Business Ethics &

Managerial Behavior

Msc Investment Banking &

Capital Market

Myriam Degrave
S1 2020-21
This course comprises of two parts :

PART I PART II
(8h) (16h)

DRIVING ETHICAL AND

SUSTAINABLE GROWTH: BUSINESS ETHICS :

Business ethics at the core of Practical cases

business performance

Myriam Degrave Alexandre Da Cruz

 Part I : Learning objectives

Understanding… Acting…
Session 1

Solve professional dilemmas

The ethical decision- using concepts of CSR and
making process ethics

(Individual perspective)
Session 2

Relationship between
Create shared and sustainable
ethical business and
value for organizations
value creation

(Collective perspective)
Assessment system for the full course

Class participation 15% Both profs

Individual essay 25% M. Degrave

Group presentation 25% A. Da Cruz

Individual exam 35% A. Da Cruz

WHY A COURSE ON BUSINESS ETHICS?
Lack of business ethics can be very costly for business…
Lack of business ethics can be very costly for business…
… and can also drive significant value creation

What is the correlation between good ESG management and financial performance?
Why should it matter to me?

We falsely assume that scandals result from sole “evil” individuals and that we will
never be exposed

Apple – Foxconn Facebook and Wirecard

Subprimes BP Deepwater Rana Plaza in
human rights Cambridge accounting
(2008) Horizon Oil Spill Bangladesh
(2012) Analytica (2018) fraud (2020)
(2010) (2013)

Overtime, most scandals required the knowing cooperation of numerous employees, sometimes
numerous companies. How does this occur?
IESEG’s 2025 vision
 PART I.
THE ETHICAL DECISION-MAKING PROCESS
AND ISSUES FACED BY BUSINESSES
4 steps in the ethical decision process
WHAT ETHICAL ISSUES DO MANAGERS FACE ?
What is business ethics ?

“Business ethics is the study of business situations, activities and

decisions where issues of right and wrong are addressed”
(Crane and Matten, 2010)
Group discussion (groups of 3)

What ethical issues

have you observed or
experienced in your
internships/jobs?
Managers make ethics-related decisions on a daily basis

4
1 Marketing &
Strategy Sales
Product misrepresentation
Business model Greenwashing
New markets Data privacy
New products Abuse of dominant position
M&A

2 5
HR Finance
Equality & diversity
Misrepresentation of results,
Discrimination, harassment
Tax avoidance & evasion,
Executive pay
corruption & bribery
Employee wellbeing

3 6
Supply chain
Operations
Labor standards
Dependency Employee health & safety
Terms of payment Product safety
Bribery Environmental impacts : CO2,
water, waste, biodiversity
Managers make ethics-related decisions on a daily basis

HR

Our performance targets are

very high. Is this realistic?

It doesn’t feel right to

terminate our bottom 5%
performing employees every
year.
Managers make ethics-related decisions on a daily basis

This supplier violates our

code of conduct and puts its
employees’ health at risk.
Should I black-list it?

Supply Chain
Managers make ethics-related decisions on a daily basis

Finance

Should I produce
this financial report
which will be used
for unethical
lobbying?
… what are the main ethical topics in Finance?

Groups of 3
5 minute discussion – then debrief
4 steps in the ethical decision process
ETHICS THEORIES PROVIDING MORAL INSIGHT
Ethical theories help provide moral insight

Name Strand of theory Key principle

Follow the rules

Deontology Principles of standards of conduct
(written or implicit)

Flourishing is best
Virtue ethics Character of the person or company achieved through honesty,
integrity, generosity

Utilitarianism Consequences of a particular action The end justifies the means

1. Deontology : follow the rules (written or implicit)

Religion and Universal Declarations

Global Compact Principles

Company-specific codes

Example : CFA Code

 2. Virtue ethics : our actions reveal who we are

Visibility Generality Legacy

Would I be comfortable Is this how I’d like my

if this action were Would I be comfortable leadership to be
described in the if everyone did this? remembered?
newspaper?
3. Utilitarianism : the end justifies the means

A decision is moral if it
produces the greatest good
for the greatest number

Example : drug trials in the

pharmaceutical industry
In practice, there are often tensions and links between these approaches

This does not mean that whichever

decision you make, it can be backed-up
by one ethical theory

The choice of approach is context-

dependent and person-dependent.

A tool to look at a situation from

different angle
Ethical dilemmas : deciding between wrong vs wrong / right vs right

• Truth vs. Loyalty

• Justice vs. Mercy
• Individual vs. Community
• Short-term vs. Long-term
Group discussion (groups of 3)

Coming back to the ethical issues you

faced or observed : how does this apply?
4 steps in the ethical decision process
WHY GOOD PEOPLE MAKE BAD CHOICES
The problem is… sometimes, good people make bad choices

https://hbr.org/2002/11/why-good-accountants-do-bad-audits
The problem is… sometimes, good people make bad choices
The problem is… sometimes, good people make bad choices

Milgram (1963) Obedience experiment Zimbardo (1973) Stanford Prison Experiment

Experiment stopped after 6

66% of participants days due to violence from
followed instructions guards and breakdowns of
prisoners
Ethical fading and moral disengagement

What factors can encourage good people to act unethically ?

https://hbr.org/2002/11/why-good-accountants-do-bad-audits
Unconscious biases

Obedience Escalation

Conflict of interest Socialization

Attachment Approval Discounting

Illusion of
objectivity
4 steps in the ethical decision process
PROMOTING ETHICAL BEHAVIOUR
ACROSS THE BUSINESS

GROUP EXERCISE :
WELLS FARGO
GROUP EXERCISE : WELLS FARGO (teams of 4-5)

Key events :
• Sept 8, 2016 : Wells Fargo fined $185 million by Consumer Financial Protection
Bureau
• Reason : opening over 2 million accounts without knowledge or customer approval
(between 2011 and July 2015)
• 5,300 employees fired (1%) of workforce – mostly lower level employees
• Employees accused top management of aggressive sales goals (8 products per
client)
GROUP EXERCISE : WELLS FARGO (groups of 4-5)

Exercise 1:
• You are employed as an account manager at Wells Fargo in 2012 (before the
scandal). You have knowledge of widespread fake account creation practices. You
want to voice your concerns.

• What do you do?

• You are NOT trying to find an ideal solution to this ethical issue. You are merely
trying to practice developing and improving a script that someone wishing to voice
her/his values could use in such a situation.
What levers can you use to engage in ethical conduct?

Search for
Propose Think in
allies Demonstrate
solutions terms of Gather
the business
(colleagues, long term data
boss’ boss, (agent of impact
compliance improvement) growth
officer…)
GROUP EXERCISE : WELLS FARGO (teams of 4-5)

Exercise 2 :
• You are appointed by the board as new CEO of Wells Fargo after the
scandal, to re-establish integrity and a solid and ethical business

• What do you do?

• Public Relations / Crisis Management is out of scope for this exercise

Tools to strengthen an organization’s ethical standards

Code of conduct

Transparency Corporate culture

Stakeholder
Objectives management

Leadership as a role
model
Bad apples or bad barrels ?

“- And given that, in this dreadful affair,

someone must go to jail, we all think,
Smith, that it would be absolutely fantastic
if it could be you”
 NEXT WEEK :
Creating shared and sustainable value for organizations

• Stakeholder Capitalism
• Responsible Investment (ESG)
Responsible Investment

The UNPRI defines responsible investment as a strategy and

practice to incorporate environmental, social and governance
(ESG) factors in investment decisions and active ownership.

Source : https://www.unpri.org/an-introduction-to-responsible-investment/what-is-responsible-investment/4780.article
Responsible Investment
 Responsible Investment

1. Prepare a 5 min presentation on the following topics:

1 2 3 4 5
Ahmed Bhairavi Chaudhari Al-Qudus Lawal
Zaki Abdel Hamid Edouard Didron BAROUD Oussama
Hadba Rahhali
Ewu
Zainab Ahmed Nkwentan Diob Emmanuel Cristian Romero Nassim IDIRI RIVEROS Sebastian
Mahdi Ben Youssef Mohammed
Tony El Jouni Maxime Loras
Hicham Shawy VALDEZ VILLALBA Luis Eduardo
Zainab Bourass Arthur Geens Davina Sundanum Paul Roussaly

Zied Lahouimel Grégoire Blondeel Pierre Yaacoub

Recommended starting point :

https://www.unpri.org/investment-tools/an-introduction-to-responsible-investment