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Christian Fanning June 6 th , 2007
Decisions Decision making occurs as a reaction to a  problem  or an  opportunity . Problem Opportunity
Stages of Moral Development 6. Following self-chosen ethical  principles even if they violate  the law. 5. Valuing rights of others and  upholding absolute values  and rights regardless of the  majority’ s opinion. 4. Maintaining conventional  order by fulfilling  obligations to which  you have agreed. 3. Living up to what is  expected by people close to you. 2. Following rules only  when doing so is in your  immediate interest. 1. Sticking to rules to avoid physical punishment. Conventional Principled Preconventional Source:  Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Developmental Approach,” in  Moral Development and Behaviour: Theory, Research, and Social Issues , ed. T. Lickona (New York: Holt, Rinehart and Winston, 1976), pp. 34-35.
Stage of moral development Organizational environment Locus of control Ethical decision-making behaviour
Utilitarianism Rights Justice/Care Unethical Unethical Unethical Ethical o N o N o N s e Y s e Y s e Y Does the decision respect the rights of the individuals affected? Is the decision  motivated by  self-serving  interests? Is the decision  fair and equitable? Question 1 Question 2 Question 3
Judgement Shortcuts Daniel Kahneman & Amos Tversky Heuristics “ judgement shortcuts in decision making, to simplify the decision process,  rather than going through all of the steps of the rational decision-making model”
Heuristics Framing “ you give radically different answers to the same question if it is  posed in different ways” Availability Heuristic “ tendency for people to base their judgements on information  that is readily available to them rather than complete data” Representative Heuristic “ basing a decision on the tendency of a small sample or pre-existing category” Ignoring the  Base Rate “ judgement error that people make when ignoring the  statistical likelihood that an event might happen” Escalation Of Commitment “ an increased commitment to a previous decision despite negative information,  i.e. stick with original decision
Mindset “ All publicly traded corporations have been structured, through a series of legal decisions, to have a particular and disturbing characteristic. They are required by law to place the financial interests of their owners above the competing interests… … In fact, the corporation, is legally bound to put its bottom line ahead of everything else… … even the public good” The Corporation
Mindset “ They have no soul to save… … they have no body to incarcerate” Barron Thurleau
 
 
 
 
“ We have no obligation to make history… We have no obligation to make art… We have no obligation to make a statement… To make Money… … is our only obligation” Michael Eisner
“ You can manipulate consumers… into wanting… and therefore…  … buying your products… It’s a game.”
“ In devastation… there is opportunity…”
 
Worldcom "It is disappointing that the company that commits the greatest fraud in  American history, $11 billion, leading to a loss of $180 billion to the retirement  accounts and savings of thousands of people receives only a slap on the wrist."
“ We like risk… because you make money taking risks.” J. Skilling Welcome to a Financial Fantasy Land
 
 
 
 
 
 
 
Mark to Market Accounting
 
 
an innovative trader…. is a good trader..
 
 
 
Financial Incentives “ In 2001 executives received huge one-time bonuses because Enron’s stock price hit various targets during 2000. Investigators have suggested that during 2000, those same executives were inflating the company’s profits by as much as a billion dollars. Legal experts suggest that the bonuses tied to stock price goals may have provided a motive for executives to distort the company’s performance…  … How large were these bonuses? Well, Andrew S. Fastow, the former CFO, received more than $3 million (US) in bonuses over a one-month period! In the words of a former federal prosecutor, “The levels of compensation that we are talking about here would certainly seem to be a powerful incentive for anyone to do anything.”
 
 
The Tall Tale
Stage of moral development Organizational environment Locus of control Ethical decision-making behaviour
 
 
[object Object],[object Object],Top executives were paid bonuses totalling  $55 million
[object Object],[object Object],Top executives cashed in  $116 million in stock
[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],$30,000,000,000
[object Object],[object Object]
“ Whether you obey the law or not is a matter of whether it is cost effective. If the chance of getting caught and the penalty are LESS than the cost to comply, people think of it as being just a business decision.” The Corporation
ask why.
Special Thanks
Stanley Milgram ,[object Object]
Milgram’s Theories ,[object Object],[object Object]
Ethical Question

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Corporate Ethics

  • 2. Decisions Decision making occurs as a reaction to a problem or an opportunity . Problem Opportunity
  • 3. Stages of Moral Development 6. Following self-chosen ethical principles even if they violate the law. 5. Valuing rights of others and upholding absolute values and rights regardless of the majority’ s opinion. 4. Maintaining conventional order by fulfilling obligations to which you have agreed. 3. Living up to what is expected by people close to you. 2. Following rules only when doing so is in your immediate interest. 1. Sticking to rules to avoid physical punishment. Conventional Principled Preconventional Source: Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Developmental Approach,” in Moral Development and Behaviour: Theory, Research, and Social Issues , ed. T. Lickona (New York: Holt, Rinehart and Winston, 1976), pp. 34-35.
  • 4. Stage of moral development Organizational environment Locus of control Ethical decision-making behaviour
  • 5. Utilitarianism Rights Justice/Care Unethical Unethical Unethical Ethical o N o N o N s e Y s e Y s e Y Does the decision respect the rights of the individuals affected? Is the decision motivated by self-serving interests? Is the decision fair and equitable? Question 1 Question 2 Question 3
  • 6. Judgement Shortcuts Daniel Kahneman & Amos Tversky Heuristics “ judgement shortcuts in decision making, to simplify the decision process, rather than going through all of the steps of the rational decision-making model”
  • 7. Heuristics Framing “ you give radically different answers to the same question if it is posed in different ways” Availability Heuristic “ tendency for people to base their judgements on information that is readily available to them rather than complete data” Representative Heuristic “ basing a decision on the tendency of a small sample or pre-existing category” Ignoring the Base Rate “ judgement error that people make when ignoring the statistical likelihood that an event might happen” Escalation Of Commitment “ an increased commitment to a previous decision despite negative information, i.e. stick with original decision
  • 8. Mindset “ All publicly traded corporations have been structured, through a series of legal decisions, to have a particular and disturbing characteristic. They are required by law to place the financial interests of their owners above the competing interests… … In fact, the corporation, is legally bound to put its bottom line ahead of everything else… … even the public good” The Corporation
  • 9. Mindset “ They have no soul to save… … they have no body to incarcerate” Barron Thurleau
  • 10.  
  • 11.  
  • 12.  
  • 13.  
  • 14. “ We have no obligation to make history… We have no obligation to make art… We have no obligation to make a statement… To make Money… … is our only obligation” Michael Eisner
  • 15. “ You can manipulate consumers… into wanting… and therefore… … buying your products… It’s a game.”
  • 16. “ In devastation… there is opportunity…”
  • 17.  
  • 18. Worldcom "It is disappointing that the company that commits the greatest fraud in American history, $11 billion, leading to a loss of $180 billion to the retirement accounts and savings of thousands of people receives only a slap on the wrist."
  • 19. “ We like risk… because you make money taking risks.” J. Skilling Welcome to a Financial Fantasy Land
  • 20.  
  • 21.  
  • 22.  
  • 23.  
  • 24.  
  • 25.  
  • 26.  
  • 27. Mark to Market Accounting
  • 28.  
  • 29.  
  • 30. an innovative trader…. is a good trader..
  • 31.  
  • 32.  
  • 33.  
  • 34. Financial Incentives “ In 2001 executives received huge one-time bonuses because Enron’s stock price hit various targets during 2000. Investigators have suggested that during 2000, those same executives were inflating the company’s profits by as much as a billion dollars. Legal experts suggest that the bonuses tied to stock price goals may have provided a motive for executives to distort the company’s performance… … How large were these bonuses? Well, Andrew S. Fastow, the former CFO, received more than $3 million (US) in bonuses over a one-month period! In the words of a former federal prosecutor, “The levels of compensation that we are talking about here would certainly seem to be a powerful incentive for anyone to do anything.”
  • 35.  
  • 36.  
  • 38. Stage of moral development Organizational environment Locus of control Ethical decision-making behaviour
  • 39.  
  • 40.  
  • 41.
  • 42.
  • 43.
  • 44.
  • 45.
  • 46. “ Whether you obey the law or not is a matter of whether it is cost effective. If the chance of getting caught and the penalty are LESS than the cost to comply, people think of it as being just a business decision.” The Corporation
  • 49.
  • 50.