MLTA 2013 Spring Education Seminar Session VIII: Business Ethics

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Winfred Armstrong
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1 MLTA 2013 Spring Education Seminar Session VIII: Business Ethics Friday, May 17, 2013 (10:15-11:45) Belle Marie, CPA, CMA, CIA, CFE Professor, Business Department Carroll College Helena, MT Prepared for Montana Land Title Association 1

2 Topics Outline Section 1: Introduction Professionalism/Codes of conduct Section 2: Definition of ethics/morality Section 3: Selected ethical theories Teleology: Utilitarianism Deontology: Kant s Imperative Virtue ethics Section 4: Ethical decision-making 2

3 Why Study Business Ethics 3

4 Professionalism Code of conduct is hallmark of a profession Highly educated individuals Personal responsibility Serve the public interest Self-organized Professional standards (Cheffers & Pakaluk, 2007) 4

5 MLTA PRINCIPLES OF FAIR CONDUCT 1. To engage only in business practices that are lawful and consistent with a high standard of ethical behavior. 2. To encourage a culture of compliance within their organizations for federal and state laws that govern the title insurance business and for these Principles. 3. To treat consumers in a fair and ethical manner. 4. To provide consumers with timely and comprehensive information regarding their policies, services, products, and prices so as to enable consumers to shop effectively among providers of title-related services. 5. To encourage and assist consumers to be educated purchasers of title insurance and title-related services. 5

6 Writing a Personal Code of Conduct Two principles (reciprocity & universality) Would I want everyone to do this? Would I want other people applying the same rule to me? (p. 77) Keep the code simple a few prioritized statements are more manageable Is it useful? excellence not perfection (Howard & Korver, 2008) 6

7 Code of conduct or ethics program does not guarantee ethical entity culture 7

8 Self-Reflection: How ethical am I? In the last several months, have I Conducted personal business on company time? Used or taken company resources for personal purposes? Called-in sick when I really wasn t? Told or passed along an ethnically or sexually oriented joke? Engaged in negative gossip, or spread rumors about someone? Bad-mouthed the company or management to co-workers? Snooped into a co-worker s conversations or private affairs? Passed along information that was shared with me in confidence? Knowingly ignored (violated) an organizational rule or procedure? Failed to follow through on something I said I would do? Withheld information that others needed? Fudged on a time sheet, billing sheet, estimate, or report? Knowingly delivered a poor quality (or defective) good or service? Been less than honest (lied or manipulated the truth) to make a sale? Accepted an inappropriate gift or gratuity? Taken or accepted credit for something that someone else did? Failed to admit to or correct a mistake I made? Knowingly let someone [mess] up and get into trouble? Adapted from Performance Systems Corporation. (Harvey & Airitam, 2002, p. 21) 8

9 Ethics Morality is often described as the standards of right and wrong or good and bad (Shaw, 2005, p. 4) Ethics, a derivative of the Greek word ethos meaning character, refers to the study and assessment of those standards (Shaw, 2005, p. 5) Terms ethics & morality often used interchangeably 9

10 Ethics Standard to follow & courage to follow the standard (Henry, 2009, p. 49) 10

11 Ethics is not necessarily associated with a particular religion/spirituality Golden Rule exists in most religions 11

12 Approaches to Business Ethics Compliance-based: Legal aspects of ethics or professional requirements are emphasized. Comply with laws/regulations in order to avoid fines/penalties. Integrity-based or values-based: Emphasizes arriving at morally correct actions. (Knapp, 2011) 12

13 Moral Philosophies All ethical theories have strengths/weaknesses Individuals must use moral imagination (creative solutions to ethical dilemmas) Three common ethical theories: Utilitarianism Kant s Categorical Imperative Virtue Ethics 13

14 TELEOLOGICAL THEORIES Key Points of Utilitarianism Focus is on producing the greatest happiness (good) and the least pain Balance of good over evil Does not imply that the end justifies the means 14

15 Utilitarianism - Weaknesses Whose happiness should be promoted (scope & intensity of happiness) Quantitative versus qualitative results Unforeseen effects Ignores motivation/focuses on consequences Tends to be backward (consequence) rather than forward looking 15

16 Key Points of Kant DEONTOLOGICAL THEORIES Follow ethical duties regardless of consequences (motivation/intent of individual matters) Encourages consistent behavior Categorical imperative obligation to observe ethical laws that can be applied universally Practical imperative treat individuals as ends not means Kantian Principle may pursue personal goals provided they do not violate practical imperative Let conscience be our guide 16

17 Kant - Weaknesses What if two moral laws conflict Doesn t consider justice and fairness Sets very high standard 17

18 Virtue Ethics Deep-seated characteristics Woven into individual character Shape both thinking & behavior Virtues are task specific 18

19 Courage Prudence Optimism Integrity Humility Reverence Compassion Justice Common Virtues 19

20 Key Points of Virtue Ethics Focus on happiness for individual that is created by living a virtuous life (in accordance with reason) Virtue is a path between extremes (e.g., courage is the virtue between cowardice & rashness) All things in moderation Focus on moral character of individual rather than consequences or motivation/intentions Individual s character traits remain fairly stable (develop through emotional/ethical maturity) Denies false dichotomies (separation from personal actions versus business actions) Voluntary actions Moral education & moral exemplars/role models are necessary 20

21 Virtue Ethics - Weaknesses Problems of determining what virtues individuals should possess What if there are conflicting virtues (e.g., truth versus compassion) Virtues can be situation specific 21

22 Ethical Decision-Making Cognitive & affective (emotional) reasoning Influenced by individual s moral development Influenced by individual s dominant values Individuals may disagree on the most ethical decision Influenced by ethical philosophy applied Avoid ethical relativism - not all decisions are ethical Decision that applies moral reasoning is ethical 22

23 Ethical decision-making Rushworth Kidder s (1995) ethical checkpoints Recognize there is a moral issue. Determine the actor. Gather relevant facts. Test for right-versus-wrong issues. Test for right-versus-right paradigms Apply the resolution principles (Utilitarian, Kant, etc.). Determine if a compromise position exists. Make a decision. Feedback loop: Revisit and reflect on the decision. 23

24 Ethical Advice Laws Rules & procedures Your conscience Your promises/word Your ethical heroes/mentors Legal counsel Boss & co-workers Other stakeholders Family/community Religious/spiritual leaders (Armstrong et al., 2003; Harvey & Airitam,2002; Sauser, 2011) 24

25 Creating a Strong Ethical Culture Code of ethical conduct Ethical training Hiring practices Promotion of ethical behavior/discipline for unethical behavior Hotlines/reporting mechanism & protection for whistleblowers/social audits (Sauser, 2011) 25

26 Two Wolves (Cherokee Story) An old Cherokee told his granddaughter about a fight that was going on inside himself. He said it was between two wolves. One wolf was evil: Anger, envy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, and ego. The other wolf was good: Joy, peace, love hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion, and faith. The granddaughter thought about it for a minute and then asked her grandfather, Which wolf will win? The Old Cherokee simply replied, The one that I feed. (see Smith, 2006, p. 95). 26

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28 References Armstrong, M. B., Ketz, J. E., & Owsen, D. (2003). Ethics education in accounting: Moving toward ethical motivation and ethical behavior. Journal of Accounting Education, 21, Cheffers, M., & Pakaluk, M. (2007). Understanding accounting ethics. Sutton, MA: Allen David Press. Harvey, E., & Airitam, S. (2002). Ethics 4 everyone. Dallas, TX: Performance Systems Corporation. Henry, K. (2009). Leading with your soul. Strategic Finance, 90(8), Howard, R. A., & Korver, C. D. (2008). Ethics for the real world. Boston, MA: Harvard Business Press. Kidder, R., (1995). How good people make tough choices. New York: Morrow. Knapp, J. C. (2011). Rethinking ethics training: New approaches to enhance effectiveness. In R. R. Sims & W. I. Sauser, Jr. (Eds.), Experiences in Teaching Business Ethics (pp ). Charlotte, NC: Information Age Publishing. Owen, J. P. (2005). Cowboy ethics. Ketchum, ID: Stoecklein Publishing. Rein, S. (2009, May 21). Confucius' three keys to successful leadership. Forbes. Retrieved from Sauser, W. I., Jr. (2011). Beyond the classroom: Business ethics training programs for professionals. In R. R. Sims & W. I. Sauser, Jr. (Eds.), Experiences in Teaching Business Ethics (pp ). Charlotte, NC: Information Age Publishing. Shaw, W. H. (2005). Business ethics (5 th ed.). Belmont, CA: Thomson Wadsworth. Smith, N. R. (2006). Workplace spirituality. Peabody, MA: Axial Age Publishing. 28

Making Decisions on Behalf of Others: Who or What Do I Select as a Guide? A Dilemma: - My boss. - The shareholders. - Other stakeholders

Making Decisions on Behalf of Others: Who or What Do I Select as a Guide? - My boss - The shareholders - Other stakeholders - Basic principles about conduct and its impacts - What is good for me - What