COMMON ETHICAL PROBLEMS OF INDIVIDUALS BA 354 COLLEGE OF BUSINESS 1 ASSUMPTIONS OF THE “GIVING VOICE TO VALUES” APPROACH: Ethical dilemmas at work are common, not rare. You have values that you want to live up to. There are many ways that you can voice your values. Practicing ahead of time will help you to be more effective. 2 THE POWER OF FAIRNESS The example of grades Equity Reciprocity Impartiality 3 Discrimination Unequal treatment based on one’s race, gender, ethnicity, national origin, religion, age, disability, etc. Standard for hiring, promotions, etc., should be the ability to do a job + 4 Have you ever experienced discrimination? What could you have done about it? Why is discrimination an ethical issue? DISCRIMINATION 5 CONFLICTS OF INTEREST Objectivity is compromised by possibility of financial or other gains. Gifts or bribes Access to resources such as privileged information Relationships or Influence 6 CONFLICTS OF INTEREST 7 Conflict of Interest Your daughter is applying to a prestigious university. Since admission to the school is difficult, your daughter has planned the process carefully. She has consistently achieved high marks, taken preparatory courses for entrance exams, and has participated in various extracurricular activities. When you tell one of your best customers about her activities, he offers to write her a letter of recommendation. He's an alumnus of the school and is one of its most active fund raisers. Although he's a customer, you also regularly play golf together and your families have socialized together on occasion. 8 CUSTOMER CONFIDENCE Includes such issues as Confidentiality Product safety Truth in advertising Fiduciary responsibilities 9 Confidentiality You work for a consulting company in Atlanta. Your team has recently completed an analysis of Big Co. including sales projections for the next five years. You're working late one night when you receive a call from an executive vice president at Big Co. in Los Angeles, who asks you to immediately fax her a summary of your team's report. When you locate the report, you discover that your team leader has stamped "For internal use only" on the report cover. Your team leader is on a hiking vacation and you know it would be impossible to locate him. Big Co. has a long-standing relationship with your company and has paid substantial fees for your company's services. 10 Product Safety You’re the head of marketing for a small pharmaceutical company that has just discovered a very promising drug for the treatment of Alzheimer’s disease. You have spent months designing a marketing campaign which contains printed materials and medication sample kits for distribution to almost every family physician and gerontologist in the country. As the materials are being loaded into cartons for delivery to your company’s representatives, your assistant tells you that .

1. COMMON ETHICAL PROBLEMS OF INDIVIDUALS
BA 354
COLLEGE OF BUSINESS
1
ASSUMPTIONS OF THE “GIVING VOICE TO VALUES”
APPROACH:
Ethical dilemmas at work are common, not rare.
You have values that you want to live up to.
There are many ways that you can voice your values.
Practicing ahead of time will help you to be more effective.

2. 2
THE POWER OF FAIRNESS
The example of grades
Equity
Reciprocity
Impartiality
3
Discrimination
Unequal treatment based on one’s race, gender, ethnicity,
national origin, religion, age, disability, etc.
Standard for hiring, promotions, etc., should be the ability to do
a job

3. +
4
Have you ever experienced discrimination?
What could you have done about it?
Why is discrimination an ethical issue?
DISCRIMINATION
5
CONFLICTS OF INTEREST
Objectivity is compromised by possibility of financial or other
gains.

4. Gifts or bribes
Access to resources such as privileged information
Relationships or Influence
6
CONFLICTS OF INTEREST
7
Conflict of Interest
Your daughter is applying to a prestigious university. Since
admission to the school is difficult, your daughter has planned
the process carefully. She has consistently achieved high marks,
taken preparatory courses for entrance exams, and has
participated in various extracurricular activities. When you tell
one of your best customers about her activities, he offers to
write her a letter of recommendation. He's an alumnus of the
school and is one of its most active fund raisers. Although he's
a customer, you also regularly play golf together and your
families have socialized together on occasion.
8

5. CUSTOMER CONFIDENCE
Includes such issues as
Confidentiality
Product safety
Truth in advertising
Fiduciary responsibilities
9
Confidentiality
You work for a consulting company in Atlanta. Your team has
recently completed an analysis of Big Co. including sales
projections for the next five years. You're working late one
night when you receive a call from an executive vice president
at Big Co. in Los Angeles, who asks you to immediately fax her
a summary of your team's report. When you locate the report,
you discover that your team leader has stamped "For internal
use only" on the report cover. Your team leader is on a hiking
vacation and you know it would be impossible to locate him.
Big Co. has a long-standing relationship with your company and
has paid substantial fees for your company's services.

6. 10
Product Safety
You’re the head of marketing for a small pharmaceutical
company that has just discovered a very promising drug for the
treatment of Alzheimer’s disease. You have spent months
designing a marketing campaign which contains printed
materials and medication sample kits for distribution to almost
every family physician and gerontologist in the country. As the
materials are being loaded into cartons for delivery to your
company’s representatives, your assistant tells you that she has
noticed a typographical error in the literature that could mislead
physicians and their patients. In the section that discusses side
effects, diarrhea and gastrointestinal problems are listed as
having a probability of 2 percent. It should have read 20
percent. This error appears on virtually every piece of the
literature and kits, and ads containing the mistake are already
on press in several consumer magazines.
11
Fiduciary responsibility
Imagine that your financial firm is offering a new issue--a
corporate bond with an expected yield of 4–4.5%. In the past,
offerings like this one have generally been good investments for
clients, and you have sold the issue to dozens of large and small
clients. You're leaving on a two-week vacation and only have a

7. few hours left in the office, when your firm announces that the
yield for the bond has been reduced; the high end will now be
no more than 4%. The last day of the issue will be next week,
while you're away on vacation. What should you do?
12
Fiduciary responsibility
For 12 years, you’ve been the financial advisor for an elderly
man in his late 70s who is an active investor of his own
portfolio and for a trust which will benefit his two children. In
the last few months, you’ve noticed a subtle, yet marked change
in his behavior. He has become increasingly forgetful, has
become uncharacteristically argumentative, and seems to have
difficulty understanding some very basic aspects of his
transactions. He has asked you to invest a sizable portion of his
portfolio and the trust in what you consider to be a very risky
bond offering. You are frank about your misgivings. He blasts
you and says that if you don’t buy the bonds, he’ll take his
business elsewhere.
13

8. COMPENSATION ISSUES
Fair wages for honest work
Pay equity (by gender, race, etc.)
“The Dash wonders whether voluntarily surrendering that kind
of money is the second costly knee-jerk decision of Andersen’s
career. The first was leaving Wisconsin…”
https://sports.yahoo.com/gary-andersens-abrupt-bizarre-break-
oregon-state-isnt-first-head-scratcher-career-215015127.html
“Complicating matters is another clause in Pitino's contract that
could mean the school is still on the hook to pay the coach the
$44 million still left on the deal.”
http://www.businessinsider.com/rick-pitino-contract-louisville-
44-million-2017-10
14
USE OF CORPORATE RESOURCES
Includes such issues as
Corporate reputation
Financial resources

9. Providing honest information
15
BLOWING THE WHISTLE AT WORK
Things to consider:
Should be viewed as a last resort
Be willing to pay a price for it
Make sure your intentions are good
Think about timing
16
Blowing the whistle
A long-time customer approaches you for financing for a new
business venture. The customer offers as collateral a piece of
property it has purchased in a rural location for the purpose of
building a housing development. You send an appraiser to the
property and he accidentally discovers that this property holds

10. toxic waste. You’re sure this customer is unaware of the waste;
in fact, the waste is migrating and in a few years will invade the
water table under a nearby farmer’s fields. You explain the
situation to your manager, who naturally instructs you to refuse
to accept the property as collateral, but he also forbids you to
mention the toxic waste to the customer. “Let them find out
about it themselves,” he says. Do you alert the customer to the
toxic waste? Do you alert government regulators?
17
How to Blow the Whistle
Approach your immediate manager first
Discuss the issue with your family
Take it to the next level
Contact your company’s ethics officer
Consider going outside of your chain of command
Go outside of the company
Leave the company
18
Part 3 of your Personal Ethical Action Plan
19
Describe your personal professional purpose.
Answer each of the Questions of Personal Purpose from the

11. “Key Self-Assessment Questions” in the Giving Voice to Values
book pg. 116. in your appendix for your reference.
Once you have considered each of these questions, craft a brief
but clear statement of professional purpose.
Then, describe this purpose in greater detail by including your
responses to each of the personal purpose questions. Do not
include the questions in Q&A format, but utilize paragraphs to
answer them in a way that integrates well with the rest of the
paper.
20
What are your personal goals? Your professional goals?
What is your personal purpose for your business career?
What impact do you want to have through your work? On
whom?
How do you define your impact as an auditor, investor,
manager, product developer, marketer, senior executive and so
on?
Whom do you want to know you benefited, and in what ways?
What do you hope to accomplish?
What will make your professional life worthwhile?
How do you want to feel about yourself and your work, both
while you are doing it and in the end?
Questions of Personal Purpose

12. 21
“JUST THIS ONCE…”
Don’t fall for “just this once” logic. It never stops at once.
Life is often an unending stream of extenuating circumstances.
“It’s easier to hold to your principles 100% of the time than to
hold to them 98% of the time.”
-Clayton Christensen, Harvard Business School
22
ETHICAL DECISION MAKING AND ACTION
BA 354
COLLEGE OF BUSINESS
*

13. +
The Relationship between Ethical
Awareness, Judgment, and Action
Ethical Judgment
Ethical Awareness
Ethical Action
*
+
Case
You’ve just started a new job in the financial services industry.
One afternoon, your manager tells you that he has to leave early
to attend his son’s softball game, and he asks you to be on the
lookout for an important check that his boss wants signed
before the end of the day. He tells you to do him a favor—
simply sign his name and forward the check to his boss.
Is this an ethical issue?
What might influence whether you see this as an ethical issue or
not?
*

14. Cognitive Moral Development
Level I (Preconventional)
Stage 1 – Obedience and Punishment Orientation
Stage 2 – Instrumental Purpose and Exchange
Level II (Conventional)
Stage 3 - Interpersonal Accord - Conformity – Mutual
Expectations
Stage 4 – System Maintenance - Upholding duties, laws
Level III (Postconventional or Principled)
Stage 5 – Social contract and individual rights
Stage 6 - Theoretical stage only
*
Kohlberg’s Stages of Moral Development
*
+
Let’s Look at a Case:
Evelyn worked for an automotive steel casting company. She
was part of a small group asked to investigate the cause of an
operating problem that had developed in the wheel castings of a
new luxury automobile and to make recommendations for its
improvement. The problem did not directly create an unsafe
condition, but it did lead to irritating sounds. The vice-president
of engineering told the group that he was certain that the
problem was due to tensile stress in the castings. Evelyn and a

15. lab technician conducted tests and found conclusive evidence
that the problem was not tensile stress. As Evelyn began work
on other possible explanations of the problem, she was told that
the problem had been solved. A report prepared by Evelyn’s
boss strongly supported the tensile stress hypothesis. All of the
data points from Evelyn’s experiments had been changed to fit
the curves, and some of the points that were far from where the
theory would predict had been omitted. The report “proved” that
tensile stress was responsible for the problem.
*
What should Evelyn do in each stage?Level I
(Preconventional)Stage 1 – Obedience and Punishment
OrientationStage 2 – Instrumental Purpose and Exchange -
RewardsLevel II (Conventional)Stage 3 - Interpersonal Accord
- Conformity – Mutual Expectations – Pleasing OthersStage 4 –
System Maintenance - Upholding rules, duties, lawsLevel III
(Postconventional or Principled)Stage 5 – Social order and
harmonyStage 6 - Theoretical stage –Universal moral principles
that a person adopts
*
60 Minutes: Origins of Morality
*

16. What did you learn from the 60 Minutes video about the
development of morality and ethics?Babies come “hard-wired”
with certain values: justice, fairness, etc.They show a tendency
to prefer others who are more similar to them.When young they
show strong tendencies toward the self, but with age they learn
to cooperate with others.
*
Mental shortcutsHeuristicsMental ModelsScripts
*
Understanding mental scripts
Type 1 Thinking

17. Type 2 Thinking
*
PSYCHOLOGICAL BIASES
Over-confidence biasConfirmation biasReduction of
consequencesSelf biasOptimism biasIllusion of
controlEscalation of commitmentIllusion of morality or
superiority
*
Individual factors the contribute to our ethical judgment and
action:
Decision-making style: idealism vs. relativismLocus of
controlMachiavellianismMoral disengagement
Our embedded learning about the value of our natural
environment may be eroding as much of modern life is spent in
isolation from the natural world.Disconnection from our natural
world may be contributing to our planet’s destruction.5,6,7

18. 5=Howard, 1997
6=Schultz, Shriver, Tabanico, & Khazian, 2004
7=Nisbet, Zelenski, & Murphy, 2009
*
The Cost to Society of Dying in a Pinto
(in 1971 dollars) equals…
$200,000
The benefit and cost of an $11 safety improvement would have
been:
benefit = $49.5 million
cost = $137.5 million
*
Milton Friedman: The value of a human life debate

19. How do you feel about the way Ford assigned monetary value to
human life?
What explanation did Prof. Gioia give for his failure to act on
his values?
“I had not internalized a script for applying my values in a
pragmatic business context.”
*
Advice from Prof. Gioia
-Develop your ethical base now!
-Recognize that you are a victim of your own cognitive
structuring.
-Learn to recognize ethical dilemmas.
-Be aware of how strongly and subtly your job context
influences you.
-Be prepared for responsibility early on.
*

20. Getting to work on the
Personal Ethical Action Plan:
Video Link
Story One:
Recall a time in your work experience when your values
conflicted with what you were asked to do regarding a non
trivial management decision and you spoke up and tried to
resolve the conflict in a way that was consistent to your values.
Describe the situation briefly and then answer the following
questions:
What did you do and what was the impact?What motivated you
to speak up and act?How satisfied are you ?How would you like
to have responded?What would have made it easier for you to
speak and act? Things within your control? Things within the
control of others?
*
Story Two:
Recall a time in your work experience when your values
conflicted with what you were asked to do regarding a non
trivial management decision and you did not speak up and did
not try to resolve the conflict in a way that was consistent to
your values.
Describe the situation briefly and then answer the questions:

21. What happened?
Why didn’t you speak up and act? What would have motivated
you to do so?
How satisfied are you? How would you like to have responded?
What would have made it easier for you to speak and act?
*
*
*
*
*
*
*
*
*
*
*
*
*
*

22. *
*
*
*
*
ETHICAL LEADERSHIP AND CULTURE
BA 354
COLLEGE OF BUSINESS
*
WHAT IS LEADERSHIP?
Take a moment to write down a definition of leadership.
*

23. Leadership isn’t about titles
Influence as a result of what others think of you
Leadership
Influence as a result of your job title
“Because I am your boss, that’s why!”
*
WHAT IS CULTURE?
*
Organizational CultureThe shared beliefs, values and
assumptions that exist in an organization.Represents a true “way
of life” for organizational members.Tends to be fairly stable
over time.Involves matters internal or external to the
organization.Impacts on both organizational performance and
member satisfaction.
*

24. What is ethical culture?Ethical culture is a slice of the overall
organizational culture that deals with morals, values, and
ethics.Some organizations have highly unethical cultures while
others are highly ethical. Most organizations fall somewhere in
between.
*
The Culture at Apple
*
What are the dangers of valuing secrecy?
*
Microsoft vs. Netscape
*

25. How is the Bill Gates portrayed in this video different than the
way we perceive of Bill Gates today?
*
How Organizational Cultures Form
Organizational Structure
*
How Employees Learn Culture
Informal mechanismsStories and mythsRole models and
heroesRitualsMaterial SymbolsLanguage
Identify one of the above mechanisms that you have seen in an
organization (university, business, church, etc.) that served as a
way to teach the culture of the organization.
Organizational Structure
*
How Employees Learn (Ethical) Culture
Formal mechanismsSelection-Interview questions, personality
tests.Values and Mission Statements-do they live them?Policies

26. and Codes-are they taught and followed?Orientation and
Training Programs-Is ethics part of it?Performance Management
Systems-Alignment is keyOrganizational Structure-bureaucracy,
responsibility, reportingDecision making processes-numbers
only, burden of proof
*
ETHICAL LEADERSHIP:
THE GOOD, THE BAD, AND THE UGLY.
*
THE GOOD…
*
*

27. What do you think of what Aaron Feuerstein did?
What would you think of it if you were a shareholder of his
company?
*
THE BAD…
*
How did this happen at BP?
Discuss evidence for the disconnect between BPs reputation and
their actions prior to the spill.
Why did this disconnect exist?
What can organizations do to make their values an important
part of the organization?

28. *
Concluding thoughts on BP?
Tradeoff mentality: Ethics OR Financial Performance
-Numerous empirical studies have shown they have a POSITIVE
relationship.
Long-term versus short-term thinking: Compromised safety in
the future to save a few $ now.
-Updating of the safety devices would have cost $150k. Instead
they are spending 10s of billions to clean up the mess.
Image above authenticity: Winning awards for “being green”
was more important than actually doing it.
-In 2005 Greenpeace awarded the CEO Lord John Browne with
‘best impersonation of an environmentalist” award. He was
asked to resign in 2007.
*
THE UGLY…
“CHAINSAW” AL DUNLAP, FORMER CEO OF SUNBEAM

29. *
In Conclusion……
*
“Somebody once said that in looking for people to hire, you
look for three qualities: integrity, intelligence, and energy. And
if they don’t have the first, the other two will kill you. You
think about it; it’s true. If you hire somebody without the first,
you really want them to be dumb and lazy.”
-Warren Buffett
*
Part 4 of your Personal Ethical Action Plan
*

30. Give Voice to Value Part 4
Write a self-story that allows you to align what you think is
right with who you already think you are. Your self-story
should be broad enough that it could be used in a variety of
situations where your morality or ethics are challenged.
One of two forms: a description of a particularly vivid past
experience that cemented within you a firm desire to follow
your values or a description of the source of your values that
helps explain why they are so important to you.
ETHICS AND YOU
BA 354
COLLEGE OF BUSINESS
What is an Ethical Dilemma?
A situation where values are in conflict
Two or more values you hold dear - or –
A personal value conflicts with an organizational value

31. *
The Layoff
You’re the plant manager in one of ABC Company’s five plants.
You’ve worked for the company for 15 years, working your way
up from the factory floor after the company sent you to college.
Your boss just told you in complete confidence that the
company will have to lay off 200 workers. Luckily, your job
won’t be affected. But a rumor is circulating in the plant, and
one of your workers (an old friend who now works for you) asks
the question. “Well, Pat, what’s the word? Is the plant
closing? Am I going to lose my job? The closing on our new
house is scheduled for next week. I need to know.”
What will you say?
*
Consequentialist Analysis
Bottom line = action that produces the greatest good for the
greatest number of people, for society overall!
StakeholderTell - HarmsTell - BenefitsDon’t Tell - HarmsDon’t
Tell - Benefits#1#2#3#4
….etc.

32. Prescriptive Approaches
3 Common Ethical PhilosphiesFocus on consequences
(consequentialist theories)Focus on duties, obligations,
principles (deontological theories)Focus on integrity (virtue
ethics)
*
Focus on Consequences
(Consequentialist Theories)
Utilitarianism - best known consequentialist theoryIdentify
alternative actions and consequences to stakeholdersBest
decision yields greatest net benefits to societyWorst decision
yields greatest net harms to society
*
Focus on consequences – classic Trolley example
A runaway trolley is hurtling down the tracks toward 5 people
who will be killed if it proceeds on its present course. You can
save these 5 by diverting the trolley onto a different set of
tracks, one that has only 1 person on it, but if you do this that
person will be killed.
Should you turn the trolley to prevent 5 deaths at the cost of
1?

33. Focus on consequences – classic Trolley example
Now you have the same situation as before; the trolley is headed
toward the five workers on the track. But this time there is a
bridge and a fat man standing on this bridge. If you push the
man over he would stop the trolley.
Would you push the man to save the five on the track?
*
Self driving car scenario:
What would a self driving car do in the trolley situation:
Sacrifice one to save many or do everything to keep its
passenger safe.
Christoph von Hugo a Mercedes senior safety manager, made
statement to protect the person in the car in this type of
scenario.
Received a lot of backlash!
*
Consequentialist QuestionsCan I indentify all the
stakeholders?Immediate, distant?What are the potential actions
I could take?What are the harms and benefits for stakeholders

34. given potential decisions/actions? What decision will produce
the most benefit (and least harm) for the greatest number of
people, and for society at large?
Focus on Consequences
(Consequentialist Theories)AdvantagesPracticalAlready
underlies business thinkingChallengesDifficult to evaluate all
consequencesRights of minorities can be sacrificed
Focus on Duties, Obligations, Principles (Deontological
Theories)Decisions based upon abstract universal principles:
honesty, promise-keeping, fairness, rights, justice, respectFocus
on doing what’s “right” (consistent with these principles) rather
than doing what will maximize societal welfare (as in
utilitarianism)
*
Deontological Questions
Which values or principles apply?
Which are most important and why?
What are my ethical duties, obligations?
Have I treated others as I would want to be treated? (Golden
Rule)
Have I assumed that the other(s) is ethical and responsible?
If everyone behaved this way, would that be acceptable?
Would I want to live in that world? (Kant’s categorical
imperative)

35. *
Focus on Duties, Obligations, Principles (Deontological
Theories)AdvantagesRights approach found in public policy
debates (e.g., abortion)ChallengesDetermining rule, principle,
or right to follow: ex. Golden rule, Kant’s maximDeciding
which takes precedenceReconciling deontological and
consequentialist approaches when they conflict
What would deontology and utilitarianism demand in each
scenario?
*
A Drug Study
A number of physicians are recruited to participate in a large-
scale, multi- center study to investigate the survival rates of
breast cancer victims who are being treated with a new drug.
Strict rules are developed regarding inclusion of patients in the
study. Only those who have had surgery within the last three
months can be included. Dr. Smith has a patient who hears
about the study and wants very much to participate. Dr. Smith
thinks the drug could help this patient.
Taking the utilitarian approach what should he do?
Taking the deontological approach what should he do?

36. *
Deontology vs Utilitarianism
The Burning Building
Assume you approach a burning building and hear voices
coming from both ends, each seeking help. Assume the fire is
burning so rapidly you only have time to go to one or the other
end of the building. Initially, you hear multiple voices at one
end and a sole voice at the other end. Which way do you go?
Why? Now include some additional information. The sole voice
is that of your daughter (father, mother, etc.). Or, the sole voice
is that of a Nobel laureate who is close to finding a cure for
cancer? Do you still choose to go to the end with multiple
voices (will that even do the greatest good for society)? What
will the different approaches advise? What will you do?
Focus on Integrity
(Virtue Ethics)Focus on integrity of moral actor rather than the
act
Considers character, motivations, intentions
Need to identify relevant community
*

37. Virtue Ethics Questions
What does it mean to be a person of integrity in this situation,
profession, etc.?
What ethical community would hold me to the highest ethical
standards?
Do carefully developed community standards exist?
What would the broader community think if this were
disclosed? New York Times test?
What would my “harshest moral critic” expect me to do?
What would my “ethical role model” expect?
What do I want my professional reputation to be?
*
Focus on Integrity
(Virtue Ethics)AdvantagesCan rely upon community
standardsChallengesLimited agreement about community
standardsMany communities haven’t done this kind of
thinkingCommunity may be wrong
Nine Steps to Ethical Decision Making in BusinessGet the
facts.Define the ethical issuesIdentify the stakeholdersIdentify
possible courses of action to resolve the dilemma.Identify
consequences associated with each contemplated action.Identify
duties and obligations.Consider your integrity.Think creatively
about other possible solutionsCheck your gut.

38. *
Practical Preventive Medicine
(When Asked to Make a Snap Decision) Pay attention to your
gut Ask for time Find out about organizational policy Ask
manager or peers for advice Use New York Times test
(disclosure rule)
Getting to work on the
Personal Ethical Action Plan:
*
*
Another values exploration exercise…Think of five people
(living or dead) that you most admire. Write their names
down.Then, next to each of their names, list five attributes that
come to mind when you think of that person.Now, review your
list (you should have 25 attributes listed). The attributes that
came up most often can be viewed as your core values.If you

39. live in harmony with these values you are living with integrity.
If you live on conflict with these values you will likely be
unfulfilled and unhappy.
*
The Cost to Society of Dying in a Pinto
(in 1971 dollars) equals…
$200,000
The benefit and cost of an $11 safety improvement would have
been:
benefit = $49.5 million
cost = $137 million
*
In your group record some of the main facts of this case:
include information about the development of the Ford
PintoFord’s leadership at the time the problem with the Pinto’s
gas tank the potential fix they identified the financial analysis
Ford conductedthe decision they madeany other pertinent
information that you feel is noteworthy regarding the case
*

40. *
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41. +
Financial Disaster 2008
*
Shadow Financial Market
-- Credit Default Swaps
- Securitized Mortgages (“slice & dice”)
- Hedge Funds
Subprime Mortgages
-- “Liar” Loans
-- No $ down, no income verification
-- Consumers bought more than they could afford
Regulatory Climate
-- Glass-Steagall Act repealed
-- Debt regulations for banks eased
-- “Markets can self-regulate”
-- Revolving door between regulators and companies
-- “Government is the problem”
Incentives
-- Big rewards for short-term thinking for companies and
individuals
Direct Causes
Contributing Factors
“Herd Mentality”
- Wall Street
- Consumers
- “Real estate is safe”
Investment Banks
-- Go public
-- No “skin” in the game
Lots of Cheap $$
-- Fed (low interest rates)

42. -- Demand from China and Middle East
Rating Agencies
-- Conflicts of interest
-- Didn’t under-stand what they were rating
“Innovation”
-- Math whiz kids create complex products
-- No one really understood what these products were
Bottom-line:
-- Arrogance
-- Greed
-- Total recklessness
*
+
The PlayersRating AgenciesWent public and became
shareholder owned; paid fees by companies they were supposed
to rate; took the investment banks’ advice on how to rate
securitized mortgages (AAA ratings while many were complete
junk) CEOsMuch of their compensation is driven by stock price
– this focused them on the short term; Also many did not
understand the sophisticated financial products their firms
peddledFinancial ProfessionalsPaid huge salaries and bonuses
for short-term resultsMortgage OriginatorsRelaxed lending
standards and created sophisticated products consumers did not
understandRegulators“Asleep at the switch” -- also looking for
their next jobs (high-paying) in the financial industry (which
they are regulating)LegislatorsLobbied and “paid” by the
financial industry to relax regulations – “the markets can self-
regulate” InvestorsPunished companies that did not deliver huge
returnsHome OwnersBought more house than they could afford.
Home values plummet and mortgages are “under water” – home

43. values sink and are worth less than their mortgages
*
+
Financial Disaster ResultsBusiness failures or
contractionsGovernment bailoutsUnemploymentConsumer
distress: foreclosures and bankruptciesTattered reputations
(corporations, industries, countries)Plummeting trust in
government and institutions
+
Your Cynicism Quotient Complete the worksheet, honestly.
There is no judgement in this class.
+

44. Test Your Cynicism Quotient
1 = Strongly Disagree 5 = Strongly AgreeFinancial gain is all
that counts in business.Ethical standards must be compromised
in business practice.The more financially successful the
business person, the more unethical the behavior.Moral values
are irrelevant in business.The business world has its own
rules.Business persons care only about making profit.Business
is like a game one plays to win.In business, people will do
anything to further their own interest.Competition forces
business managers to resort to shady practicesThe profit motive
pressures managers to compromise their ethical concerns.
+
MBA Oath
As a business leader, I recognize my role in society. My
purpose is to lead people and manage resources to create value
that no single individual can create alone. My decisions affect
the well-being of individuals inside and outside my enterprise,
today and tomorrow.
Therefore I promise:I will manage my enterprise with loyalty
and care, and will not advance my personal interests at the
expense of my enterprise or society.I will understand and
uphold, in letter and in spirit, the laws and contracts governing
my conduct and that of my enterprise.I will refrain from
corruption, unfair competition, or business practices harmful to
society.I will protect human rights and dignity of all people
affected by my enterprise, and I will oppose discrimination and
exploitation.I will protect the right of future generations to
advance their standard of living and enjoy a healthy planet.I
will report the performance and risks of my enterprise
accurately and honestly.I will invest in developing myself and
others, helping the management profession continue to advance
and create sustainable and inclusive prosperity.

45. In exercising my professional duties according to these
principles, I recognize that my behavior must set an example of
integrity, eliciting trust and esteem from those I serve. I will
remain accountable to my peers and to society for my actions
and for upholding these standards.
This oath I make freely, and upon my honor.
*
+
Business Ethics DefinedThe principles, norms, and standards of
conduct governing an individual or group
*
+
Why Bother Teaching Ethics?Bad apples are encouraged by bad
barrelsGood character isn’t always enough. Some believe it is
an employers duty to teach employees how to make ethical
choicesEthics can be taught, but should it be taught? Adults
develop moral judgment into their 30sConduct is influenced by
environment. Teaching ethics imposes values and implements
control over behavior of others.Business students might need
ethical training more than most students! Agree or Disagree?
*

46. +
Case
You’re the VP of a medium-sized organization that uses
chemicals in its production processes. In good faith, you’ve
hired a highly competent scientist to ensure that your company
complies with all environmental laws and safety regulations.
This individual informs you that a chemical the company now
uses in some quantity is not yet on the approved Environmental
Protection Agency (EPA) list. However, it has been found to be
safe and is scheduled to be placed on the list in about three
months. You can’t produce your product without this chemical,
yet regulations say that you’re not supposed to use the chemical
until it’s officially approved. Waiting for approval would
require shutting down the plant for three months, putting
hundreds of people out of work, and threatening the company’s
very survival. What should you do?
+
Relationship Between Ethics and the Law
*
+
Why Be Ethical? Who Cares?Individuals careEmployees
careManagers careExecutives careIndustries careSocieties care

47. +
Person with High IntegrityWho do you know with high
integrity?How does this person behave that makes this obvious?
*
+
Group Exercise
Laura Bush, Donald Trump, Tiger Woods, Oprah Winfrey, Paris
Hilton, Barack Obama, and Bono
*
+
Group Exercise - BrandsWhat three adjectives describe him or
her?What kind of car does he or she drive?What is his/her
favorite piece of jewelry?What three artist/songs are at the top
of their favorite playlist?Where do they go for their news of the
world?Do they have a tattoo? If yes, of what and where?
*
+
Group Exercise – What Would You Do?

48. “When your colleague, Bill, is out of town, you receive a call
from his wife. She's having a crisis with one of their children
and needs to reach Bill immediately. You offer to track him
down for her and when you do, you inadvertently discover that
he's vacationing with Marie, the chief investment officer of a
prestigious college endowment fund that Bill manages. He tells
you to keep his location a secret and that he will call his wife
immediately. Two hours later, his wife calls back and screams
that his cell phone is off and she hasn't heard from you or him.
What do you do?”
Group Exercise – What Would You Do?
What are the ethical issues involved in this case?
Who are the stakeholders?
Who has the most to lose?
What are your obligations?
What could happen if you do nothing?
+
Group Exercise – What Would You Do?A) tell her you haven't
been able to reach him. Then call your boss and update him on
his wife's latest call.B) give his wife the number of the hotel
where she can reach him.C) tell your manager's manager about
the situation.D) tell her that you left an urgent message for him,
but she'll have to wait for his call.
*

49. +
Bernie Madoff Discussion QuestionsWhat is a Ponzi
Scheme?What is a feeder fund?How did Fairfield Greenwich
make its money?What was the condition Mr. Madoff imposed on
people marketing his investments? Why did he do this?When
investors received their statements, what responsibility did they
have to review and understand them?What kind of due diligence
did the feeder funds do?
*
+
Bernie Madoff Discussion QuestionsStarting in 2001, Harry
Markopolos alerted SEC three times to the likelihood that
Bernard Madoff was running a Ponzi scheme. Why do you think
the SEC didn’t act on this information until 2006?To what
extend do you think the SEC did not do its job?What was the
final straw that uncovered the Madoff Ponzi
Scheme?Ultimately, who do you think was responsible for the
losses incurred by investors?
+
Bernie Madoff Discussion QuestionsDo you think the US
government should offset the losses incurred by investors with
Madoff?What actions should the US government take to
minimize chances of other Ponzi schemes taking place?

50. Preparation for the midterm:
· Financial Disaster of 2008: Who were the main players? What
are some main ethical dilemmas that lead to the disaster? What
were the results for the disaster?
· Why bother teaching ethics? Support your answer with at least
3 well developed points
· Be familiar with the Bernie Madoff story as well as his view
of what happened
· Be able to describe the three main ethical philosophies, as
well as their advantages and challenges. Be able to take a case
and analyze it from the three different philosophies.
· Identify and be able to use the 9 steps to ethical decision
making in business. You will be given a case that you will need
to work through using the 9 steps.
· Be able to discuss in detail, with examples Dan Ariely’s fudge
factor. Include what can be done to minimize a person’s fudge
factor and how it can be applied in the workplace.
· Jonathan Haidt uses the metaphor of an elephant and a rider to
describe ethical decision-making behavior. Be able to explain
the metaphor, what does the elephant and rider represent? How
does his view of ethical decision making differ from more
traditional vies put forward by Bentham and Kant.
· Be familiar with the Ford Pinto case. Be able to discuss Denny
Gioia’s personal experience at Ford and his involvement with
the case. How did this case reveal the power of context which
was able to influence even a seemingly well-intentioned morally
grounded individual like Gioia.

51. · Be able to explain Kohlberg’s stages of moral development
and how they can be related to the 60-minute piece dealing with
moral development in children.
· Be familiar with the different bias that affect decision making
in ethical dilemmas.
· Be able to explain the terms; power of fairness, conflict of
interest, discrimination, customer confidence, use of corporate
resources and whistleblower.