CHAPTER 14 MANAGING TECHNOLOGICAL CHALLENGES Preface Changes in environmental condition become the important factor in every businesses consideration.

However, companies are required to be ready for facing any changes if they want to exist in business environment. It is because of requirement of market that change every time in the line of environmental alteration. With the result that adaptation of changes become a crucial aspect in developing a company. Technology is one example of alteration in environmental condition. It can be denied that technology will change in every minute and every day. Inventions and innovations are influenced humans life, not only in developed countries but also in developing countries like Indonesia. Technological change has raised ethical and social questions of privacy, security, ownership, health, and safety. Companies now days are required to fulfill technological standards that occur informally in society. There are no basic standards about it, but technological developments become a consideration of society in occupying their needs. Simplicity and quality that offered by technology successfully become a good point in society. After all, few question about technology and the impact, especially for business environment are appeared. Moreover, who is responsible for determining how much technological change should occur or how fast things should change? Should technology be controlled, and if so, who should be in charge of managing technology and the challenges it poses for humans and cultures in our global community? All of those questions will be answered in another part of this paper.

Businesses Protecting Privacy Technology at work is become a common thing and can find in everywhere. By technology, employers can use new-sophisticated technology to monitor employees movements, computer usage, and personal and work interactions. In response to employees complaints that these practices are invasions of their privacy, many businesses have developed a privacy policy, which explains what use of the companys

technology is permissible and how the business will monitor employee activities (Lawrence & Weber, 2008: 298). Issues of privacy spill over into business-consumer relationship. According to a Minnesota Department of Public Safety report, a company could purchase the personal data information of all Minnesota drivers license holders for $1,500; by 2006, 800 companies had done exactly that. Recent technological advancements have increased the number of ways that privacy violations may occur. Industry and government are effort to manage privacy, especially for stakeholder privacy. Although some companies have addressed the issue of Internet privacy, some skeptics believe international government supervision of the Internet is necessary. However, such international management of technology is difficult to achieve. International government control of privacy will be difficult to achieve, especially as it pertains to the Internet. Management privacy may need to come from the Internet companies themselves.

The Management of Information Security Businesses have become acutely aware of the importance of maintaining information in a secure location and guarding this valuable resource. How best to manage information security remains a major challenge for businesses (Lawrence & Weber, 2008: 301). Information security describes activities that relate to the protection of information and information infrastructure assets against the risk of loss, misuse, disclosure or damage. Information security management (ISM) describes controls that an organization needs to implement to ensure that it is sensibly managing these risks. The risks to these assets can be calculated by analysis of the following issues:1 Threats to your assets. These are unwanted events that could cause the deliberate or accidental loss, damage or misuse of the assets.
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Vulnerabilities. How susceptible your assets are to attack.

Wikipedia, Information Security Management, http://en.wikipedia.org/wiki/Information_security_management

Impact. The magnitude of the potential loss or the seriousness of the event. Standards that are available to assist organizations implement the appropriate

programs and controls to mitigate these risks are for example BS7799/ISO17799, Information Technology Infrastructure Library and COBIT (Control Objectives for Information and Related Technology). One example that can make business entities realize to manage information security, in order to protect assets and all that related with their company. In May 2005, Time Warner reported that a cooler-sized container of computer tapes containing personal information on 600,000 current and former employees had been lost, apparently during a trip to a storage facility. A month later, Citigroup informed its customers that computer tapes containing personal information on nearly 3,9 million customers were lost by United Parcel Service while in transit to a credit reporting bureau. The publics fears were heightened just 12 days later when MasterCard International reported that more than 40 million credit card accounts might have been exposed to fraud through a computer security breach at its payment processing company. The announcement came after law enforcement officials and company experts had identified a pattern a fraudulent charges that were traced to an intrusion at Card Systems Solutions in Arizona, which processes more that $15 billion in payments annually for small and midsized retail businesses and financial institution. (Lawrence & Weber, 2008:301). According to these examples, placed personal information will appear risks, and it can categorize as human error. It sometimes will threat to our privacy come from criminals. The number of reported computer virus infections is increasing, despite efforts to detect or prevent their disruption. Most viruses are carried in file attachments and are activated when users click to open them. A new form of the virus, a computer worm, attacked computers through the Microsoft Windows operating system. In order to response invasions of information security, firms began to see the necessity of investing more resources to protecting their information. The responsibility of managing technology with its many privacy and security issues for business organizations is entrusted to the chief information officer (CIO). Many firms have elevated the role of their data processing managers by giving them the title of chief information officer. The CIO must set, align, and integrate an information technology vision with the companys overall business objectives. Protecting Intellectual Property

Intellectual property has become more challenging to protect with the advances in technology. The ideas, concepts, and other symbolic creations of the human mind are often referred to as intellectual property. In the United States, intellectual property is protected through a number of special laws and public policies, including copyrights, patents, and trademark laws. Not all nations have policies similar to those in the United States. In Australia, some Intellectual property rights are automatic while others are granted after application and examination against the relevant criteria by government agencies2: IP Australia administers patents, trademarks, designs and plant breeders rights with an examination and registration process The Attorney-Generals Department administers the legislation for copyright protection and circuit layout rights where there is no registration process. Historically and culturally, most Indonesians still hold to Adat norms that do not recognize private sector, individual ownership in intellectual works or inventions. This factor contributes to the denial of rationales for protection of intellectual property rights, acknowledged in many Western countries. Although Adat recognizes individual possession of material goods, it does not allow individual rights of possession to override principles of the public interest and the social function of goods. In Adat norms, the focus of law protection is not on individuals, but on communities. This helps explain why, before Dutch colonization, the concept of a monopoly over intellectual works was unknown in Indonesian society, as intellectual works were important not only for individual owners, but also for the communities to which they belonged3.

Software Piracy Software piracy or illegal copying of software becomes a global problem that
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Australian Government, Intellectual Property Protection in Australia, http://www.austrade.gov.au/ArticleDocuments/1358/Intellectual-Property-ProtectionGuide.pdf.aspx 3 Afifah Kusumadara. Problem of Enforcing Intellectual Property Laws in Indonesia http://ialsnet.org/meetings/business/KusumadaraAfifahIndonesia.pdf.

must be face by businesses environmental. According to the Business Software Alliance, global software piracy accounted for more than a third of all packaged software installed on personal computers and resulted in $34 billion in losses worldwide in 2005 (Lawrence & Weber, 2008: 306). Software companies predicted these lost would continue to rise as Third World countries became more involved in the global marketplace. In China, where experts estimate that 90 percent of all software in use is unlicensed, government officials decided in 2006 to against the piracy. The Chinese government announced that computer markers must ship all their product with licensed operating systems preinstalled and inspected all government computer systems for licensed software. Some of their motivation was economic, as China was poised to develop a massive technology-based communications industry (Lawrence & Weber, 2008: 306). Software piracy also attacked our country, Indonesia. Although Indonesia as a whole has a pretty good understanding of technology, the level of software piracy in this country is still high according to a study from the Business Software Alliance Indonesia (BSA), jointly conducted with the International Data Corporation (IDC). The study asserts that the commercial value of illegal software in the Asia Pacific region reached $18.7 billion. It also claims the global the revenue lost due to software piracy jumped to $59 billion, nearly double what it was in 2003. For Indonesia, the study says the commercial value of software without licenses that are installed on personal computers reached $1.32 billion in 2010. BSA says that it isnt just personal users, but many companies still do not realize that theyre using illegal software.4 Since 1988, the Business Software Alliance (BSA) has been an international representative for the worlds leading software companies before governments and consumers. BSA sought to educate computer users on software copyright laws, lobby for public policy that would foster innovation and expand software companies trade opportunities, and aggressively fight against software piracy. Its members include Apple Computer, Corel, Macromedia (Asia), Microsoft, Symantec, and many other influential organizations in the software industries. Figure 1 Top 20 Pirating Nations and Top 20 Lowest Piracy Nations
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Indonesia Ranks as The 11th Worst Pirating Nation, Tech in Asia, May 15, 2011, http://www.techinasia.com/indonesia-pirating-nation/

Source: http://www.techinasia.com/indonesia-pirating-nation/ Pirating Copyrighted Music Technology was going rapidly. It is make people can do everything by technology, including download music from Internet. In 1990, people can download music faster than ever before and store the music as their private collection in their playlist. Individuals downloaded millions of songs and burned them onto CDs, and listening whenever they wanted. This action denied the copyrighted of the artist who created the music and to the companies that manufactured or distributed these artists CDs. According to the International Federation of the Phonographic Industry, 20 billion songs were illegally downloaded or swapped in 2005, or one out of every three musical disks sold in the world, with sales totaling $4.6 billion. Nine out of 10 recordings in China were pirated, and 75 percent of Singaporeans surveyed said that 6

had no personal objection to using pirate material (Lawrence & Weber, 2008: 307). In order to protect music industry from pirating, especially in United States, the Recording Industry Association of America (RIAA) launched a series of lawsuits aimed at prohibiting illegal copying of music, protecting the legal property of the authors or publishers, and assuring that profit earned from music sales be distributed to those holding the copyrights. Piracy of Movies on CDs and DVDs Technology, with its advances can make people downloaded movie from the Internet to CDs or DVDs more easily. Result from The Motion Picture Association of America for piracy of movies; by their study they found that Hollywood studios lost $6.1 billion worldwide in 2005. The Federal Communications Commission ordered that all U.S made digital television receivers, by July 1, 2005, had to have technology installed meant to block the widespread and illegal redistribution of copyrighted programming.

CHAPTER 15 STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE Stockholders Stockholders (or shareholders, as they also are called) are the legal owners of business corporations. There are two types of stockholders own shares of stock in corporations such as individual and institutional. Individual stockholders are people who directly own shares of stock issued by companies. These shares are usually purchased through a stockbroker and are held in brokerage accounts. For example, a person might buy 100 shares of Intel Corporation for his or her portfolio. Such stockholders are sometimes called Main Street investors, because they come from all walks of life. Institution, such as pensions, mutual funds, insurance companies, and university endowments, also own stock. For example, mutual funds such as Fidelity Magellan and pensions such as the California Public Employees Retirement System 7

(CalPERS) buy stock on behalf of their investors or members. These institutions are sometimes called Wall Street investors. For obvious reasons, institutions usually have more money to invest and buy more shares than individual investors. Objectives of Stock Ownership Individuals and institutions own corporate stock for a number of reasons. People buy stock because they believe stocks will produce a return greater than they could receive from alternative investments. Stockholders make money when the price of the stock rises (capital appreciation), and when they receive their share of the companys earnings (dividends). Although the primary motivation of most stockholders is to make money from their investments, some have other motivation as well. Some investors use stock ownership to achieve social or ethical objectives. Some investors have mixed objectives. They wish to make a reasonable return on their investment but also to advance social or ethical goals. Stockholders Legal Rights and Safeguards In United States and most other countries, stockholders have legal rights that are often more extensive than those of other stakeholders. To protect their financial stake in the companies whose stocks they hold, stockholders have specific legal rights, such as: They have rights to share in profits of the enterprise if directors declare dividends. They have rights to receive annual reports of company activities and to inspect the corporate books, provided they have a legitimate business purpose for doing so and that it will not be disruptive of business operations. They have the right to elect members of the board of directors, usually on a one share equals one vote basis. They have the right to hold the directors and officers of the corporation responsible for their acts, by lawsuit if they want to go that far. They usually have right to vote on mergers, some acquisitions, and changes in the charter and by laws, and to bring other business-related proposals before the

stockholders. They have right to sell their stock.

Corporate Governance Corporate governance refers to a process by which a company is controlled, or governed. As a nations that have governments that respond to the needs of citizens and that establish policy, so do corporations have systems of internal governance that determine overall strategic direction and balance sometimes divergent interests. The Board of Directors The board of directors plays a central role in corporate governance. The board of directors is an elected group of individuals who have a legal duty to establish corporate objectives, develop broad policies, and select top-level personnel to carry out these objectives and policies. The board also reviews managements performance to be sure the company is well run and stockholders interests are protected. Corporate boards vary in size, composition, and structure to best serve the interests of the corporation and the shareholders. A number of patterns do exist, however. According to a survey of governance practices in leading firms in the Americas, Europe, and Asia Pacific, corporate boards average 11 members. The largest boards are in banking, insurance, aerospace, and pharmaceutical companies, and the smallest are in the small and midsized firms and in the high-tech, retailing, energy, and health care industries. Board members are elected by shareholders at the annual meeting, where absent owners may vote by proxy, as explained earlier. The system is formally democratic. As a practical matter, shareholders often have little choice in the matter. Principles of Good Governance In the wake of the recent corporate scandals, like Enron and WorldCom, many sought to define the core principles of good corporate governance. By the mid 2000s, a broad consensus had emerged about some key features of effective boards. These included the following:

Select outside directors to fill most positions. No more than two or three members of the board should be current managers. Moreover, the outside members should be truly independent, that is, should have no connection to the corporation other than serving as a director.

Hold open elections for members of the board. Some groups favored a proposal under which dissident shareholders, under certain conditions, could put their own candidates for the board on the proxy ballot.

Appoint an independent lead director (chairman of the board) and hold regular meetings without the CEO present. The independent chairman would then hold meetings without management present, improving the boards chances of receiving completely candid reports about a companys affairs.

Align director compensation with corporate performance. Like top executives, directors should be paid based, at least in part, on how well the company does.

Evaluate the boards own performance on a regular basis. Directors themselves should be assessed in how competent they were and how diligently they performed their duties. The movement to improve corporate governance has been active in other

nations and regions, as well as the United States. For example, in South Korea, companies in the securities industry launched the Corporate Governance Service in 2002 to promote management transparency and create shareholder value, and began giving awards to companies that achieved the highest standards in corporate governance. In South Africa, the stock exchange announced new rules in 2003 that would require companies to disclose all compensation to directors and what ties, if any, they had to the company.

Executive Compensation: A Special Issue Executive compensation is one of the most important functions of the board of directors. The emergence of the modern, publicly held corporation in the late 1800s effectively separated ownership and control. That is, owners of the firm no longer managed it on a day-to-day basis; this task fell to hired professionals. This development

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gave rise to what theorists call the agency problem. Executive compensation in the United States, by international standards, is very high. In 2005, the chief executives of the largest corporations in the United States earned, on average, $8.4 million, including salaries, bonuses, and the present value of retirement benefits, incentives plans, and stock options.

CHAPTER 16 CONSUMER PROTECTION Companies face challenging and often conflicting demands to produce a high quality products or services, keep prices down, protect privacy, prevent fraud, and meet the changing expectations of diverse customers around the world. Advocacy for Consumer Interests As long as business has existed, consumers have tried to protect their interest when they go to the marketplace to buy goods and services. The increasing complexity of economic life, especially in the more advanced industrial nations, has led to organized and collective efforts by consumers to safeguard their own rights. These organized activities are usually called consumerism or consumer movement. There are some advocacy organizations to protect consumer interest in USA. For example Consumer Federation of America, Consumers Union, Public Citizens, The National Consumers League, the Public Interest Research Group, and American Association of Retired People. In international level, there is Consumers International. That organization is an international non-governmental organization that represents more than 250 consumer groups in 115 nations. Reason for Customers Movement Customers movement exists because consumers want to be treated fairly and honestly in the marketplace. Beside that reason, there are some other reason why customer movement exists. Second reason is complex products have enormously complicated the choice consumers need to make when they go shopping. Third reason is service, as well as products, have become more specialized and difficult to judge. Forth reason is when business tries to sell either products or services through

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advertising, claims may be inflated or they may appeal to emotions. The last reason is some businesses have ignored product safety. The Rights of Consumers The central purpose of the consumer movement around the world is to protect the rights of customers in the marketplace. It aims to make consumer power an effective counter-balance to the power of business firms that sell goods and services. As business firms grow in size and market power, they increasingly acquire the ability to dominate marketplace transactions with their customers. Frequently, they can dictate prices. Typically, their advertisements sway consumers to buy one product or services rather than another. The economic influence and power to business firms may therefore become a problem for consumers unless ways can be found to promote an equivalent consumer power. Consumer advocates argue that consumers are entitled to five core rights, these are: 1. Rights to be informed. Its the rights to be given all facts to make and informed purchasing decision.
2. Rights to safety. Its the rights to be protected against marketing of goods that are

hazardous to health or life. 3. Rights to choose. Its the right to be assured access to a variety of products and services at competitive prices. 4. Rights to be heard. Its the rights to be assured that consumer interest will receive full and sympathetic consideration in the formulation of government policy and fair treatment in the courts.
5. Right to privacy. Its the rights to be assured that information disclosed in the course

of a commercial transaction is not shared with others unless authorized The Role of Government to Protects Consumers Governments involvement in protecting consumers interests has evolved over time. During 1960s and 1970s, Congress passed important laws to protect consumers, created new regulator agencies, and strengthened older consumer protections agencies. These developments meant that consumer could also turn to government for protections.

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Goals of Consumer Laws Consumer laws or we can say consumer protections laws was made to protect the consumer rights stated before. 1. To provide consumers with better information when making purchase Consumers can make more rational choices when they have accurate information about the products. For example, the laws require health warning on cigarettes and alcoholic beverages. Another example is manufacturers, retailers, and importers must specify whether warranties are full or limited, must spell them out in clear language, and must give consumers the right to sue if warranty are not honored. The laws also require food manufacturers to adopt uniform nutrition label, specifying the amount of calories, fat, salt, and other nutrients. Labels must list the amount of trans fat. Strict rules also define what can properly be labeled organic. 2. To protect consumers against possible hazards Required warnings about possible side effects of pharmaceutical drugs, limits placed n flammable fabrics, restrictions on pesticide residues in fresh and processed foods, the banning of lead-base paints, and inspections to eliminate contaminated meats are examples of these safeguards. 3. To promote competitive pricing and consumer choice When competitors secretly agree to divide up markets among themselves, or when a single company dominates a market, this artificially raises prices and limits consumer choice. So, the law was made to protect consumer rights to choose.

4. To protect privacy For example, the federal trade commission established a do not call list to protect individuals from unwanted telemarketing calls at home and a persons mobile phone. Major Consumer Protection Agencies There are 6 major consumer protection agencies government has. 1. The Department of Justice The civil rights division of this department enforces the provisions of the civil rights act that prohibit discrimination against consumers. 2. The National Highway Traffic Safety Administration 13

This agency affects many consumers directly through its authority over automobile safety. 3. Food and Drug Administration FDAs missions are to assure the safety and effectiveness of a wide range of consumer products, including pharmaceutical drugs, medical devices, foods, and also cosmetics. 4. Federal Trade Commission This Federal Trade Commissions missions are to keep competitive pricing, to protect consumers from deceptive trade practices, to set the rule of packaging and labeling, to set the rule of consumer credit disclosure and reporting, and also to keep the online privacy. 5. Consumer Product Safety Commission This consumer product safety commissions missions are to set safety standards for consumer products and to set flammable, fabrics, and hazardous substance, poison prevention packaging. 6. National Transportation Safety Board It has special purpose that is to set the rule of airline safety. Consumer Privacy in the Internet Age In early 21st century, rapidly evolving information technologies have given new urgency to the broad issue of consumer privacy. Shoppers have always been concerned that information they reveal in the course of a sale transaction might be misused and also unwarranted incursion into personal privacy. This might happen because there is a technology called cookie, an identifying marker placed on a users computer hard drive during visits to some web sites. The dilemma of how best to protect consumer privacy had generated a wideranging debate. There are 3 major solutions have been proposed: 1. Consumer self-help In this view, the best solution is to use technologies that enable users to protect their own privacy. For example, special software can help manage cookies, encryption can protect message, and surfing through intermediary sites can provide user anonymity. Critics of this approach argue that many unsophisticated web surfers are unaware of these technologies. Moreover, tools for protecting privacy can always be defeated by more powerful technologies. 14

2. Industry self-regulation Many internet-related business have argued that they should be allowed to regulate themselves. In advantage of the self-regulation approach is that companies might do the best job of defining technical standards. Critics of this approach are, however, that industry rules would inevitably too weak. 3. Privacy legislation Some favor new government regulations protecting consumer privacy online. Any approach to online privacy would face the challenge of how best to balance the legitimate interest of consumers and of business. Product Liability The product liability refers to the legal responsibility of a firm for injuries caused by something it made or sold. Strict Liability In USA, the legal system has generally looked favorably on consumer claims. Under the doctrine of strict liability, courts have held that manufacturers are responsible for injuries resulting from use of their products, whether or not the manufacturers were negligent or breach the warranty. The product liability in USA may be different with other country. In europe, awards are usually smaller than in USA, and also paid partly because the medical expenses of victims are already covered under national health insurance. Business Efforts to Reform the Product Liability Laws Many businesses have argued that the evolution of strict liability has unfairly burdened them with excess costs. Liability insurance rates have gone up significantly, especially for small business, as have the costs against liability lawsuits and paying large settlements to injured parties. In 2005, congress passed the class action fairness act. The 2 key elements were: 1. Most large class-action lawsuit were moved from state to federal courts. 2. Attorneys in some kinds of cases were paid based on how much plaintiffs actually received, or on how much time the attorney spent in the case. Although most businesses welcomed these changes, many called for further reforms, such as: 15

1. Set up uniform federal standards for determining liability. 2. Shift the burden of proving liability to consumers. 3. Require the loser to pay the legal costs of the winner. 4. Limit punitive damages. 5. Establish liability shields for certain kinds of products. A promising approach to resolving product liability conflicts without going to court is called alternatives dispute resolution (ADR). Positives Business Response to Consumerism The consumer movement has demonstrated that business is expected to perform at high levels of efficiency, reliability, and fairness in order to satisfy the consuming public. That brings some of the more prominent positive response from the firms. 1. Quality management Quality has been defined by international organization standardization (ISO) as a composite of all the characteristics, including performance, of an item, product, or service that bear on its ability to satisfy stated or implied needs. Then, we can conclude that quality management refers to all the measures an organization takes to assure quality. Taking steps of the production process to ensure consistently high quality has many benefits, for example, reduces the risk of lawsuits and builds brand loyalty. 2. Voluntary industry codes of conduct Businesses in some industries have banded together to agree on voluntary codes of conduct, spelling out how they will treat their costumer. 3. Consumer affairs department This department handles consumer inquiries and complaints about a companys products and services. Some companies have installed costumer hot line for dissatisfied customer to place telephone calls directly to the manufacturer. 4. Product recalls Companies also deal with consumer dissatisfaction by recalling faulty products. Product recall occurs when a company, either voluntarily or under an agreement with government agency takes back all items found to be dangerously defective. One problem with recalls is that the public may not be aware of them, so dangerous products continue to be used.

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Consumerisms Achievements Consumers today are better informed about the goods and services they purchased, are more aware of their rights when something goes wrong, and are better protected against inflated advertising claims, hazardous or ineffective products, and in fair pricing. Some businesses have heard the consumer message and have reacted positively. All these achievements bring the consuming public closer to realizing the key consumer rights: to be safe, to be informed, to have choices, to be heard, and to privacy.

References:
Afifah Kusumadara. Problem of Enforcing Intellectual Property Laws in Indonesia

http://ialsnet.org/meetings/business/KusumadaraAfifah-Indonesia.pdf. (Accessed: June 16, 2012). Australian Government, Intellectual Property Protection in Australia,

http://www.austrade.gov.au/ArticleDocuments/1358/Intellectual-Property-ProtectionGuide.pdf.aspx. (Accessed: June 16, 2012). Lawrence, A.T dan Weber, J. 2008. Business and Society: Stakeholders, Ethics and Public Policy, 12th ed. USA: McGraw Hill. Tech in Asia,Indonesia Ranks as The 11th Worst Pirating Nation, May 15, 2011, http://www.techinasia.com/indonesia-pirating-nation/. (Accessed: June 18, 2012) 17

Wikipedia, Information Security Management, http://en.wikipedia.org/wiki/Information_security_management. (Accessed: June 18, 2012).

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