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  • 1. Marquette University College of Business Administration FINA 194: Investment Management, Ethics, and Society Dr. Sarah W. Peck Spring 2006 Goals of the Course: The objectives of this course are to make students aware of the importance of making ethical and socially responsible decisions. Business have an important role in society are responsible to other stakeholders, beyond shareholders. Sometimes ethical and socially responsible behavior can conflict with traditional business objectives creating dilemmas for managers. Individuals that work in the area of investment management have a special duty to behave in an ethical and socially responsible way. Not only, do they have a moral and fiduciary duty to their clients, but they also can influence business practices at other corporations through their investment decisions. Portfolio managers can sell securities when they disagree with corporate practices and thereby punish poorly performing firms by limiting their ability to raise capital in the financial markets. Thus it is important for students considering a career in investment management to be acutely aware of the possible dilemmas they will face and provide them with the skills to resolve these dilemmas ethically. This need is only highlighted by the recent spate of financial scandals. This course will first provide a broader framework of business ethics in which to examine these issues. We then will look at specific issues that are relevant to the investment management industry. We will learn the process of ethical decision making in these areas by active class discussion. The small size of the class will facilitate such discussion which will be critical in helping you to become an ethical and socially responsible investment manager. In addition this course will require more reading, writing, and discussion and less analytics, than other finance courses. These skills are equally important as more quantitative skills, e.g., building spreadsheet models, and integral to being a good analyst. Investment professionals will come to speak to the class periodically to share their experiences and insights on investment ethics in the money management industry. Finally, students will learn the specific ethical and professional standards recommended by the CFA Institute who confer the designation of Chartered Financial Analyst® on it members by administering the CFA® exams. The material on ethical standards is critical to successfully passing the first of three of these exams. This course will prepare students for that part of the exam. FINA 194- Syllabus 1/5/2006 1
  • 2. Course Materials: Available from Book Marq: Ethical Theory and Business, Beauchamp and Bowie, 6th Edition, Pearson-Prentice Hall Corporate Governance, Minow and Monks, 3rd Edition, Blackwell Publishers Ethics in Finance, John R. Boatright, Blackwell Publishers Available from the CFA Institute (http://www.cfainstitute.org): Standards of Practice Handbook, 9th Edition, (CFA Institute, 2005) Global Investment Performance Standards (GIPS ® ), (CFA Institute, 2005) The Corporate Governance of Listed Companies: A Manual for Investors, (CFA Institute, 2005) Available from various other sources (http://www.amazon.com): When Genius Failed, Roger Lowenstein, Random House, ISBN 0-375-75825-9 Liar’s Poker, Michael Lewis, Penguin Books, ISBN 0-14-014345-9 Tales from the Boom-Boom Room: Women vs. Wall Street, Susan Antilla, Harper Collins, ISBN 0-06-056545-4 Various Articles: These will be largely news items from the financial press and articles from practitioner and academic journals and available through the library’s web site. These will be announced in class as the course proceeds to keep students current on ethical issues in the industry. D2L: D2L will be used for electronic materials and course communication. FINA 194- Syllabus 1/5/2006 2
  • 3. Communication: Office: Straz Hall 303C Office Phone: 288-1461 Finance Office: 288-6200 Home Phone: 962-7249 (emergencies only, please) e-mail: sarah.peck@marquette.edu fax: 288-5756 Office Hours: 2-3 pm, Tuesday and Thursdays and by appointment. I encourage you to ask whenever you have a question about course material or difficulties with the concepts. This includes questions during class, office hours or appointments, by phone, fax, or e-mail. I am generally on campus 9 a.m. to 5 p.m., Monday through Friday. You are welcome to stop by my office any time. Absences: Students are expected to attend all sessions of the course. Consistent with both University and Business School policy, I will make no distinctions between excused and unexcused absences. Students that miss more than the equivalent of two weeks of classes will automatically be dropped from the course. If you do miss a class, it is your responsibility to find out from a fellow student what material you missed. I will not repeat material that was gone over in class to an individual student during office hours because that student missed class. Academic Honesty: Academic dishonesty will not be tolerated. You should not represent material from secondary sources as your own in your report, i.e., plagiarize material from secondary sources. It is critical that all material used is carefully credited. Cheating on the exams will not be tolerated. Cheating is defined as (but not limited to): use of unauthorized materials during exams; looking at, copying or otherwise colluding with anyone during the exam; copying test questions; and removal of the exam. Anyone engaging in the above activities will automatically receive an "F" in the course and the case will be referred to the department Chairperson for further action. FINA 194- Syllabus 1/5/2006 3
  • 4. Course Projects: Students will work on individual and group projects. A schedule of project due dates and assignments are attached. Requirements for Individual Student Projects: Students will be required to make a presentation to the class and provide their class mates with a written report on a topic selected by the instructor. Written Report: These should be research papers that are 10 pages in length exclusive of any tables, graphs, etc. They should include: • A comprehensive review of articles (both academic and practitioner) and a reference list. • Careful use of citations. • The review of the articles should be organized to delineate the issues involved. • Examples and illustrations of issues which are quantitative in nature. • Diagrams where necessary. • Well written, organized. The written report should be made available to students one week prior to the presentation. Presentation: • Half of a class period will be devoted to your presentation and discussion; plan your time wisely. • Power point Presentation • At least six discussion questions. These materials should be made available to students one week prior to the presentation. Requirements for All Student Projects: Students will be assigned to teams to work on these projects. Written Report: 3 pages in length; exclusive of tables and figures. Sources used in analysis should be cited. Should include a conclusion and your final recommendation for investment. Presentation: • Presentations should be 5 minutes in length; therefore focus your discussion on only the most important issues. • Power point Presentation FINA 194- Syllabus 1/5/2006 4
  • 5. Team Grading: All team members will be required to grade each other. Each team member is to allocate 100 points across all the team members. If you feel that all team members participated equally you should allocated the points equally across the members in the team including yourself. Point allocations will be added up to determine each member’s individual grade on the project. For example, if there are four team members and all members allocate the points equally, then each member will receive (25+25+25+25= 100) the full grade on the project. Another example, might be a student receiving (20+20 + 25+ 25 = 90) or only 90% of the full grade on the project as their project grade. The maximum grade an individual team member can receive on a project is the grade on the project itself. For example, if the team project grade is a B, an individual team member can not receive more than a B for their grade for their project. Peer grading cannot be kept confidential, since, students are entitled to know how their grade is determined. Individual Student Written Cases: In preparation for the CFA exam, students will be required to write a hypothetical case that tests understanding of at least four of the standards from CFA Institute, Standards and Practice Handbook. Final Exam: Final exam will be comprehensive and consist of essay type questions and multiple choice questions on the CFA Standards and Practice. Grading and Course Requirements: Your grade will be based on the following: Individual Student Project 25% All Student Project-1 15% All Student Prjoect-2 15% All Student Project- 3 15% Individual Student Case 10% Final Exam 20% Total 100% FINA 194- Syllabus 1/5/2006 5
  • 6. Course Schedule: The class schedule is tentative. While, I have every intention of adhering to the schedule, I reserve the right to make changes as the need arises. Any changes will be announced in class. It is the student’s responsibility to be informed of any changes. Week Topic Readings and Other Course Materials 1 Ethical Decision Making: What it is and how it Beauchamp and Bowie, Chapter 1: Ethical Theory and Business can become difficult in a business setting Practice • Philosophical Basis for Decision CFA Institute, Standards and Practice Handbook, 9th edition, Standard I: Professionalism Making • Overview of Ethical Issues in Finance • The Role of Professional Standards 2 The Corporation’s Stakeholders: Beauchamp and Bowie, Chapter 2: The Purpose of the Corporation • Social Responsibility Beauchamp and Bowie • Fiduciary Responsibility • Agency Theory Chapter 3: The Regulation of Business: Accountability and Responsibility Beauchamp and Bowie, Chapter 4: Acceptable Risk Beauchamp and Bowie, Chapter 5: Rights and Obligations of Employers and Employees Beauchamp and Bowie, Chapter 6: Hiring, Firing, and Discrimination CFA Institute, Standards and Practice Handbook, 9th edition, Standard III: Duties to Clients (A) CFA Institute, Standards and Practice Handbook, 9th edition, Standard IV: Duties to Employers Monks and Minow, Chapter 1: What is a Corporation? “The Insider”- movie Liar’s Poker, Michael Lewis Tales from the Boom-Boom Room: Women vs. Wall Street, Susan Antilla 3 The Corporation’s Stakeholders (continued) 4 The Corporation’s Stakeholders (continued) 5-8 Corporate Governance The Corporate Governance of Listed Companies: A Manual for Practices: Good and Bad Investors, (CFA Institute, 2005) • Shareholder Rights Monks and Minow, Chapter 2: Shareholders: Ownership • Board of Directors • Executive Compensation Monks and Minow, Chapter 3: Directors: Monitoring Monks and Minow, Chapter 4: Management: Performance FINA 194- Syllabus 1/5/2006 6
  • 7. 9 International Corporate Governance Beauchamp and Bowie, Chapter 8: Ethical Issues in International Business Beauchamp and Bowie, Chapter 9: Social and Economic Justice Monks and Minow, Chapter 5: International Governance 10 Ethical Money Management; CFA Institute, Standards and Practice Handbook, 9th edition, Integrity of Capital Markets Standard II: Integrity of Capital Markets • Ethical Use of Information (Insider When Genius Failed, Roger Lowenstein Trading) • Market Manipulation “Wall Street”- movie 11 Ethical Money Management: Reporting CFA Institute, Standards and Practice Handbook, 9th edition, Standard III: Duties to Clients (D) Global Investment Performance Standards (GIPS ® ) (note students will apply these standards to the AIM Fund in FINA 193). 12 Ethical Money Management: Security Analyst Independence, Jennifer Francis, Qi Chen, Donna Research Analysts R. Philbrick, and Richard H. Willis, CFA Institute Analysts Recommendations and Investment CFA Institute, Standards and Practice Handbook, 9th edition, Banking Standard V: Investment Analysis, Recommendations, and Actions CFA Institute, Standards and Practice Handbook, 9th edition, Standard VI: Conflicts of Interest (A, C) 13-14 Ethical Money Management: CFA Institute, Standards and Practice Handbook, 9th edition, Client Trades Standard III: Duties to Clients (B, C, E) CFA Institute, Standards and Practice Handbook, 9th edition, Standard VI: Conflicts of Interest (B) 15 Ethical Money Management: Beauchamp and Bowie, Chapter 7: Marketing and Disclosure Soft Dollars CFA Institute, Standards and Practice Handbook, 9th edition, Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate FINA 194- Syllabus 1/5/2006 7

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