Project Report On Business Ethics- Case Study: Facebook

Submitted in the partial fulfilment for the requirement of Post Graduate Diploma in Management

(PGDM)

Submitted By: PGDM-VII (A) Submitted To: Prof. Aditi Midha Sachin Dhiman (47) Sachin Narang (48) Anuj Sharma (63)

Jagannath International Management School Kalkaji, New Delhi

Contents
S.No.
1 2 3 4

Particulars
Introduction To Ethics Five Sources Of Ethical Standards Framework For Ethical Decision Making Case study:
4.1 Companys overview 4.2 Introduction 4.3 The Ethical Challenges Start 4.4 Too Big To Go To Jail

Page Number

ETHICS IN BUSINESS

Ethics in business, or business ethics as it is often called, is the application of the discipline, principles, and theories of ethics to the organizational context. Business ethics have been defined as "principles and standards that guide behavior in the world of business." Business ethics is also a descriptive term for the field of academic study in which many scholars conduct research and in which undergraduate and graduate students are exposed to ethics theory and practice, usually through the case ,method of analysis. Ethical behavior in business is critical. When business firms are charged with infractions, and when employees of those firms come under legal investigation, there is a concern raised about moral behavior in business. Hence, the level of mutual trust, which is the foundation of our free-market economy,is threatened.

APPROACHES TO ETHICAL DECISION MAKING

Philosophers have studied and written about ethics for thousands of years. The moral philosophies or ethical "theories" that have been developed form the foundation for ethics in business. Teleology Teleological theories of ethics focus on the consequences caused by an action and are often referred to as "consequentalist" theories. By far the most common teleological theories are egoism and utilitarianism. Egoism Egoism defines right and wrong in terms of the consequences to one's self. Egoism is defined by self-interest. An egoist would weigh an ethical dilemma or issue in terms of how different courses of action would affect his or her physical, mental, or emotional well being. Thus, an egoist, when faced with a business decision, would tend to choose the course of action that he or she believes would best serve selfinterest. Although it seems likely that egoism would potentially lead to unethical and/or illegal behavior, this philosophy of ethics is, to some degree, at the heart of a free-market economy. Since the time of political economist Adam Smith, advocates of a free

market unencumbered by governmental regulation have argued that individuals, each pursuing their own self-interest, would actually benefit society at large.

Utilitarianism In the utilitarian approach to ethical reasoning, one emphasizes the utility, or the overall amount of good, that might be produced by an action or a decision. If the good appears to outweigh the harm, the decision to move may be deemed an ethical one, by the utilitarian yardstick. This approach also encompasses what has been referred to as cost-benefit analysis. In this, the costs and benefits of a decision, a policy, or an action are compared. Sometimes these can be measured in economic, social, human, or even emotional terms. When all the costs are added and compared with the results, if the benefits outweigh the costs, then the action may be considered ethical. One fair criticism of this approach is that it is difficult to accurately measure costs and benefits. Another criticism is that the rights of those in the minority may be overlooked.

Deontology Deontological theories of ethics focus on (1) the rights of all individuals and (2) the intentions of the person(s) performing an action. Deontological theories differ substantially from utilitarian views on ethics and would not allow, Deontology proposes that the principles of ethics are permanent and unchangingand that adherence to these principles is at the heart of ethical behavior. Many deontologists believe that the rights of individuals are grounded in "natural law." Justice Justice-based theories of ethics concern the perceived fairness of actions. A just (ethical) action is one that treats all fairly and consistently in accord with ethical or legal standards. interactional fairness relates to the personal treatment one receives in the administration of a decision-making process. Interpersonal fairness has to do with the respect and consideration shown in the administration of decisions.

Informational fairness has to do with the explanations and accounts provided for the decisions made.

Relativism Teleological, utilitarian, and justice theories of ethics are all "universal" theories, in that they purport to advance principles of morality that are permanent and relatively enduring. Relativism states that there are no universal principles of ethics and that right and wrong must be determined by each individual or group.

FACTORS EFFECTING ETHICAL DECISION MAKING

1.Individual Difference Factor Individual difference factors are personal factors about an individual that may influence their sensitivity to ethical issues, their judgment about such issues, and their related behavior. Research has identified many personal characteristics that impact ethical decision-making. The individual difference factor that has received the most research support is "cognitive moral development. The cognitive moral development framework is relevant to business ethics because it offers a powerful explanation of individual differences in ethical reasoning. Individuals at different levels of moral development are likely to think differently about ethical issues and resolve them differently. 2.Situational (Organizational) Factors Individuals' ethical issue recognition, judgment, and behavior are affected by contextual factors. In the business ethics context, the organizational factors that affect ethical decision-making include the work group, the supervisor, organizational policies and procedures, organizational codes of conduct, and the overall organizational culture. Each of these factors, individually and collectively, can cause individuals to reach different conclusions about ethical issues than they would have on their own.

3.Issue Related Factors Ethical issues in business must have a certain level of "moral intensity" before they will trigger ethical decision-making processes. Individual and situational factors are unlikely to influence decision-making for issues considered by the individual to be minor. Certain characteristics of issues determine their moral intensity. In general, the research suggests that issues with more serious consequences are more likely to reach the threshold level of intensity. Likewise, issues that are deemed by a societal consensus to be ethical or unethical are more likely to trigger ethical decision making process.

CASE STUDY FACEBOOK : BEACON AND PRIVACY

Synopsis In November 2007, the social networking site, Facebook, offered a free tool to online partners such as Blockbuster, The New York Times, and Overstock.com to track users activity. Embedded in a partners website, the Beacon program would track the users activities and ask Facebook if the user was a Facebook member. All Facebook members would be asked if their activity should be sent as a broadcast to their friends through a notification window. If the user opted out, Facebook would not send the information. If, however, the user ignored the window or neglected to opt-out of the broadcast, Facebook would take the user activity data and send the information to the users friends through an existing service called News Feed. Users were not given the ability to reject sharing all information. Rather, the notification window appeared every time the user entered a partner site.Online community response to this practice was immediate. MoveOn.org created the Facebook group Petition: Facebook, stop invading my privacy! that stated, Sites like Facebook must respect my privacy. They should not tell my friends what I buy on other sitesor let companies use my name to endorse their productswithout my explicit permission. TheFacebook group and petition garnered 2,000 members within the first 24 hours and eventually grew to over 80,000. Additionally, the Beacon service tracked off-Facebook user activities after they had logged off the social-networking site and tracked those who had previously opted out of having their activities on partner sites broadcasted to Facebook friends. While Facebook improved the notification window, users still were not offered the ability to permanently opt out of the service. In fact, users were not informed that the data on their activities was always flowing back to Facebook, nor were they given the option to block that information from reaching Facebook.

FACEBOOK : BEACON AND PRIVACY In November 2007, Nate Weiner realized his personal life was being circulated online without his permission. Weiners Internet choices were being shared with all his closest friends via his Facebook profile. While registering with Facebook had seemed like a good thing at the timeautomatically updating a group of preselected friends on his activitiesWeiner was uncomfortable with unauthorized information dropping into the hands of his Facebook friends, so he decided to blog about it.So here I am, burning some brain cells and taking some time to relax playing a game on Kongregate, when a little window pops up in the corner of my screen and says Kongregate is sending this to your Facebook profile: Nate played Desktop Tower Defense 1.5 at Kongregate. Which immediately elicited a Hell no from my mouth. Maybe what shocked me was the way it was worded, essentially saying that Kongregate was sending the data without even asking my permission (even though there is a No Thanks button in the corner) but needless to say, I was not too thrilled about my surfing habits showing up on my Facebook profile. So I clicked No Thanks, and hopped over to Facebook and looked at the privacy settings for this new program. And found they give you the options of choosing allow, notify me, or never. The problem however is that even though you can choose whether or not it is made public that you visited these sites, Facebook still has the data regardless of your privacy settings. Now I dont mean to sound like Im tin-foil-hat-wearing paranoid, but that does seem to encroach a little past what Facebooks role in my life should be.

Beacon It was also in November 2007, when social networking site, Facebook, began offering a free tool, Beacon, to online partners such as Blockbuster, The New York Times, and Overstock.com for tracking user activity. Once Beacon was embedded into a partners web site, it recorded Facebook members activities and proactively broadcast such off-Facebook activities to designated Facebook friends. Considered at the forefront of online advertising,

Beacon was hailed as a mechanism to target potential customers based on their social network(s) and through friends implied recommendations. Facebooks attempts to alert its users of this new feature, however, were not easily identified. The opt-out notice appeared in a small window, which disappeared without users taking any action. Unless the user opted out quicklythe notification window would close or could be missed all together by the userthe user activity data would be sent to the Facebook users friends through an existing service called News Feed. Users were not given the ability to reject all sharing; rather, the notification window appeared every time the user entered a partner site. Residing on a partners website, the Beacon program would track the users activities and ask Facebook if the user was a Facebook member. All Facebook members would be asked if their activity should be sent as a broadcast to their friends through a notification window. If the user opted out, Facebook would not send the Information. If, however, the user ignored the window or neglected to optout of the broadcast, Facebook would take the user activity dat and send the information to the users friends. The online community responded immediately to this intrusion. MoveOn.org created a Facebook group Petition: Facebook, stop invading my privacy! that stated: Sites like Facebook must respect my privacy. They should not tell my friends what I buy on other sitesor let companies use my name to endorse their productswithout my explicit permission. The Facebook group and petition had 2,000 members within the first 24 hours and eventually grew to over 80,000 names. Facebook Facebook was created in a Harvard dorm room by Mark Zuckerberg and co-

founders Dustin Moskovitz and Chris Hughes as an online version of the ubiquitous facebook, known primarily on college campuses and used to identify and locate individuals. Facebook was a social utility that helps people communicate more efficiently with their friends, family, and coworkers. The site relied upon user-generated data of particular interest to their friends and allowed for viewing and comments. A Facebook member maintained a Facebook

page by frequently updating important information relevant to the member. Pictures, relationship status, activities, and accomplishments could be viewed by individuals who were identified as friends. The site allowed individuals to provide updates and view others updates on their own time. Facebook and Privacy Previously, Facebook differentiated its service from its closest competitor, MySpace, by offering users various privacy settings based on the users friends or social

networks. At a most basic level, Facebook required its members to join under a real name and use real information where MySpace placed fewer limits and users often operated anonymously. In addition, Facebook members could limit the type of information available to others, the ability of others to search their information, and the degree to which personal information was accessible to others Facebook applications. Facebook users were offered a variety of designations for each piece of information rather than merely public versus private. In doing so, Facebook also competed with LinkedIn by allowing members to separate work friends from non-work friends. Facebooks organizational principles centered on privacy concerns and formed the core of its organization. The principles stated that (1) an individual should have control over his personal information, and (2) an individual should have access to the information others want to share. These principles went on to delineate the type of information Facebook collected; why Facebook collected the information; who had access to the information; and how to get rid of information. Previously, Facebook users had created uproar over News Feeda Facebook feature that allowed user activity on ones own Facebook site to be broadcast to friends. News Feed allowed friends to be proactively notified of a users changes without having to constantly visit the users Facebook page. Seen as a key

differentiator for Facebook, News Feed was individualized for each member based on the activities of the members friends since the previous log-in. What makes the Facebook News Feed unlike any other communications tool that preceded it is that none of these friends explicitly said they wanted you to get this information. Instead,

it came to you because Facebook's software has concluded, by sophisticated algorithmic means, that you are likely to be interested. Upon its initial release, however, Facebook groups formed with 100,000+ members to protest the broadcasting of personal information. Privacy settings remained in place and the member could remove any data from being in the broadcast at any time Slowly, the uproar diminished as members learned to use News Feed. The feature has been embraced since by the Beacon.The revolt over Beacon, however, Facebook community Reaction to differed in its pervasiveness and

intensity, and members of the online community shared their opinions. One blogger highlighted online activist group MoveOn.orgs charge that Facebooks Beacon advertising program was a violation of users privacy. MoveOn.org spokesman Adam Green was quick to provide an additional response. If Facebooks argument is that sharing private information with hundreds or thousands of someones closest friends is not the same as making that information public, that shows how weak Facebooks argument is, Green said in an e-mail. Facebook users across the nation are outraged that the books, movies, and gifts they buy privately on other sites are being displayed publicly without permission and its time for Facebook to reverse this massive privacy breach. Bloggers continued to criticize Facebooks Beacon advertising program, as indicated by R. Crusoes blog response: Looks to me like Facebook has found a solution to the problem of their sites popularity. There is a growing number of Facebook competitors and this is a sure fire way of encouraging their users to go somewhere else. The online communitys level of expertise pushed Facebook to understand Beacon at a fine-grained level. As it became apparent through journalistic inquiries and the persistence of the online community, Beacon captured detailed data along with IP addresses of all visitors on a partner siteFacebook users and non-Facebook usersand determined whether or not to store and broadcast the information once the tracking information was sent back to Facebook. How much user activity data was captured, stored, and released by Facebook was not disclosed quickly enough for much of the blogging community. In reality, much

of the technical information about Beacon was pulled out of Facebook through reactions to blogs. As Nate Weiner discovered, he was not alone in his dismay over privacy issues caused by Beacon. Communicating his feelings online produced a wave of response not only from others in the online community, but also from Facebook. Follow-up blog postings continued. An example of the current process as is: 1. User goes rents a movie from Blockbuster online. 2. Blockbuster Online asks Facebook, is this person a Facebook User? 3. Facebook says yes (log could be made of transaction). 4. Blockbuster sends the movie the user rented to Facebook. 5. Facebook stores the data. This could all go away by simply adding a first step on Blockbusters end that says: Are you a Facebook user? And if so, would you like to share the movie you rented with your Facebook friends? And if you choose to, THEN the transaction to Facebook could be made. And if not, Facebook hears nothing and everyone is happy Facebook Beacon Drama Continues Nick O'Neill, December 1st, 2007 Of particular interest to me was that Facebook was notified of purchase information prior to a user confirming whether or not they approved that information being displayed. Chris Kelly, Facebooks Chief Privacy Officer, informed me that

Facebook discarded purchase information if the user did not want that information to be displayed. In the latest Beacon drama, Facebook is accused of storing information even if the user is no longer logged into Facebook. More information soon became known about Beacon. The service tracked users offFacebook even after they had logged off the social-networking site as well as those who had previously opted out of having their partner site activities broadcast to their Facebook friends.While Facebook improved the notification window, users still were not offered the ability to permanently opt out of the service. In fact, users were not informed that data on their activities was always flowing back to Facebook,

nor given the option to block that information from arriving at Facebook. Facebook user ever decided to have her computer remember

If

herlogin

information, Facebook could then tie into third-party site activities even if the user was logged off or had opted out of broadcast. An open question remained: What happened to that user activity data (1) if the user was not a Facebook member or (2) if the Facebook member opted out of the broadcast?

Pressure on Partners Beacon was directly targeted to these partner sites by giving partners the control to insert the Beacon program code (Add 3 lines of code and reach millions of users) when and how it worked for them. Little attention, however, was paid to the Facebook partners who voluntarily implemented Beacon. Partners such as Blockbuster, Sony Online Entertainment, eBay, The New York Times, and IAC, took a wide range of approaches to the adoption of Beacon. Overstock.com stated: We have a specific threshold that the program needs to meet, in terms of privacy, before well be turning it back on. Others opted to trust Facebook to delete the information they sent back via Beacon. Kongregate used the program only to track games people played, not other activities on the site. Other partners took a similar nuanced approach to installation. For example, Six Apart asked its users to optin and at that point, inserted the script for the Beacon program. Six Apart started with Beacon turned off, so at the onset, users and their information were not included and never sent to Facebook. eBay also used Beacon in a limited fashion by applying the program to sellers only, asking them to opt in. What Next? On November 30, 2007, the front page of The Washington Post carried the story of Sean Lane and his encounter with Beacon. Sean Lanes purchase was supposed to be a surprise for his wife. Then it appeared as a news headlineSean Lane bought 14k White Gold 1/5 ct Diamond Eternity.

Without Lanes knowledge, the headline was visible to everyone in his online network, including 500 classmates from Columbia University and 220 other friends, co-workers and acquaintances, and his wife. No longer solely within the online community, the Beacon and Facebook privacy debate had hit the mainstream media. The MoveOn.org petition drive had gathered 50,000 members, and articles began appearing in papers and magazines across the country.

Remedial Actions by Facebook In December 2007, Facebook decided to give its members the option to permanently turn off Beacon, thus affecting 55 million users, and apologized for its mistakes. On December 6, 2007, Facebook CEO Mark Zuckerberg made the following announcement: Announcement: Facebook Users Can Now Opt-Out of Beacon Feature. Thoughts on Beacon About a month ago, we released a new feature called Beacon to try to help people share information with their friends about things they do on the web. Weve made a lot of mistakes building this feature, but weve made even more with how weve handled them. We simply did a bad job with this release, and I apologize for it. While I am disappointed with our mistakes, we appreciate all the feedback we have received from our users. Id like to discuss what we have learned and how we have improved Beacon. On behalf of everyone working at Facebook, I want to thank you for your feedback on Beacon over the past several weeks and hope that this new privacy control addresses any remaining issues weve heard about from you. Thanks for taking the time to read this.~~Mark Zukerberg Beacon transformed from an extreme opt-out programwhere if the user ignored the pop-up window, the user activity data would be broadcastto a multi-stage optin program Specifically, Facebook made the following changes to Beacon:

 Facebook users were asked to allow the broadcast of their activity before their offFacebook activity was sent to friend-- Whereas consent was assumed previously, Beacon now asked users to opt-in to the service. Beacon would send activities to a members friends through a News Feed, however Before that happens, the website will send some information to Facebook in order for Facebook to generate a notification that will display in the lower right corner of your screen. If you click No Thanks, no stories or information will be published anywhere on Facebook. Any information that was sent to Facebooks servers will be deleted. If you click Close or ignore the story, the story will be sent to Facebook, but not yet published.

Facebook added an additional point of control for members to clarify the type of information to be broadcast to their friends. Upon visiting their Facebook pages, members were reminded of a pending story. Any off-Facebook activity would not be automatically sent to friends through a News Feed story even if the members had already opted-in. Rather, members would be asked to proactively approve the story again, and if they ignored the reminder, no story would be sent. Facebook clarified the ability to permanently turn off Beacon: If you do not want any websites to ever attempt to generate Beacon stories for you, you can opt-out by checking the Dont allow any websites to send stories to my profile box. In addition, Facebook would not automatically store information from thirdparty partner sites. In the case of logged-off users, deactivated accounts and non-members, Facebook deletes the data upon receiving it. Facebook decided not to modify Beacons ability to indiscriminately track actions of all users on external sites that have implemented Beacon. This facet of Beacon was referred to as broad user tracking,since Beacon captured web-page addresses visited, IP addresses, and actions performed on sites of Facebook members and nonmembers.

In March 2008, Zuckerberg stated: Almost all of the mistakes we made, we didnt give people enough control. We need to give people complete control over their information. The more control and the more granular the control, the more info people will share and the more we will be able to achieve our goals. Facebook updated its privacy options to support Zuckerbergs statement in May 2008, with a standardized user interface to increase the probability of members actually using the privacy settings. In addition, different friends lists allowed members to determine what information was shared with different groups of people and to create distribution lists for messaging and group invitations. The friends lists were critical to giving members the ability to share and restrict information based on specific friends or friend lists.