the “justice” term, which has been defined as demanding at least that firms avoid fraud and deception, show respect for workers’ humanity, and “avoid any practice that systematically worsens the situation of a given group in society” (Donaldson, 1982, p. 53). It is argued that society would allow

corporations to exist only if their managers adhered to the “social welfare” and “justice” terms of this hypothetical contract, which is inspired by the deontological stream of traditional philosophical ethics.

The major objection to this argument is one that focuses on the definition of a “contract.” Generally, it is claimed that one is a party to a contract only if one has consented to it. But those who incorporate would be unlikely to have considered — let alone, agreed to — the terms of the hypothetical social contract, thus making it ethically suspect (Hasnas, 1998). Although it has been given little play in previous writings, it is also reasonable to object to the specific formulation of the social contract NTBE outlined above, even if one agrees to its original premise. One can agree that starting with a state of “individual production” and proceeding to a hypothetical social contract is a profitable task, even if one disagrees with the conclusions regarding the terms that are proffered by the widely embraced Donaldson (1982) formulation. In other words, different contract negotiators might well have agreed on a different set of terms.

It is seen, then, that each of the NTBEs has some claim to a grounding in one or more of the theories of traditional philosophical ethics. Just as with the original theories, of course, there is no consensus as to any of these theories being “right.” There are reasonable objections to each. Codified Rules The previous two theoretical bodies — traditional philosophical ethics and the NTBE — both rely on some amount of normative argumentation, at least in applying the theories, when quandaries are confronted in a “moment of truth.” Codified rules attempt to circumvent the need for such argumentation by providing a set of guidelines that can be followed. These guidelines can be constructed at several levels, most notably for a specific corporation (often called a “Corporate Code of Conduct,” the breach of which is sometimes cause for dismissal); for a profession or industry (often denoted a “Code of Ethics”); or for a society as a whole, as witnessed in its legal structure.

Within the I/S ethics literature stream, most of the attention has been given to the law and to professional codes. This is likely due to the fact that corporate codes rarely contain clauses that are specific to I/S issues, so they have offered little that merited study. Further, industries producing I/S products (e.g., hardware, software, telecommunications) have rarely constructed industry codes, so there is little fodder for research. Legislation surrounding specific I/S issues has on occasion drawn attention (e.g., Laudon, (1996; Milberg et al., 1995; Sipior & Ward, 1995; Straub & Collins 1990). With respect to professional codes,

some far-reaching analyses, not always in agreement, have been offered (Conger & Loch, 2001; Kallman & Grillo, 1996; Mason, et al., 1995; Oz, 1992; Oz, 1993; Oz, 1994).

In that light, consider the application of a widely used professional code, that of the Association for Computing Machinery (ACM), to the quandary that AOL’s managers most likely faced in the example at the beginning of this paper. At some point along the line, the managers had a possible deal in front of them: exchange AOL subscribers’ names and phone numbers with telemarketers in return for either a fee or a percentage of the telemarketers’ revenues. We can assume that the terms and conditions had already been modified and posted online, as was described earlier. Within the ACM Code of Ethics and Professional Conduct (ACM, 1993), parts of paragraph 1.7 of the code, titled “Respect the privacy of others,” would be directly on point:

“…It is the responsibility of professionals to maintain the privacy and integrity of individuals and groups…This imperative implies that… personal information gathered for a specific purpose not be used for other purposes without consent of the individual(s).”

These words create an “opt in” obligation on the part of the firm. Since the information had been gathered from the subscribers for a different purpose, AOL would not be allowed to use it for any other purpose (that is, the transfer to telemarketers) without getting the overt consent of the subscribers. Simply informing the subscribers of a change in terms is not adequate, according to this rule. Thus, the manager would have to conclude, according to the ACM code, that AOL should avoid the arrangement with the telemarketers.

The clarity with which the ACM code addresses the AOL situation is both a blessing and a curse. Obviously, in a positive sense, it gives the manager immediate direction as to a professional obligation. However, in a troubling sense, it could lead the manager to a decision with unfortunate consequences for both the organization and for his or her career. There is little consensus in the U.S. regarding whether an “opt in” or an “opt out” system is appropriate (Clausing, 2000; Simpson & Petersen, 2000; Smith, 1994), and — as was seen in an earlier section — the different theories of business ethics suggest different conclusions regarding the “right” answer for AOL. But the ACM code truncates the debate by asserting that there is a right answer, although it does not provide a normative defense for this position. Its definitive clarity comes at the expense of ethical argumentation, which should form a foundation for any codified rule if it is to have credibility in its guidance. And it can cause real problems in implementation: for example, consider that

the AOL manager might have to defend the “opt in” position to colleagues. The ACM code provides the manager with little ammunition for these debates, but that situation is hardly unique to that code or to this particular example.

Of course, it is possible to link almost all codified rules to one or more of the ethical theories, either from traditional philosophical ethics or from the NTBEs. But seldom do entities establish these linkages in a tight form. Whether the codified rules appear in corporate codes of conduct, in professional or industry codes of ethics (such as the ACM code), or in a society’s legal rules, the rules are most often stated without any explanation of their grounding. It is as if the rules represent the conclusions from an ethical debate, but the arguments from the debate are not articulated.

It is impossible at this juncture to fully explore all the relationships represented by dotted lines B, C, and D and to establish an exhaustive argument for each. However, in the next three sections, I will consider briefly what has been established for each of these linkages in previous work and will outline additional work for each that would be appropriate. Linkage from Traditional Philosophical Ethics to Codified Rules (dotted line B in Figure 1) It is helpful to distinguish between a first-order (high level) and second-order (granular, at the level of specific rules) linkage. In a first-order context, the linkage from traditional philosophical ethics to codified rules has received attention in two venues — one outside the I/S literature stream and one inside it. In the former, a developing body of legal literature, led largely by Perry (1988), has argued for certain moral perspectives in legal systems, particularly with respect to constitutional law. Considered within those discussions are ethical questions such as when, if ever, it is right to disobey a law. Those debates can certainly not be resolved here; interested readers are urged to consult Perry (1988) and the references noted therein.

In the latter venue — the I/S literature stream — this linkage has received some attention. In a largely descriptive sense, Mason et al., (1995, pp. 116-117) argued that individuals resolve a quandary by appealing to rules and codes of ethics, which are grounded in principles, which are in turn grounded in ethical theories. Mason et al., (1995) and Conger and Loch (2001) also considered the role of codified rules from the perspective of information professionals. Mason et al., (1995, p. 162, italics in original) noted that while “…codes of ethics are useful aids to individual decision making [,]” these codes “supplement — they do not replace — the general standards for behavior for the society as a whole.”

Further, Conger and Loch (2001) have considered that these codes do not replace individuals’ own ethical argumentation, which can sometimes lead to conclusions that are at variance even with their own society’s standards. The same arguments would presumably apply to codified corporate rules as to professional and industry rules.

Mason et al., (1995) did not explore the normative connections leading from traditional philosophical ethics to the codified rules in great depth, which is understandable given their objective. Additional work in this area, even in a first-order context, would most certainly be helpful in extending the linkage. As was noted by Luegenbiehl (1992) in his examination of an earlier version of the ACM code, a lack of clarity in a code regarding its basic source of justification weakens it significantly. Although Luegenbiehl (1992) did not explore this weakness in great detail, it is most certainly grounded in the general precept that an individual’s acceptance of any set of codified rules — corporate, professional/industry, or legal — should have some firmament, which is usually some acceptance of duty based on personal normative argumentation. Such duties are ordinarily associated with categorical viewpoints (see, especially, Kant (1804/1981)), but one could also construe a rule utilitarian argument that suggested it would be best for all of society, in the long run, if members of certain groups adhered to certain codified sets of rules. (While slightly different than a categorical “duty,” such an ethical argument would, in practice, likely result in the same outcome.)

In practice, such arguments (categorical or consequentialist) often work better for rules codified into law or a corporate “code of conduct” than for those in other codified forms: a manager will seldom be urged to embrace an illegal resolution for a quandary, and — at least internal to a firm that has codified a certain set of rules — a manager will seldom be reprimanded for following them. But once a manager turns to professional/industry codes for resolution of quandaries, (s)he is on more tenuous turf in internal debates. Armed only with the first-order defenses, a manager who quotes a codified rule as a resolution for a particular quandary (e.g., the AOL example) can likely defend his or her conclusion only in general terms. The manager can refer to a personally felt obligation to adhere to the code, whatever the code may say. However, any further defense of the specific position being taken (e.g., why to demand an “opt in” in the AOL example and to reject an “opt out”) would be left to the manager’s own skills of argumentation.

It becomes apparent that having only a first-order defense of an obligation to adhere to codified rules may not be enough. Indeed, one often needs a second-order defense of the codified rules themselves

for granular arguments. But virtually no work has been done in this context. From a philosopher’s vantage point, the burden for such arguments falls on those who proffer sets of codified rules, since they are in effect offering normative judgments as to appropriate behaviors. It would follow, then, that each offering of codified rules — be they for a firm, industry, professional society, or society (in laws) — should be accompanied by a full set of normative arguments defending each. In the earlier example of an “opt in” rule within the ACM code, this would suggest that ACM was obliged to provide a clear and convincing normative argument that rejected other alternatives (e.g., “opt out”). Further, such an argument would be demanded for each imperative in the Code’s first three sections (ACM, 1993). Of course, none of the major codes includes such arguments (see Oz (1994, Chapter 6) and the more recently approved code of ethics for software engineering in Gotterbarn et al. (1998)).

In reality, it is asking a bit much of developers of codes to document rigorous normative arguments for each stated rule. However, this stands as a real opportunity for researchers who wish to contribute to the dialogue regarding ethical behavior. By providing rigorous normative scrutiny of the codified rules, researchers can either defend or refute the positions that are taken by those entities that develop the codes. Linkage from NTBEs to Codified Rules (dotted line C in Figure 1) The linkage from the NTBEs to codified rules (dotted line C in Figure 1) has received uneven attention. With respect to the law, there are case decisions dating back to the early 1900s that suggest the stockholder theory has some legal standing in U.S. law. However, many observers — perhaps most notably the 3,000 members of the American Law Institute who are judges, lawyers, and law professors — have embraced a set of “Principles of Corporate Governance” that appear to have more in common with the stakeholder theory. (See Paine (1994) for a synthesis of these and other perspectives.) It suffices to say that there is much room for judicial interpretation in this area, and expectations may well shift in the next few years.

With respect to codified rules in the corporate sector, a few firms’ codes do provide guidance to employees regarding the NTBEs. Perhaps most often quoted is Johnson and Johnson’s “Credo,” which suggests that customers come first, followed by other stakeholders (Aguilar & Bhambri, 1983). Overall, however, the bulk of codes’ content seems to be devoted to how one should act when dealing with various stakeholders rather than to any overt statement regarding a hierarchy of obligations to stakeholders (Lefebvre &

Singh, 1992; Mathews, 1987; Wood, 2000). Thus, there is little evidence that firms have taken clear stands in their own codes regarding the NTBEs. Although there is certainly no reason to infer causality in this matter, one seven-year study of upper and middle level American managers indicated that they were split in their own perceptions of normative obligations: 40% endorsed the stockholder perspective, with 60% expressing a view that could be reasonably interpreted as akin to the stakeholder theory (Hampden-Turner & Trompenaars, 1993).

In the realm of professional and industry codes, little work has been done to examine the linkages to the NTBEs. One notable exception is Conger and Loch (2001), who have sketched a normative argument defending, and described a process for establishing, codified rules based on the social contract NTBE. Obviously, one might reasonably extend their research stream by applying their framework to specific quandaries. Further, researchers who disagree with the social contract theory might profitably apply one of the other NTBEs in a similar fashion and demonstrate where the approaches converge and diverge. This seems to be a fertile area for future research and one that, unfortunately, has been little explored. Linkage from Codified Rules to NTBEs (dotted line D in Figure 1) Finally, I consider the linkage from codified rules to the NTBEs. In one theoretical respect, it could be argued that such a directional linkage should not exist, since the codified rules should draw their grounding from the NTBEs or from traditional philosophical ethics — not vice versa. Even so, there are some exceptions to this assertion because of provisions contained in two of the three NTBEs (and possibly inferred in the third).

Both the stockholder theory and the social contract theory assert that managers should act within the law. The stakeholder theory includes a provision that managers should avoid violating stakeholders’ ethical rights. In some (but certainly not all) situations, these ethical rights may well correspond to those codified in sets of rules, such as professional/industry codes or the law. Beyond these assertions, none of the theories (in its original form) pays any specific homage to other codified rules. However, one might interpret some recent work in social contract theory (see Donaldson and Dunfee (1994; 1999, p. 105) and interpretation by Conger and Loch (2001)) as providing for certain communities (e.g., a professional group) to establish norms for that group’s members and, presumably, these norms might then be extended into a larger community.

Just as dotted line C in Figure 1 offered fertile ground for additional research, dotted line D also seems to

offer some promise in this regard. Especially under the social contract theory in its current, expanded form (Donaldson & Dunfee, 1999), there is much room for consideration of the distinctions between global norms (called “hypernorms” by Donaldson and Dunfee (1994; 1999)), local laws and cultural norms, and rules that are codified by entities such as industry and professional organizations. Following the nascent research stream started by Conger and Loch (2001), researchers can explore the convergence and divergence of these normative judgments in great depth. Conclusion In this paper, I have considered the three major normative approaches to resolving ethical quandaries, each of which had received some amount of previous attention in the I/S literature, and have considered the linkages between them. The paper makes two important contributions. First, although the components of the three approaches had been discussed discretely, I am unaware of any previous attempts to document all three in a single venue. Thus, this paper can be viewed as providing a meta-framework that can serve as a reference document for those concerned about alternative approaches to resolutions of ethical quandaries. Second, and perhaps more important, this paper focused attention on the linkages between these three normative approaches. Although these linkages have been mentioned on occasion in other writings, they have not received a focused treatment in the past.

Obviously, there is no single “right” answer to many ethical quandaries that I/S managers and professionals may confront. But, as this discussion has shown, one who confronts such a quandary will have taken a large step towards its resolution by simply establishing which normative base is to be used as the reference point. One can cling to one of the theories of traditional philosophical ethics (categorical, consequentialist); for quandaries in the corporate realm, one can appeal to one of the NTBEs; or one can follow a set of codified rules at one of several levels. Of course, even within these three domains, one must establish which theory is to drive one’s own argumentation.

In the end, “ethics is about the decision making and actions of free human beings” (Laudon, 1995, p. 34). While it is a normal human reaction to desire closure and a clear roadmap for such decisions, resolution of ethical quandaries is not always that simple. A firm, organization, or society can impose certain rules on its members and can enforce those rules by threat of firing, revocation of membership, ostracism, or even incarceration. But it is still left to the individual to

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About the Author

H. Jeff Smith is associate professor, Babcock Graduate School of Management, Wake Forest University. His research focuses on the societal reactions to strategic uses of information technology. His research has appeared in California Management Review, Communications of the ACM, Harvard Business Review, MIS Quarterly, Organization Science, Sloan Management Review, and in other journals. Endnotes 1 Many authors have referred to this ambiguity, but it was perhaps noted first by Johnson (1989). 2 For example, see (Conger and Loch, 2001; Kallman and Grillo, 1996; Mason, 1986; Mason, et al., 1995; Oz, 1994; Smith, 1994).

3 Although many interchange the two terms, there is a distinction between a quandary and a dilemma, as explained by Mason et al (1995, p. 100, italics in original):

An ethical quandary is created whenever an agent faces a moral bind between competing goods and competing evils. Some people may call this a “dilemma.” Literally, however, the term dilemma describes a choice between two equally unwelcome alternatives. A quandary, however, is a richer, more perplexing state in which there may be many different directions to turn, each of which is laced with bad and good implications…

4 Within this article, explanations of the “social contract” NTBE rely on Donaldson’s (1982) derivation of a social contract for corporations. In later writings, Donaldson and Dunfee(1994; 1999) have proposed a broader “integrative social contracts theory” [ISCT], which applies to all collectives, including corporations. 5 A good overview of the general streams can be found in Chapter 1 of Donaldson and Werhane (1998). A more detailed treatment, which explains more of the divisions within each stream, can be found in Frankena (1973). 6 My use of financial well-being as the “good” should not be construed as a normative judgment on my part. I have adopted this approach solely for illustrative purposes and because it provides a relevant metric for all affected parties. Obviously, some other “goods” could also be salient for some parties. However, the use of financial well-being as a “good” in utilitarian arguments is fairly common. 7 Although it appeared that such a situation might have been developing in July 1997 (Kalish, 1997), alternative management techniques (e.g., providing some small benefits, far less than the associated revenues, to subscribers for rental of their names) would likely dampen the concerns and reduce the probability of defections. 8 A more extensive treatment of the NTBE in an I/S context can be found in Smith and Hasnas (1999). An even deeper analysis of the NTBE’s philosophical derivations is provided in Hasnas (1998). 9 I refer to the normative stakeholder theory primarily as presented in Evan and Freeman (1988). Additional clarifications can be found in Donaldson and Preston (1995) and in Clarkson (1995). Note that I am considering only the normative version of the theory, which states how managers ought to behave. There are also descriptive versions of the stakeholder theory, which describe actual behavior of managers, and instrumental versions, which predict outcomes (for example, higher profits) if managers behave a certain way. These distinctions are drawn crisply in Jones and Wicks (1999). 10 Note that these are ethical rights. They may or may not correspond to legal rights or to rights established by professional/industry codes, etc. 11 Interested readers may wish to consult Hasnas (1998), where a deeper, though more polemic, discussion can be found. 12 This argument is presented in an articulate and provocative fashion in Friedman (1997).