‘2011122, 1037 PM Arts and Humanities / Philosophy / Ethics [MAA250 Ethics - Revision Seminar Flashcards | Quzlet MAA250 Ethics - Revision Seminar Terms in this set (99) Topic 1 - Ethics About choices - assessing alternatives, making the ‘right’ decision based on moral principles. Encompasses individuals, groups, organisations and society. Hierarchy of Ethical Decision Making Hierarchy of Ethical Decision Making - Levels Level 1 - Ethics and Law (any legislation, no conscious decision making necessarily required as we know it is already law. Level 2 - Ethics and Codes of Conduct (designed to address basic business decisions that do not have any serious/complex ethical implications OR simple ethical decisions) Level 3 - Ethics and Personal Principles (designed to address more complex business decisions that do have serious ethical implications/where a higher level of ethical judgement and decision making is, required). -Be able to differentiate between the 3 levels. -Be able to provide examples of each 3 levels. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 123‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Ethical Lens Inventory (EL!) Each person makes ethical decisions based on their values and perspectives, rarely have an understanding of our approach to ethical decision making. ELI is a personal evaluation tool designed to help understand the values that influence their choices. -Identifies how they prioritise values when making ethical decisions. -Understanding what values are most important to them so that they can minimise conflict, make better ethical decisions and live with integrity. ELI Objectives To identify the valves that are most important to the individual -Determine which ELI reflects their ethical preference. -Discover the strength of their preferred lens. -Explore the gifts of their preferred lens. -Gain knowledge of how to analyse a dilema, -Exercise discernment in difficult situations by asking the right questions. -Have a common language for ethics and decision making. ELI Building Blocks Topic 2 - Theories of Ethics ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 223‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Stakeholder Theory A theory that holds that social responsibility is paying attention to the interest of every affected stakeholder in every aspect of a firm's operation -Rejects the view that sole important relationship is between managers and shareholders. Baird Decision Making Model Normative Theories of Ethics Represented by a value judgement on ‘what people out to be’, or 'what one should do! ~'Normative' (or 'prescriptive) ethics develops some theoretical underpinning a a basis for our decision making, creating and evaluating moral standards. ~"Descriptive’ ethics - describes how people behave. Normative (‘Prescriptive’) Ethics What ought to or should be happening in practice. -Following/complying with all: i)Guidelines ii)Regulation ii)Standards ivpRules v)Policies vi)Codes vii) Corporate Governance Amore sound model, as it ensures compliance and at stage 4 of Kohlberg’s model (stage 4 is minimum) ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Descriptive Ethics What is actually in practice/reality. Not always a sound model, as what is in practice may be unethical (based on greed, patterns, bad habits, corrupt corporate culture). Consequential Ethics (outcomes) - Teleological Decisions are based on attaining a particular ‘outcome or consequence. Utilitarianism - means to bring the greatest amount of benefit to the largest number or majority of people. Non-Consequential Ethics (principles) - Deontological Decisions are not driver or motivated by a particular outcome or consequence. Most common examples: theory of rights/justice Agent-Centered (character) Suggest that decision making should be driven by what type of person we ‘should! be, versus focusing on the rules that they should follow. Examples: virtue, care, integrity, honesty, relationship building, nurturing, Mapping Theories of Ethics Summary of Normative Theories of Ethics ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Topic 3 - Moral Reasoning and Ethical Decision Making Models Moral Philosophy and Moral Reasoning Moral Philosophy is concerned with what is morally right or wrong and is composed mainly of the normative theories of ethics. Moral Reasoning is concerned with the process (how and why) that individuals follow in ethical decisions. ~eg. telling the truth out of respect vs telling the truth to avoid harm to oneself. Kohiberg's Stages of Moral Reasoning & Development Summary of Kohlberg's Model Financial Professionals and Kohlberg’s Model Factors why professionals struggle to reach stages Sand 6: -Tradtionally, best choice is profit maximisation, thus exceeding level 4 is not practiced or valued. -Numbers based mentality. -Profit driven cultures -Compliance driven - acting at the minimum, -Corporate cultures which do not openly invite questioning, challenging or holistic/disruptive mentality -Lack of protection against whistle-blowers. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet AAAT-Step Ethical Decision Making Model AAA T-Step Model - Step 2 Ethical Issues 2. Ethical issues - a) Primary stakeholders identified b) Ethical issues need to be clearly identified - obligations in which stakeholders have competing interests. e.g. Stakeholder right to know may conflict with company's obligation to maintain confidentiality. Step 3 Norms, Values and Principles Step 3 - Norms, principles and valves related to the case. -10 core values: Caring, honesty, accountability, promise-keeping, pursvit of excellence, loyalty, fairness, integrity, respect for others, responsible citizenship. -Fundamental Principles of Professional Conduct: Public Interest, Competence, Confidenti Care, Integrity Objectivity and Professional behaviour. y, Due Step 4 Alternative Courses of Action Step 5 Best Course of action consistent with Step 3 4- Need at least two options. 5 - Need to reflect on the combo of values which is compelling enough that one alternative is clear. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Step 6 Consequences ‘Step 7 What is the decision, Step 4 should consider the consequences in the short or tong term, -Do consequences uphold or violate the values in step 3. -How will decision affect shareholders? Step 7 Need to balance the consequences of each decision for each course of action to select an appropriate alternative. Topic 4 Ethics in a Corporate Environment Ethical climate - comprises the values, beliefs and traditions that influence the behaviour of organisational members. -Represents a shared set of norms, values and practices about appropriate behaviour at work. -Employee's perception of what is important to an organisation. -Ethical culture develops public trust and loyalty. Shareholder v Stakeholder Traditionally, focus on shareholder and profit maximisation - profit is king. seer est tare Professionals in Business Salaried, employed or international professionals, Also have a professional duty with integrity and objectivity (publicly accountable). Can be influenced by: -Pressure to collude, professionalism (professional ethics) vs subservience to employer. -Group-think and dominant personalities. individuals yield to dominant view of group. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 123‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Benefits of a Corporate Code Codes as a tool of good governance. -Codes of conduct can increase predictability in employee behaviour if corporate culture is strong, -Codes are useful to companies in decentralised or fragmented into smaller divisions. -Assist internal control. Management setting the tone. ~The ethics of an organisation is dependent on senior management setting the appropriate tone at the top. ~‘Setting the tone, employees learn the appropriate behaviour from senior management leading by example. Benefits of a Corporate Code part 2 Management setting the tone. -Codes and subsequent employee behaviour is influenced by management's commitment to the code. -Codes supported by senior management will always be a strong assurance of ethical culture. -Code must be communicated, acknowledged, applied in training and reinforced. Enforcement -A penalty system operates as a deterrent. -Engage a positive tone throughout code of conduct, that encourages good behaviour rather than penalising bad behaviour. Leadership Style and Setting Culture Leadership style and behaviour filters/flows downwards to lower levels of an organisation. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 823‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Schein's Model and Coporate Culture Leadership ‘Summary of Schein's 6 Mechanisms ‘Summary of Schein's 6 Mechanisms part 2 Topic 5 Professional Ethics and Conflict of Interest Conflict of Interest arises when the interests of the professional conflicts with the interests of another party (or potential). -Conflicts of interest cause professionals to impair their ability to discharge their fiduciary responsibilities properly. ~Self interest also includes looking after one's. friends and family. -Conflicts of personal interest can arise self-interest or interests of other related parties. 5 Elements of Conflict of Interest (FPSRA) 1. Fiduciary relationship 2. Proper exercise of duty 3. Selt-interest 4, Real or perceived CO! 5. Actual or potential harm ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet 5 Elements of Conflict of Interest - Explained 1,2 1. Fiduciary relationship -When the professional is in a position of authority with responsibility for making judgements that have an effect on other parties -Primary duty is to act in best interests of the other party - uphold public interest. 2. Proper exercise of duty -Divided loyalty can make it difficult to exercise sound, independent and objective judgement. 5 Elements of Conflict of Interest - Explained 3 3. Self Interest -A COl originating from personal interest interfering with proper exercise of duties and objective judgement. -When a professional favours self-interest in a professional client relationship: clients suffer, detract from rep and credibility of profession. -Second type of conflict: Arises when professional occupies dual roles (e.g. marriage breakdown, sell- buy transaction) representing a conflict between clients. Actions interest of one client, but not in interest of another. 5 Elements of Conflict of Interest - Explained 4/5 4, Real or perceived COI - it is not necessary for an actual COI to exist, only the perception that it does. 5. Actual or potential harm - harm from unsound judgement is not necessary for the existence of a conflict of interest, only need the potential for harm, ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 10123‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Identifying a Conflict of Interest A professional has a responsibility to: -Identify and evaluate conflicts relating to their business or clients. -Be vigilant in identifying relationships, financial, interests and situations that could be viewed by others as aCOl Recognising a COI is problematic when objectivity is clouded -Useful to inform colleagues of potential CO! -Thought experiment involving the ‘test of trust’ - would others trust my judgement if they were aware of COI? Resolving a Conflict of Interest (DRS) Difference between client and employee centred COls, provide examples. ‘One can mitigate/reduce threat of COI by: -Disclose the conflict to all interested parties. -Removing oneself from the conflict. -Seek advice from a confidential counselling service. Disclosure When a (potential) conflict of interest is identified: -the prof may inform interested parties, and -only proceed with their informed consent to continue the relationship this will allow clients to judge themselves the likelihood of damage, if any, and by giving consent, they bear the risk of the adverse effects from the col ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 128‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Removal When a conflict is unavoidable, one should remove themselves from the situation, allow others to undertake the task. When a colleague is invited to assume these responsibilities, consideration should be given in revealing the conflict, in case it pressures or passes the conflict to the incoming colleague. Seeking advice - Confidential Counselling ‘Seek guidance from an independent and objective source. -Prof assoc's normally provide a counselling service that offers confidential advice. -Open and frank discussions with experienced members may help the professional to clarify concerns and articulate possible resolution strategies. Financial Professionals - Duty to act w/ Integrity and Objectivity Can be under influence of: 1. Pressure to collude - Professionalism (professional ethics vs subservience to employer. 2. Group-think and dominant personalities - individuals yield to dominant view of group. Put client first vs. Public Interest If client is requesting ethical behaviour, adhering to law, uphold professional duty, clients needs are valued. If client is applying undue pressure (bullying) to act unethically, not acceptable to put client first. Serving public interest is the foremost ethical obligation. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 1223sa1rti22, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Fundamental Principles of Professional Conduct (APESTIO) (PPPCOl) Threats to Compliance (SSAFI) FASEA Code of Ethics “imposes ethical duties for FP's that go above the requirements in the law. Itis designed to encourage higher standards of behaviour and professionalism in the financial services industry.” FASEA Code of Ethics - Values (TCFHD) FASEA Code of Ethics - Values part 2 FASEA Code of Ethics - Standards: Ethical Behaviour FASEA Code of Ethics - Standards: Client Care ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet FASEA Code of Ethics - Standards: Quality Process FASEA Code of Ethics - Standards: Professional Commitment Topic 7 - Tax Services and Fraud Tax Minimisation Occurs when a client's taxation affairs are legitimately arranged to reduce the amount of tax payable. -Professional has an obligation to put forward the position which best favours the client (as long as, ethical), -provide example Tax Evasion Deliberate falsification of information or use of deceit to escape tax liability. -schemes are unlawful and a criminal offence. -provide example Tax Avoidance Process of arranging one's affaiurs to secure a tax advantage by legal, but sometimes contentious means. -provide example e.g. multinationals reducing tax through organising their financial affairs in tax haven countries / read articles under resources, ‘The News -ethics + business’ a. Legal but unethical b. Primary purpose is to avoid tax liability (Tax Act) ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet According to ACFE 2012 1. Asset misappropriation, Types of Fraud 2. Financial statement manipulation. 3. Corruption (includes bribery). "a theft committed in the course of employment involving the use of deception to obtain a financial Fraud advantage" ie, Fraud is corporate theft. Fraud Triangle Commercial bribery is a form of bribery which involves corrupt dealing with the agents or employees of potential buyers to secure an Bribery advantage over business competitors. Facilitation payments: Provide Example: AWB Case Link to cross-cultural business. "the activity of disclosing information externally that is confidential within the firm, but the disclosure is. deemed to be in the public's best interest” -Occurs when one or more employees, without Whistleblowing authorisation, disclose info about unethical or illegal activity. -To an external party -Provide example ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 19123‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Whistleblower Moral Dillema 1.A duty of loyalty and confidentiality to fellow staff and employer vs. 2. The obligation of protecting public interest by blowing the whistle on the organisation and rogue practices and employees. Whistleblowing - Pros and Cons Conditions for Whistleblowing 1. Internal protocols have been observed. 2. Whistle-blower has an appropriate moral motive. 3. Evidence would convince a reasonable person, Encouraging Whistleblowing 1. Management must establish a culture that, supports WB as a positive act - a loyal act, best interest of org. 2. Provide support and guidance to employees with grievances about their employers. 3. Encourage employees to blow the whistle internally, resolve problem before it becomes a public scandal. 4, Designated officers have a responsibility to act on reports received by employees. Effectiveness of Whistle- Blowing (Anonymity) 1. Employee's identity remains a secret. 2. Competent system of investigation. -Processes such as whistleblower hotline remains anonymity and encourages disclosure. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Consequences of Positive Corporate Culture which supports W.B. -Ethical = rewarded (eg. the WB) -Unethi -WB is encouraged = positive internal control -Provides mgmt with opportunity to corredct unethical acts and punish perpretrator. -Act as a deterrent for future unethical behaviour/ = punished -Open communication and WB hotlines -Ethical leadership continues. -Less likely for public scandals Topic 8 - Cross Cultural Ethics Cultural Relativism The standards that guide ethical behaviour are those that have been established by the host country, Problems: -lack universal standard which determines right from wrong. -common practice does not make a wrong act right. -for relativists, nothing is wrong. Universalism Absolute Moral Truths which should be obeyed at all times without exception. Problems: -Ignores ethical and cultural differences between countries. -Moral authoritarianism - universalist sees their own culture as superior to others. -All practices that are different, are inherently wrong, ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 12s‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Moral Minimum Between relativism and universalism. Companies should respect and adapt to norms of, the culture while: ~Adhering to a minimum standard of conduct, that -Transcends any particular nation or culture. ~eg, Declaration of Human Rights (UN) Cross Cultural Ethics - summary if Topic 10 - Corporate Governance and Agency Theory Corporate Governance "encompasses the control processes, procedures and relationships involved in the economic, legal and operational performance of a corporation’ Ethics + Corporate Governance =sound business practices =reduced likelihood of corporate collapse Board governs -Example: CBA Board flaws in C.G, Board failed responsibility to assess risk of IDM's and guide CFO. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Corporate Governance part 2 “focuses on the responsibilities of Board and its sub committees, their management, and oversight of the corporation, risk management and BOD performance, evaluation, remuneration etc." "In essence, CG is designed to ensure that BOD is fully aware of operational practices, managing the executive level in an ethical, diligent and responsible manner on behalf of the shareholders/owners." Role of Board of Directors Strategic Planning Supervisors the rule of the CEO and management. Appointing new senior management Monitoring performance of company. ‘Communicating to shareholders. Board of Directors Definition A group of persons chosen to govern the affairs of a corporation or other large institution. Made up of a mix of both executive and non- executive directors. -Majority non-exec, chairperson is non-exec. Executive vs. Non-executive Directors (non-independent Director) - employed by organisation, paid as part of their salary. (Non-executive Director) - not employed by organisation, consultancy role, paid as part of a set fee for service. Executive vs. Non-executive Directors part 2 ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards!‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet ASX Codes of Corporate Governance (SIRRR) Importance of Corporate Governance Se oes Leeann Agency Problem Arises because: agents of a corporation (the executives) do not always share same commitment or sense of ownership as: -Principal (shareholders) May fail to operate with same level of responsibility ie. self-interest or bias -Agency gap can emerge, where there is a differential of commitment between a principal and agent Explain: Agent uses Principal's resources for their ‘own gain or bias. Management (agent) Remuneration Incentive for managers to act in interests of shareholders Performance-based remuneration: salary related to individual/company performance transfer risk to the manager's compensation -managers suffer financially if manager or firm does not meet target -Poorly performing managers often leave with huge payouts: Golden Handshakes: CEO of CBA announcing resignation after ML allegations, leaving with handsome sum of money. ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 20123‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Equity Based Remuneration 1. Management share ownership - increased risk to management wealth ie. if share prices drop through poor financial performance, so does remuneration, -goal alignment with shareholders 2. Share options - future purchases of share at a fixed price. Monitoring Audit: Independent financial expert provides an opinion on the financial statements. Committees Audit Committee has responsibility for risk management and compliance with the law. Topic Il - Corporate Social Responsibility An enterprise taking into account the impact of its activities on its shareholders (profitably) and: -balances longer-term societal impacts ~(short-term) financial gains Impact of a business’ actions of society - extension of Stakeholder Theory. CSR Includes -Social responsibility -Environmental responsibility -Commitment to employees -Commitment to stakeholders CSR Examples Students must be able to define, know range of motivations to engage in CSR, provide examples of firms who engage in CSR, discuss specific cases why companies embrace it Readings ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 2123‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet Stakeholder Theory vs CSR ST rejects the view that the sole important relationship is between managers and shareholders - broader perspective. Stakeholders are central to CSR, not just shareholders in the establishment of CSR policy. Social and Moral Obligations for CSR CAMAC Report (2006) describes the social obligation case for CSR: -business has access to valuable resources -privilege of limited liability -consequential obligation to assit in solving social problems and advancing public welfare -even in absence of discernible benefit to company, social obligation important. Social Licence to Operate Social and Moral Obligations for CSR - Social License to Operate Company Managers have no mandate that enables them to ignore their moral obligations (Quinn and Jones, 1995). -Do the right thing -Business have resource and wealth and therefore an obligation to help society for no gain - Do you agree? -Moral responsibility to act ethically -Competing obligations: maximising shareholder wealth vs minimising harm to others ntps:fquzietcom/au/482457368imaa250 athics-revision-seminar-tash-cards! 228‘2011122, 1037 PM [MAA250 Ethics - Revision Seminar Flashcards | Quzlet CSR ‘Reporting! The provision of info about performance of an organisation in relation to its interaction with physical and social environment. Includes factors such as: -Interaction with local community -Support for community projects -Support for developing countries -Health and safety record Training, employment and education programs -Environmental performance. Incentives for companies to disclose CSR Activities -Public expectation to do so, needs to be seen asa good corporate citizen. -Failure to do so would lead to undesirable consequences. -Add value to organisation, thus ultimately helping financial performance. -Public relations: highlight superficial 'good’ being done, de-emphasising undesirable/unethical activities = skew/alter public perception Motivations to pursue CSR ntps:iquiziet com/au/482457368imaa250-sthics-revsion-sominar-tash-cards! 223