AIS security cost-benefit tradeoff decisions: Hacking risk ethical dilemmas in a cost-cutting environment

• In Event: AIS Potpourri

Abstract

Recent data breaches experienced by retailers like Target and Home Depot underscore the importance of improved data storage security for information collected during the online AIS sales cycle. However, the high costs for security measures may be prohibitive for some firms. This creates an ethical dilemma for CXOs about investment in AIS security, especially when a firm is under pressure to contain such costs due to earnings pressure. Our experimental study examines the ethical reasoning and managerial interventions of potential CEOs about CFO AIS security investment decisions after management learns that the firm has a serious security breach that could expose it to hacking risk.
Our results suggest that when moral intensity is low in an AIS related case, ethical reasoning is compromised, and CEOs are less likely to intervene in an unethical decision made by the CFO. We also find that CEOs who possess independent thinking are more able to make effective managerial interventions regarding the subordinate CFO’s behavior. We find it concerning that CEO reprimands of CFO unethical behavior are much more lenient when the firm is not hacked versus when it is hacked. This result suggests that CEOs have an ends justifies the means mindset that we contend could cause disastrous consequences to a firm if unchecked by corporate governance that includes institutionalizing an ethical environment.

Authors

• Partha Sarathi Mohapatra, texas tech university

• Gary Martin Fleischman, Texas Tech University