1. Making Ethical Decisions in the Financial Services Industry Julie Ragatz, Director of the Cary M. Maguire Center for Ethics and the Charles Lamont Post Chair in Ethics and the Professions.

2. System #1 and System #2 Thinking System #1 –Intuitive, effortless –Rapid –Below the level of conscious awareness System #2 –Deliberate, effortful –Slow –Conscious

3. Opening Exercise…Heinz’s Dilemma A woman was near death from a special kind of cancer. There was one drug that the doctors thought might save her. It was a form of radium that a druggist in the same town had recently discovered. The drug was expensive to make, but the druggist was charging ten times what the drug cost him to make. He paid $200 for the radium and charged $2000 for a small dose of the drug. The sick woman’s husband, Heinz, went to everyone he knew to borrow the money, but he could only get together about $1,000 which is half of what it cost. He told the druggist that his wife was dying and asked him to sell it cheaper or late him pay later. But the druggist said: “No, I discovered the drug and I’m going to make money from it.” So Heinz got desperate and broke into the man’s store to steal the drug for his wife. Should the husband have done this? (Kohlberg, 1963, 19)

4. What Is Ethics? Ethics is an investigation into the nature of our obligations to other people and to ourselves. –Why do we have these obligations and not others? –What should we do when these obligations come into conflict? –How can we best fulfill these obligations?

5. Ethics Is Not Compliance Compliance refers to the adherence to regulatory and legal requirements governing financial services practitioners.

6. Importance of Ethics in the Financial Services Industry Contracts are incomplete. Success and sustainability of financial services industry is based on trust. –Trust is promoted by the presence of ethical values, i.e. honesty, respect and integrity. Without personal and organizational ethics, there is an increased likelihood of more government regulation and intervention.

7. Why Trust Matters? http://www.youtube.com/watch?v=2icr QX6Yjachttp://www.youtube.com/watch?v=2icr QX6Yjac

8. Ethical Decision Making Model Have you defined the problem accurately?

9. Moral Perception The ability to recognize the morally salient facts of a situation A morally salient fact is one that reflects or impacts an ethical value Difference between general rules and particular applications

10. Moral Perception Moral sensitivity is a skill. We are trained (or not) to be morally sensitive through our participation in various social groups. Development of moral sensitivity is largely unconscious.

11. How Moral Perception Goes Wrong Bad moral education Ignorance Cognitive bias Or some combination of all three……

12. Ethical Decision Making Model How would you define the problem if you stood on the other side of the fence?

13. Ethical Decision Making Model How did this situation occur in the first place?

14. Ethical Decision Making Model To whom and what do you give your loyalties as a person and as a member [of the organization]?

15. Ethical Decision Making Model What is your intention in making this decision?

16. Ethical Decision Making Model How does this intention compare with the likely result?

17. Ethical Decision Making Model Whom could your decision or action injure?

18. Ethical Decision Making Model Can you engage the affected parties in a discussion before you make your decision?

19. Ethical Decision Making Model Are you confident that your position will be as valid over a long period of time as it seems now? https://www.youtube.com/watch?v=OU G4JXE6K4Ahttps://www.youtube.com/watch?v=OU G4JXE6K4A

20. Ethical Decision Making Model Could you disclose without qualms your decision or action to your boss, your CEO, the Board of Directors, your family or society as a whole?

21. Ethical Decision Making Model What is the symbolic potential of your action if understood? If misunderstood?

22. Ethical Decision Making Model Under what conditions would you allow exceptions to your stand?

23. But…Ethical Decision Making is Deeply Social…

24. Signs of an Unethical Culture People refuse to challenge authority –http://www.youtube.com/watch?v=BcvSNg 0HZwkhttp://www.youtube.com/watch?v=BcvSNg 0HZwk Good people abandoning ship Explicit and persistent “me” focused attitude Incentives appeal solely to self-interest in a narrow sense. Appeals are transactional and not inspirational.

25. Questions?