The moral, ethical and legal issues affecting modern e-business organisations - Essay Example

?The moral, ethical and legal issues affecting modern e-business organisations The 21st century is an age of economic globalisation and technologicalinnovation, which has resulted in the emergence of free markets, and an integrative global economy. Computers, which has pervaded almost every home in the world, has led to an exponential rise in the number of people using Internet for various transactions, varying from using social networking sites to conducting online businesses. In 2009 UK recorded 18.3 million internet users, accounting for the 70% of country’s total population, which “is an increase of just under 2 million households (11 per cent) over the last year and 4 million households (28 per cent) since 2006” (National Statistics, Internet Access, 2009). This scenario comprise of a number of different players that range from technological innovations, multinational companies, public policies, legal issues, and ethical values, present a number of challenging constraints and opportunities. Maintaining certain ethical and moral values within any form of commercial enterprise (including modern e-business organisations) are important for attaining sustainable success for that firm. Recently it has become especially important for the business firms, especially those involved in e-commerce, to maintain correct ethical and moral behavioural attitudes to avoid legal problems. In this era of economic globalization and technological convergence there is an emergence of a new form of internet-based society often referred to as the knowledge society, and has raised questions on issues related to various ethical, moral and legal matters. The modern computer based technologies, used for collecting, amassing, managing, and communicating data, though managed to bring in new reforms in the dispersion and application of information, also brought in various ethical and legal dilemmas. The various business firms that operate within this arena face difficulties in the context of right to information, right to privacy, right to the freedom of expression, and intellectual property rights, which vary from country to country. The immense importance and efficiency of internet based systems that include worldwide and local system networks, databases, and the various programs for data processing make it compulsory that policymakers make a review of the existing rights and responsibilities, in relation to conducting e-businesses in a legal and ethical manner. (Lynch, Ethical Issues in Electronic Information Systems, 1994). Discussion What is e-business and e-commerce? In the recent times it has been observed that “The capabilities and opportunities provided by the Internet have transformed many legitimate business activities, augmenting the speed, ease, and range with which transactions can be conducted while also lowering many of the costs”( Williams, 2002, 1). The increase in e-business transactions is evident in the figures presented in the UK National Statistics survey report, “The value of Internet sales by businesses rose to ?71.1 billion in 2004, an increase of 81 per cent [from] 2003... The results of the 2004 survey show growth in the use of Information and Communication Technologies (ICTs) and large increases in the value of trade over the Internet. The results also highlight significantly greater use of ICTs by the largest businesses (those with 1000 or more employees)... Internet purchases by businesses rose 64.6 per cent from ?37.9 billion in 2003 to ?62.4 billion in 2004” (National Statistics, News Release, 2005). Though computer and data processing systems were present during the 70s and 80s, it was primarily the late nineties that saw a rise in e-trade, where the Internet changed the way many business activities were conducted through speed augmentation, “ease, and range with which transactions can be conducted while also lowering many of the costs”(Williams, 2002, 1). Thus, the changing perspectives of trading community from that of an actual ‘physical’ marketplace, to the arena of the seamless ‘virtual’ marketplace, transformed the commercial world in many ways. The changes in perspectives were related to: • “Greater information richness of the transactional and relational environment • Lower information search costs for buyers • Diminished information asymmetry between sellers and buyers • Electronic spatial proximity of buyers and sellers • Greater temporal separation between time of purchase and time of possession of physical products purchased in the electronic marketplace • Greater temporal proximity between time of purchase and time of possession of digital products purchased in the electronic marketplace” (Varadarajan and Yadav, 2002, 296). The internet has various kinds of e-commerce that operate within its realms, each having its own separate identity. The most common ones are e- commerce trade portals, which are search-engines renting spaces for advertisements, as for example, Yahoo!; e-marketplaces which sell server spaces to bring in the funds for their functional operations and allow interactions between various retailers and customers, as for example, B2B e-Marketplace; dot-com stores that sell their items only through the Internet, as for example Dot-Shops.com; e-stores are sites where the retailers regularly update their products (for advertising purposes) available in their ‘real’ shops, e.g. M&S; a portal which offers free data or services while selling server spaces to raise funds, e.g. iGoogle and AOL; and the content sites, offering quality and specialised data and services, for a price, as for example, WebMD. Given below is a e-commerce model showing how business is conducted within the virtual world. Fig 1: Model by Mark Nissen depicting e- commerce (source: Bloch, Pigneur and Segev, 1996) Along with e-commerce, there are e-businesses that are defined as “the conduct of business on the Internet. It is a more generic term than e-commerce because it refers to not only buying and selling but also servicing customers and collaborating with business partners” (Mariosalexandrou.com, E-business definition, 2010). E-business is different from ecommerce in the sense that in the former there must be a ‘physical’ world operational set-up, while e-commerce is entirely internet based. Although the concept of e-Government does not fall directly under the scope of e-Business models, this new concept has become an important example that portrays the application of Information Society Technologies for social benefit, as regards any country’s citizens, that form the customer. E-Government was viewed as one of the chief elements within the EU's ‘eEurope 2005 Action Plan,’ where its role in achieving the “Lisbon strategy for economic, social and environmental renewal” was acknowledged (Spindler, et al., 2004, 11-12). Some basic characteristics of the modern e-business models comprise of: strengthening the existing customer base by gaining personal data and specific behavioural patterns of the customers, and using these obtained information to offer customised product and service offers; Closer customer interactions, to find out their needs later produce them during the designing of the product or service offered; The ambition to establish a strong global dominion and a detailed market understanding as in Virtual Industrial Districts or SMEs’ clusters; A joint approach to the study and subsequent exploitation of the offered services or products (ibid, 6). Legal issues that affect modern business firms: During the 90s when there was a shift towards the creation of a worldwide based integrated information society, it became increasingly necessary to have an updated framework for regulating the e-business organisations and online financial transactions, through an uniform and well-co-ordinated legislations on a global basis. However, more than a decade has passed after the creation of the information based society and the venture of various e-businesses started, there still exists a lacuna as far as the uniformity in a global based regulatory framework in concerned (Spindler, et al., 2004, 4). Since the existing regulations were primarily created based on individual case analysis and the subsequent court judgments, there is a tendency to reflect a ‘time lag’ in context of the requirements of modern e-businesses, thus being unsuitable for the present rather chaotic e-business world. There is a complete “lack of integration of business and legal aspects in technology and new product/service development in IST, suitable for identifying “work-around” solutions supporting the new business models under the current existing regulatory framework” (ibid). This often leads to legal conflicts between new and innovative e-business processes that are exploitative in nature, with the existing public policies and regulatory framework, as regards right to privacy, data protection, consumer identity protection, intellectual property rights, etc. (Canzer, 2005, 67-82). E-business related legal issues are generally divided under two basic law types: public law and private law. Given below is a pictorial representation of the laws that may affect the operations of e-businesses. Fig 2: the various legal issues faced by the modern e-business organisations (Spindler, et al., 2004, 13). E-businesses have been greatly affected by the E-Commerce Regulations, which has come into effect in many of the European countries, under the EU Electronic Commerce Directive 2000/31/EC of the European Parliament. This Directive was brought into effect to create an uniform and comprehensive regulation of e-businesses conducted throughout Europe, in order to step-up on buyer assurance.  In the Directive, an information society is defined as "any service normally provided for remuneration at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, at the individual request of a recipient of the service” (Taylor, Website Legal Information: Basic Requirements, 2008). Under this definition, a great deal is covered, than just e- businesses, and this viewpoint was reaffirmed in 2002, by UK's Department of Trade and Industry (when it suggested that directive guidelines did not remain restricted to online commercial transactions (The UK’s E-commerce Regulations, 2010). The DTI guidelines on the e-commerce regulations stated, "The requirement for an information society service to be 'normally provided for remuneration' does not restrict its scope to services giving rise to buying and selling online. It also covers services (insofar as they represent an economic activity) that are not directly remunerated by those who receive them, such as those offering online information or commercial communications (e.g. adverts) or providing tools allowing for search, access and retrieval of data" (ibid). Thus, a UK based business enterprise cannot avoid the regulatory laws under the Directive, by basing its servers in US, since the regulations take into consideration location of a business and not the location of its equipment (ibid). The law for safeguarding privacy and data protection includes gathering, hoarding, and the processing of collected personal information. These laws are firmly embedded within European Data Protection Directive (Summaries of EU legislation, Protection of Personal Data, 2011) and find a place in a majority of the national level data protection legislations. The legal provisions for privacy and information protection are also seen in the European Union’s Charter of fundamental rights (under articles 7-8). Here the Directive clearly states that processing of personal information must be legal and correct. The data must be collected with clearly stated reasons, must be specific in nature and with legal purposes; and no information may be collected for any other reason than stated, and the collected data cannot be send to countries that lack adequate data-protection laws (Charter of Fundamental Rights of the European Union- (2000/C 364/01), 2000, 10). Under the public law arena, in UK, misuse of the cyberspace pertains to: “Content related crime, for example, child pornography and criminal copyright infringement. Traditional crimes committed by means of a computer, for example, harassment, fraud and theft. Attacks on computers and computer systems, for example, hacking” (JISC Legal Information, Cybercrime Essentials, JISC legal, 2007). A majority of the cybercrimes in UK fall within the purview of criminal code, similar to any other crime (non-cyber ones). However, owing to increasing online financial frauds and data thefts, the UK government brought in the Computer Misuse Act in 1990, which primarily dealt in computer-based crimes. Another act known as the Data Protection Act came into effect from 1998, and this Act made it compulsory for all e-business firms to safeguard the personal data stored with them. Under Section 55 of Data Protection Act, it is illegal to collect personal data, without any authorisation, and this offense can now lead to incarceration under a 2006 amendment to the Act. There were more amendments made in 2006, that included provisions for inter-web crimes and they came under a new set of laws, known as Police and Justice Act. More amendments were added in 2007 under Serious Crime Act, and all these modifications came into effect from the 1st of October 2007 (ibid). Under UK public law, administrative law includes regulations associated with public administration. It also includes other legal branches like building law, local laws, police law, public facilities laws, industrial code, civil service regulations or social law (Spindler, 2004, 17). Constitutional law becomes involved when e-business firms deal with fundamental rights or democratic rights of UK citizens. Taxation is related to all kinds of taxes that e-business firms must face, as for example sales and corporate taxes. Since countries collect revenue from various business firms, global level taxation plays an important role in shaping e-business relationships, like ePlatforms (ibid). Under UK private law, there is the contract law that tactically refers to negotiation and finalisation of contracts, which includes labour contracts (ibid, 17-18). Here the major legal issues at stake for e-firms are an appropriate use of eNotary for fulfilling official necessities of any contract, and the use of relevant information duties. Recently e-payment through electronic banking and eMoney is gaining popularity and it comes under the purview of contract law. The consumer protection legislation is a legal protection that safeguards consumers from unprecedented, unexpected and unusual risks, and balances the customer and business relationships. The corporate law in UK “deals with the establishment, management, regulation and dissolution of corporate entities and partnerships… [and] addresses the nature and classification of corporations, the extent of a corporation’s powers, how it operates and is controlled” (ibid, 19). Corporate law also includes legal issues related to the structure of the company shares, including obligations and rights of shareholders and directors, along with issues like mergers, share purchases, limited liability, firm restructuring and protection of the minorities (ibid). Under the purview of intellectual property rights come certain abstract resources including copyrights, trademarks, patents, and design rights, and the laws in this case attempts to balance “the author’s/creator’s/inventor’s rights for just remuneration with society’s interest in the use of the work/invention” (ibid, 19). Liability has a large scope in the arena of e-businesses, and includes liability for products or services bought through the internet or even information received from the internet, which has given authorisation for laws that stop violations of patent law, copyright law, unfair-commercial-practices-law and trademark law (ibid, 20). Labour law strikes a balance in the relationship between a worker and the employer (individual labour law); and the obligations and duties for trade unions (collective labour law). Individual labour law forms to be the core for e-business organisations, however collective labour law also producer a broader and more distinct effect on e-commerce. One legal contentious issue monitored by the labour law is the labour councils’ right to make use of gateway (inter or intranet) provided by a private firm for conducting their personal activities. Collective labour law is often used in regulate workers’ rights “to use internet gateways” during office hours, along with their liability rights (ibid, 21). The competition law takes into account the sustainability of a market structure that is competitive in nature, and this law regulates the formation of oligopolies or monopolies, or any other market behaviour with a domineering attitude (antitrust law). It also helps to maintain transparent and fair commercial activities between competing e-business firms, with the main objective of safeguarding consumer rights against incorrect and unfair mode advertising (through unfair competition laws) (ibid, 22). Ethical and moral issues for e-business firms: Ethical or moral values refer to certain basic principles that any individual (a free moral agent) uses for making decisions as regards the ‘right’ behavioural action. In this modern era of modern technological innovations, there are questions arising almost every day regarding the ethical and moral values of the newly formed information based knowledge society, where there are many opportunities for ushering in revolutionary socio-political changes, thus, threatening the present system of rights, financial, and power distribution. Information technology, like any other new-age technology, owing to its innovativeness and popularity, can be used extensively for conducting both criminal activities and for bringing in social reforms (Canzer, 2005, 69- 80). Ethical issues faced by the e-business firms pertain to the use of the Internet and e-commerce. Here the firms have access to technologies that make it simple for them to collect, integrate, and disseminate personal data, thus leading to concerns over the appropriate security and use of personal information of the customer, safeguarding privacy, and intellectual property rights. Financial frauds are also becoming increasingly common in the arena of e-commerce. Other important ethical issues within e-businesses are the establishment of accountability for any untoward incident within the systems; creating standards for protecting the systems quality in order to safeguard an individual and the community; and the preservation of socio-political institutions and values necessary to maintain a certain quality of life (ibid). The new-age information technology has created a sort of ‘ripple effect’ that has affected almost all aspects of an individual’s life, raising questions on ethical, environmental, and socio-political issues, which must be addressed from the social-political and individual levels (ibid). Thus, during ethical decision-making, one must take into account all these factors and look for opportunities to incorporate them within the business organisation’s basic values (fig 3). Fig 3: Factors to be considered by an e-business firm while taking decisions related to ethical and moral issues (Canzer, 2005, 69). Fig 4: The Relationship between ethical, socio-political issues within a knowledge based information society. The ethical issues faced by the firms show five moral aspects, which are: “information rights and obligations, property rights and obligations, system quality, quality of life, and accountability and control” (Organizations, Management, and the Networked Enterprise. Ethical and Social Issues in Information Systems, 129). Since the electronic world and related activities have affected all socio-political aspects of an individual’s life, there has been the creation of eDemocracy , or electronic democracy, a socio-political development comprising of “electronic communications technologies (e.g. the Internet) in enhancing and/or implementing (new) democratic processes within a democratic republic or representative democracy” (Kotsiopoulos, 2009, A-7). This process, when more evolved, would allow greater number of individuals to be involved in the direct democratic processes, resulting in greater accountability, transparency, and an increased ‘political legitimacy,’ which would produce more effective public policies (ibid). The three basic purposes of e-governance (besides given the citizens a louder voice, and a wider scope to voice their opinions) are: “Increasing transparency, where information dissemination about governance and its affairs is the main objective (eg. a government website, a political blog etc.) Increasing participation, where active involvement of citizens in the decision-making process is sought (e.g. eConsultation, eVoting, etc.) Increasing deliberation, where stimulation of interaction and discussion among citizens is the aim (e.g. forums)” (ibid, A-9). A major ethical issue faced by the e–business firms is the controversy over electronic waste (e-waste) or e-scrap, referring to the discarded electronic or electrical gadgets. It has been contended that the unauthorised form of processing of e- waste in developing nations would lead to grave environmental and health issues, since some of the e-scrap parts like CRTs, may have contaminants like lead, beryllium, or cadmium. A majority of the critics of those involved in e-businesses complain that under the garb of recycling, a majority of the e-waste or e-scarp are simply dumped in developing nations, like China, India and African countries, an action, which is completely unethical and immoral in nature (Grossman, Where the Computers go to die and kill, 2006). Even though some researchers say that the risk is not as high as reflected by the critics, but nevertheless the ethical and moral questions remain, and the e-business firms must keep this aspect in mind while conducting commercial activities. Conclusion With the popularity of the Internet and electronic commerce being on a constant rise, it is clear that any further developments within the information systems will have a direct impact on the socio-political institutions of a country, thus making ethical considerations even more necessary. In cases of e-business organisations, these firms use different innovative business models in order to make large-scale financial gains and reach a larger customer base, however, in the modern context one must take into account the varying public policies and ethical issues, to balance their profits, and rights and needs of all those concerned, in order to avoid unnecessary legal wrangles. References Canzer, B., 2005. E-business. 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