In the last decade the European information technology industry has had a spat of ethical dilemmas (especially in telecommunications and associated industries such as banking and health). Consequences of unethical behaviour in the information technology industry have led to the loss of thousands of jobs, stress, suicide, lawsuits, bankruptcy, and loss of reputation.
Corporate scandals have placed ethics and governance high on the political and public agenda. Development and investment projects and contracts are being scrutinised more than ever by the media, the tax-paying public, government and financial audit teams.
Taking the lead
Overcoming apathy to ethical considerations in management is one task that the CEO must take the lead in. One of the key characteristics of ethical leadership is that of being a role model through visible action. Most leadership positions in management, involve removal from the day-to-day activities of the business.
Senior executives rarely, if ever, deal face-to-face with middle ranking managers or junior staff. It is the time old problem of decision makers being divorced from front line entanglements, which can cause strategy to be divorced from reality. Also, what often passes for professionalism is often simply a cover to maintaining the great divide between management and the rest of the organisation and its stakeholders.
Many firms operating within the European information technology industry use codes of ethics to define responsibilities and good conduct towards their stakeholders and equally to characterise the good conduct that the firm expects of its employees. Codes of conduct and codes of ethics act to reward and punish irresponsible behaviour.
Corporate social responsibility
As a consequence understanding individual rational for ethical and unethical behaviour has been a cause of concern for those engaged in corporate social responsibility programmes (CSR).
In this context one of the most prominent challenges for European (and non-European) firms is how to handle the quest for corporate social responsibility.
The ability to define, mobilise and engage in CSR activities that serve stakeholder expectations, as well as the organisation itself, is an ongoing challenge for leadership.
CSR is a highly contested concept with as many advocates as critical voices. Again this piece highlights the mainstream concepts and challenges from a corporate perspective, while it emphasises the challenges of stakeholder salience in CSR.
The broad view stakeholder salience is that stakeholders focus their efforts on influencing the organisation to achieve positive outcomes for themselves and others. The key variables used to define stakeholder salience are ‘power, legitimacy and urgency’. The more a stakeholder possesses these attributes, the higher its salience is perceived by the management of the organisation.
At an intuitive level it could be argued that some stakeholders acquire these attributes, but what truly defines stakeholder salience is the degree to which stakeholders possess these attributes. In this context the issue I wish to address to what degree stakeholder salience is practiced within the European information technology industry? To answer this question I undertook research using an inductive and exploratory approach that involved reviewing a number of firms’ websites within the industry, and searching for published formal documents which address ethical and stakeholder salience issues.
Conform and perform
The global information technology industry is an industry subjected to diverse and recurrent governance and legislative pressures. The industry is highly regulated and comprises of mature industries, subjected to extensive governmental laws, reporting requirements, media attention and informed public interest groups and individuals.
As a consequence, firms that compete within the industry are expected to conform and perform with a high level of compliance and moral behaviour. In identifying stakeholder salience issues, consideration was given to the relationship and interrelationship between groups within firms in which codes of ethics tend to define the responsibility of a company towards various stakeholders. For example, in software services firms, ‘power’ is derived from specialist knowledge within the industry and between stakeholder groups.
In identifying stakeholders, particular attention was paid to those stakeholders frequently cited in the firms’ published literature. The group of stakeholders most often addressed were customers, employees, suppliers, government, and regulators.
Stakeholders with power
Evidence suggests that within Europe (especially, Germany), customers play an active role which results in high legitimacy. As legitimised agents, customers have power over firms. In competitive markets, customers have options to switch suppliers.
It follows that the customer’s decision to stop or reduce its purchase of products results in a definite influence of a firm’s survival, making the acceptance of customers’ power a real possibility.
Within an international context, the power of customers to exert influence over larger firms is limited. Large firms such as SAP, IBM, CGI-Group and Fujitsu UK have substantial customer foundations, together with mature systems and processes for managing customer expectations. In this context large firms within the sample were generally able to exert significant influence over their customers.
On the other hand, the ‘power of customers’ within the industry can be somewhat limited. Large firms such as SAP and IBM are able to influence the markets they operate in and the image and customer perception they create within the market.
Secondly, operating internationally enables the firms to move to other markets thereby enlarging their customer base.
If firms regard customers as legitimate stakeholders with power, it could be argued that large firms arbitrate their ‘power and legitimacy’ by managing changes in customer requirements, for example, through differential customer service agreements.
Firms within the industry frequently fail to deliver on requirements, and promises to deliver on schedule, which can raise doubts over the degree to which firms perceive customers as an urgent stakeholder group. In this context, claims by firms within the industry that they support high levels of customer ‘urgency’ are not generally supported.
Employee as resource
Employees within the industry are frequently viewed as a key resource, largely due to the domain knowledge and technical nature of what they do. Within the sample employees represent a primary group and the relationship between firms and their employees is embedded in the firm’s history and their track record of industrial relations.
The ability of employees within firms to exert influence is, in many respects, dependent on their size and prior history of social cohesion. Firms with higher degrees of social cohesion generally responded better to stakeholder expectations. For example, German companies generally have a high degree of stakeholder salience in that they operate through a two-tier board system whereby an executive and supervisory board exist independently.
Firms such as SAP and Siemens and their employees will have seats as non-executive directors on the supervisory board. The supervisory board generally influences policy, strategy and decision making. In this situation, employees within the firm look for support, try to cooperate, establish dialogues or avoid conflict in a majority of the circumstances surrounding a decision.
Deregulation within the industry has enabled many European IT firms to break loose of many bureaucratic practices. Deregulation has prompted responsiveness to key stakeholders (shareholders and business partner firms) by providing freedoms within firms to exploit entrepreneurial behaviour.
Within the European Union (EU), UK, German and French ‘governments’ are regarded as important sources of influence and are therefore considered as a group of stakeholders with both legitimacy and high power. German firms for example, have a comprehensive legal framework which has led to a more stakeholder- oriented focus in corporate governance.
Evidence from data would suggest that within many European firms, ‘urgency’ is a key attribute of stakeholder engagement. Claims made against the respective governments have to be dealt with due to the high level of legitimacy and power they have or represent. Although not always substantiated, the various European governments’ higher urgency, compared to customers, could be characterised by changes in regulation following unacceptable practices towards customers.
Within the European information technology industry we know that stakeholders are individuals or groups with multiple interests and expectations. Those stakeholders with a legitimate claim on a firm often results in the individual or group deriving some portion of the firm’s power. Principal stakeholder groups such as customers, employees and government are considered to be of strategic importance.
Positive relations to these stakeholders are considered essential for firms’ sustainability and long-term survival. European technology firms, especially those that operate out of Germany, such as SAP, Siemens, NXP and Novellu Systems, tend to be highly regulated and open to public scrutiny. Complexities in competition owing to increase globalisation, internationalisation and financial constraints within EU markets have certainly precipitated new issues in relation to CSR, and those most important stakeholder groups.
It could be argued that increased globalisation generates new problems that require ethical solutions by ensuring that firms continue to invest in stakeholder relationships and education. It could also be argued that the changing nature of business and society demands nothing else.
Notes
A study in project failure, Dr John McManus and Dr Trevor Wood-Harper
