1. Ethics Dr. Tom Smythe

2. 2 Introduction  Defined by Webster’s  The system or code of morals of a particular person, religion, group, profession, etc.*  Can something be legal but not ethical?  If so, what do we do?  Laws are what most people think of when they hear ethics, especially in the context of business  Our goal is to have a framework to examine issues – not define right and wrong *Webster’s 3 rd College Edition, 1994

3. 3 When Do Ethical Decision Arise?  In reality, many times during a day  Do you run a yellow light, sip and refill at the Quick Stop, put the pen from work in your pocket  Bigger issues usually involve  Pain – that uneasy feeling you get when a path isn’t clear  Multiple stakeholders that have competing interests  Power/pressure – someone has leverage that can be used  Short-term focus  Significant moral courage (or lack thereof)

4. 4 Case 1  There is a young Army officer who is responsible for running an M-203 grenade rangeM-203  Assigned soldiers must qualify with the weapon each year  Failure to do so hurts unit readiness, can impact officer careers via evaluations, etc.  Because not everyone uses the M-203, soldiers firing are from different units  Think of the different units as the difference between IT, mortgage lending, etc.  The officer responsible for the range is from a unit – like IT

5. 5 Case 1  To qualify on the range, everyone firing must attend a safety class the day before  In addition to weapon safety, the range has a number of obstacles behind which soldiers must fire to qualify  One unit’s soldiers do not show for the safety briefing  What should the range officer do?

6. 6 Case 1 Revisited  Additional Information Additional Information  Transition to Market$im  Could there be potential ethical issues associated with moving from 3% ROE to 12%?

7. 7 Why Discuss Ethics?  Almost every decision you make has an ethical component  Consequences of not being ethical  Is “being ethical” good business?  Does being ethical mean all constituencies are “happy”?  If the answer is ‘no’, then what should our goal be?

8. 8 Factors Impacting Ethics  Personal values  Culture  Geographic regions  Religion  Or does ethics impact religion?  Rules, regulation, laws

9. 9 Common Mistakes  Emotional reaction  Personal ethical framework as limiting barrier  Need to recognize that there isn’t one and only one approach  Group think  Firm culture and environment can be very supportive of ethical practices but can also limit one’s view  Rationalization  If the rule/regulation says its “ok” then it’s “ok”

10. 10 Multiple “Philosophies” of Ethics  The two most common are duty/rights perspective (Deontological) and cost/benefit (Utilitarianism)  Deontological  Associated with Immanuel Kant  Certain things are right or wrong – universal  Most often related to “laws”  To be “valid”, the duty must always hold AND people cannot be used as a means to an end  Utilitarian  Associated with Mill and others  Most often assumed by business  Cost/benefit

11. 11 Multiple “Philosophies” of Ethics  Is duty or utility approach correct?  Yes  They generally lead to similar decisions, but not always  People tend to lean one way or another  Because both are valid, we need to recognize both and be willing to examine from multiple views  Remember, there often isn’t one right answer (at least not with the difficult ethical issues)  Our goal is to address the issue thoroughly and thoughtfully

12. 12 Decision Framework*  Identify the facts of the situation – not hunches but facts  Data gathering stage  Identify the ethical dimensions/issues  Look outside of your normal viewpoint  Take the long-term view  Identify stakeholders  Be comprehensive  Can others give me insight?  Mentors, peers *Decision framework - adapted from “Business Ethics – Decision Making for Personal Integrity & Social Responsibility”, Second Edition, Laura P. Harman, Joe DesJardins.

13. 13 Decision Framework  Identify the alternatives and evaluate them  Is the alternative legal?  What are the consequences (costs/benefits - who gets benefits and absorbs costs)  What duties, rights, principles are involved? Possibly separate from laws Are the people involved a means to an end?  How does the alternative reflect on my own principles? Will I be able to tell my mother, wife, children about this?  Select an alternative  Understand why you selected a given alternative – this is particularly important given not everyone will be happy  Monitor results to improve evaluation process

14. 14 Case 2  Using the “Absolute Case” as your basis, in your breakout teams use the framework to address the situation  As a team make a choice as to whether you would use the fund name or not  Reconvene to discuss

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16. 16 Case 1  The next morning at the range, soldiers from the unit that missed the safety briefing show up  What should the range officer do?  He did……  The officer in charge of the delinquent unit comes to the range to talk to the range officer  The range officer is of lower rank AND worked for the unit officer  What should the range officer do? He did……  The unit officer’s boss calls the range officer explaining all of the consequences of the soldiers not firing  What should the range officer do? He did……  Return Return

17. M-203 Picture from Colt.com web site. Return