1

Welcome to
Stakeholder
Values and
Ethics
Friday 8.30 – 11.30am

UBSS Sydney CBD Campus

Level 10 & 11 233 Castlereagh Street
Sydney NSW2000
StakeholderVal
ues and Ethics
Lecture 1

Introduction to Business
Ethics

Assistant Professor Sue

Cameron
Agenda
♦ Subject Outline and Assessment
Timetable
♦ Overview
♦ Introductions (an activity)
♦ Ethics in Business
♦ Several Case studies to discuss
♦ Ethical Approaches (theory)
♦ Unethical behaviour
Subject Outline and Assessment Timetable
♦ This is now on Moodle
♦ We shall go through it together
♦ Any questions – please ask – I love questions and there is no such
thing as a silly or stupid question

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Assessments
♦ One (week 5) – Multiple Choice and Short Questions
(15%)
♦ Two (Week 9) – Short Questions and Case Study (25%)
♦ Three (Final Exam) – Short Questions and Case Study (60%)

Student Note: Students must successfully pass the final exam in order
to pass the subject
Overvie
♦ Provide a conceptual overview and critical analysis of the factors
w that influence organisational decisions regarding ethical issues
♦ Identify strategic implications of embracing corporate social responsibility
(CSR) and ethical business practices
♦ An overview of the historical context of, and the contemporary socio-
economic factors influencing corporate social responsibility
♦ Prepare students to make ethical business decisions with reference to
the
needs and expectations of all stakeholders, and seeks to anchor core
ethical concepts in a practical analysis of contemporary business
cases
♦ An overview and understanding of corporate governance and risk and
the mechanism used in these areas

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 Introductions of
Students
♦ Introduce your self (first name or nickname)
♦ Where are you from?
♦ What did you do at home? (Student, work etc)
♦ What work do you do in Australia?
♦ What do you like about Australia?
♦ What have you found that is unusual or challenging
in Australia?
♦ Any hobbies and interests?
Topic 1 Overview
♦ Taking away the mystery
♦ Isn’t business ethics just a
fad?
♦ Can business ethics be
taught?
♦ Defining ethics
♦ Managing ethics
♦ Bringing ethics down to size
♦ Ethics and the law This Photo by Unknown Author is licensed under CC BY-SA-NC
Definition of Business
Ethics
♦ The principles, norms, and standards of conduct governing an individual or group

♦ Consists of moral principles governing the right and wrongs of

human conduct
♦ Is about the principles of right and wrong accepted by individuals
or social groups
♦ A code of behaviour considered morally correct
♦ Ethical behaviour is doing what is morally right
Business Ethics
♦ Business ethics are the principles and standards that:
● Define acceptable conduct in business
● Should underpin decision making

♦ An alternative definition is: ”the moral values which govern business

behaviour and restrains companies from pursuing the interest of
the shareholder at the expense of all other considerations”
Business Ethics
♦ Some activities might be profitable and legal but nevertheless
are considered to be unethical
♦ An ethical decision is one that is both legal and meets the shared
ethical standards of the community
Is ethics the same as the
♦ No - although the law should reflect the ethical views of society there are
law?
certain activities permitted by law which some individual or groups in
society or individual might regard as unethical
● Ethical considerations are about what is right and what is wrong
● The law is about what is lawful and what is unlawful

♦ The following business activities are legal but might pose ethical dilemmas
for individuals:
♦ Profiting from gambling
♦ Selling goods manufactured by low wage in developing countries
♦ Experimenting on animals
Is it the same as corporate social responsibility?
There is clearly an overlap between CSR and business
ethics
♦ A socially responsible firm should be an ethical firm
♦ An ethical firm should be socially responsible This Photo by Unknown Author is
licensed under CC BY-ND

However there is a distinction:

♦ CSR is about responsibility to all stakeholders and not just
shareholders
♦ Ethics is about morally correct behaviour and much more broad
Ethics - decision models
When faced with an ethical question, what guides our decision
making? There are different ways of looking at the issue:
♦ Moral Principles
♦ Utilitarianism
♦ Justice Model
Human rights
♦ People have fundamental human rights and liberties - consent,
privacy, conscience, free speech, fair treatment, life, safety
♦ The test is: does it violate human rights?
♦ An ethically correct decision is one that best maintains the human
rights of those affected
♦ Decisions that violate human rights are unethical

This Photo by Unknown Author is licensed

under CC BY-NC
Human rights
♦ People have fundamental human rights and liberties - consent,
privacy, conscience, free speech, fair treatment, life, safety
♦ The test is: does it violate human rights?
♦ An ethically correct decision is one that best maintains the human
rights of those affected
♦ Decisions that violate human rights are unethical

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Ethical decision-making process

Source: Trevino and Nelson (2018)

Factors influencing ethical decision - making
♦ Four categories of factors influence the decision - making
process
1. Individual
2. Organisational
3. Professional
4. Societal

This Photo by Unknown Author is licensed under CC BY-SA-NC

Source: Trevino and Nelson (2018)

Why Bother Teaching Ethics?
♦ Bad apples are encouraged by bad barrels
♦ Good character isn’t always enough
♦ Adults develop moral judgment into their
30s
♦ Conduct is influenced by environment

This Photo by Unknown Author is licensed under CC

BY
Relationship between Ethics and the Law
♦ Overlap between law and ethics
♦ Being legal is not always ethical
♦ Ethics includes laws but extends
beyond

Source: Trevino and Nelson (2018)

Financial Disaster of 2008 – the GFC
Direct Causes

Shadow Financial Subprime Mortgages Regulatory Climate Incentives

Market -- “Liar” Loans -- Glass-Steagall Act repealed -- Big rewards for
-- Credit Default Swaps -- No $ down, no income -- Debt regulations for banks short-term thinking
-- Securitized verification eased for companies and
Mortgages (“slice & -- Consumers bought -- “Markets can self-regulate” individuals
dice”) more than they could -- Revolving door between
-- Derivatives afford regulators and companies
-- Hedge Funds -- “Government is the
problem”
Bottom-line:
-- Arrogance
-- Greed
-- Total recklessness
Contributing Factors

“Herd Investment Lots of Cheap $$ Rating Agencies “Innovation”

Mentality” Banks -- Fed (low -- Conflicts of -- Math whiz kids
-- Wall -- Go public interest rates) interest create complex
Street -- No “skin” in -- Demand from --Didn’t under- products
-- the game China and Middle stand what they -- No one really
Consumer East were rating understood what
s these products
-- “Real estate is were
safe”
The Players
Rating Agencies Went 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)
CEOs Much 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 peddled
Financial Professionals Paid huge salaries and bonuses for short-term results

Mortgage Originators Relaxed lending standards and created sophisticated

products consumers did not understand
Regulators “Asleep at the switch” -- also looking for their next jobs (high-paying)
in the financial industry (which they are regulating)
Legislators Lobbied and “paid” by the financial industry to relax regulations –
“the markets can self-regulate”
Investors Punished companies that did not deliver huge returns

Home Owners Bought more house than they could afford. Home values plummet and
mortgages are “under water” – home values sink and are worth less
than their mortgages
Financial Disaster Results
♦ Business failures or contractions
♦ Government bailouts This Photo by Unknown Author is licensed under CC
BY

♦ Unemployment
♦ Consumer distress: foreclosures and bankruptcies
♦ Tattered reputations (corporations, industries, countries)
♦ Plummeting trust in government and institutions
Moving Beyond Cynicism
♦ Edelman Trust Barometer (2009):
● More than half of respondents say they trust business less than they did
a year ago
► Worse in the U.S.
► No decline in BRIC countries (Brazil, Russia, India, China)

● Business case for trust:

► 91% of consumers purchase products from companies they trust
► 77% of consumers refuse to purchase products from companies they

don’t
trust

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under CC BY-SA
Why Be Ethical? Who Cares?
♦ Individuals care
♦ Employees care
♦ Managers care
♦ Executives care
♦ Industries care
♦ Societies care

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TestYour Cynicism Quotient
1 = Strongly Disagree 5 = StronglyAgree

♦ Financial gain is all that counts in business.

♦ Ethical standards must be compromised in business practice.
♦ The more financially successful the businessperson, the more unethical
behavior.
the
♦ Moral values are irrelevant in business.
♦ The business world has its own rules.
♦ Businesspersons 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 practices
♦ The profit motive pressures managers to compromise their ethical concerns.
Topic 2 Overview
♦ Ethical Dilemmas
♦ Prescriptive Approaches
● Focus on consequences (consequentialist theories)
● Focus on duties, obligations, principles (deontological
theories)
● Focus on integrity (virtue ethics)

♦ Eight steps to making sound ethical decisions

♦ Practical preventive medicine
What is an Ethical Dilemma?
♦ A situation where values are in conflict
● Two or more values you hold dear - or –
● Personal value conflicts with organisational
value

Value/s Value/s
The Layoffs - case
study
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? What would you say?
Prescriptive Approaches – 3 different types
1. Focus on consequences (consequentialist theories)
2. Focus on duties, obligations, principles (deontological
theories)
3. Focus on integrity (virtue ethics)
1. Focus on Consequences (Consequentialist
Theories)
Utilitarianism - best known consequentialist theory
♦ Identify alternative actions and consequences to
stakeholders
♦ Best decision yields greatest net benefits to society
♦ Worst decision yields greatest net harms to society

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Focus on Consequences (Consequentialist Theories)
Utilitarianism – case study implications
♦ What are the benefits?
♦ What are the harms?
♦ What are the net benefits?

♦ Therefore, what should you do?

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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.
Question: Should you turn the trolley to prevent 5 deaths at the cost of 1?
Consequentialist Questions
♦ Can I identify all the stakeholders?
● Immediate, distant?
♦ What are the potential actions I could take?
♦ What are the harms and benefits for stakeholders 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? Also called the greater good.
Consequentialist Analysis
Stakeholder Option 1 Option 1 - Option 2- Option 2 -
- Costs Benefits Costs Benefits

#1

#2
#3

#4
….etc.

Bottom line = action that produces the greatest good for the greatest number of people, for society
overall!
Focus on Consequences (Consequentialist Theories)
♦ Advantages
● Practical
● Already
underlie
s
busines
s
thinkin
g
♦ Challenge
s
2. Focus on Duties, Obligations,
Principles (Deontological Theories)
♦ Decisions based upon abstract universal principles: honesty,
promise- keeping, fairness, rights, justice, respect
♦ Focus on doing what’s “right” (consistent with these principles)
rather
than doing what will maximize societal welfare (as in utilitarianism)

This Photo by Unknown Author is

licensed under CC BY-SA
Ethical rules (simplified)
♦ Kant’s categorical imperative
● “What kind of world would it be if everyone behaved this
way?” “Would I want to live in that world?”
♦ Rawls’ veil of ignorance – for deciding what’s fair
● “What would decision be if decision makers knew nothing about
their identities or status?”
♦ Golden Rule
● “Treat others as you would have them treat you” (Assumption
is that both parties are ETHICAL! An ethical
person wouldn’t expect someone else to be unethical for him/her.)
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)
♦ What would be a fair action if identities were unknown? (Rawls’ veil
of
ignorance)
Focus on Deontological Theories
♦ Advantages
● Rights approach found in public policy debates (e.g., abortion)
♦ Challenges
● Determining rule, principle, or right to follow: Golden rule, Kant’s
maxim
● Deciding which takes precedence
● Reconciling deontological and consequentialist approaches when they
conflict
3. Focus on Integrity (Virtue Ethics)
♦ Focus on integrity of moral actor rather than the
act
● Considers character, motivations, intentions
● Character defined by one’s community
♦ Need to identify relevant community

♦ Disclosure rule
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)
♦ Advantages
● Can rely upon community standards
♦ Challenges
● Limited agreement about community This Photo by Unknown Author is licensed under CC BY-SA-NC

standards
● Many communities haven’t done this kind of
thinking
● Community may be wrong
Ethics comparison

Source: The Arthur W. Page Center

Eight Steps to Sound Ethical Decision Making
1. Gather the facts
2. Define the ethical issues
3. Identify the affected parties
4. Identify the consequences
5. Identify the obligations
6. Consider your character and integrity
7. Think creatively about potential
actions
8. Check your gut
Ethical Awareness And Ethical Judgement
♦ Ethical Awareness and Ethical Judgment
♦ Individual Differences, Ethical Judgment, and Ethical
Behavior
♦ Facilitators to and Barriers to Good Ethical Judgment
♦ Toward Ethical Action

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The Relationship between Ethical Awareness,
Judgment, and Action
♦ Is there awareness of an ethical
dilemma?

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Case Study
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 cheque
to his boss.
Q: What might influence whether you see this as an ethical issue or not?
Influences on ethical awareness
♦ If peers agree
♦ If ethical language is used
♦ If potential for serious
harm

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Individual Differences Influence How We Make
Ethical Decisions
Cognitive Moral Development
♦ Lawrence Kohlberg’s moral reasoning theory
♦ Focuses primarily on how people think about and decide on what course of action
is ethically right
♦ Proposes moral reasoning develops sequentially through three broad levels each
with two stages each

♦ Kohlberg Moral Development

This Photo by Unknown Author is

Cognitive Moral Development – 3 levels
♦ Level I (Preconventional)

● Stage 1 – Obedience and Punishment Orientation

Obedience to authority for its own sake, sticking to rules to avoid punishment

● Stage 2 – Instrumental Purpose and Exchange

Following rules only when its in one’s own immediate interest. Right is
an equal
exchange, getting a good deal
Cognitive Moral Development
♦ Level II (Conventional)
● Stage 3 - Interpersonal Accord - Conformity – Mutual Expectations
Stereotypical ‘good’ behavior. Living up to what is expected by
peers and people close to you.
● Stage 4 – System Maintenance - Upholding duties,
laws Fulfilling duties and obligations of the social
system.
Upholding laws and rules except in the extreme cases where they conflict
with social duties
Cognitive Moral Development
♦ Level III (Postconventional or Principled)

● Stage 5 – Social contract and rights

Upholding rules because they are the social contact if they are consistent
with values such as fairness and rights and the greater good ( not because
they are the majority opinion)

● Stage 6 - Theoretical stage only

Following ethical principles of justice and rights, Acting in accord with
principles when laws violate principles,
Why is Cognitive Moral Development Important?
♦ Because most people reason at the conventional level and are
looking outside themselves for guidance
♦ That makes “leading” on ethics essential

A
Locus of
Control
♦An individual’s perception of how much control he or she exerts over
events in life.

External Internal
Connection to Ethical Behaviour?
♦ Internals are more likely to see the connection between their
own behavior and outcomes and therefore take responsibility for
their behavior.
♦ Therefore, internals are more likely to do what they think is right

This Photo by Unknown Author is licensed under CC BY-NC-ND

Machiave lianism
♦ Self interested
♦ Opportunistic
♦ Deceptive
♦ Manipulative
Moral Disengagement
♦ The tendency for some individuals to deactivate their internal
control system in order to feel okay about doing unethical things
♦ Eight mechanisms used for doing this
1. Euphemistic language
2. Moral justification
3. Displacement of responsibility
4. Advantageous comparison
5. Diffusion of responsibility
6. Distorting consequences
7. Dehumanization
8. Attribution of blame
Moral Disengagement

STOP
AND
THINK

“It’s not my responsibility - my boss told me to do

it.” “It’s not my responsibility – my team decided
this.” “It’s no big deal!”
“It’s not as bad as (what someone else) is
doing.” “They deserve whatever they get.”
“They brought this on themselves.”
Cognitive Barriers to Good Ethical Judgment
♦ Barriers to Fact Gathering
● Overconfidence
● “Confirmation Trap”
♦ Barriers to Consideration of Consequences
● Reduced number
● Self vs. others
● Ignore consequences that affect few
● Risk underestimated: illusion of optimism, illusion of
control
● Consequences over time – escalation of commitment
More Cognitive Barriers
♦ Thoughts about integrity
● Illusion of superiority or illusion of
morality
♦ Paying attention to gut
● Careful! Gut may be wrong
Unconscious Biases
♦ The IAT and race bias
♦ The role of emotions
Toward Ethical
Action
♦ Script Processing
● Cognitive frameworks that guide our thoughts and
actions
♦ Cost-Benefit Analysis
● Too simplistic a way of analyzing
● No moral dimension

This Photo by Unknown Author is licensed under CC BY-NC-ND

Case Study

Mary, the director of nursing at a regional blood bank, is concerned about the
declining number of blood donors. It’s November, and Mary knows that the
approaching summer will mean increased demands for blood and decreased supplies,
especially of rare blood types. She is excited, therefore, when a large corporation
offers to host a series of blood drives at all of its locations, beginning at corporate
headquarters. Soon after Mary and her staff arrive at the corporate site, Mary hears a
disturbance.
Apparently, a nurse named Peggy was drawing blood from a male donor with a very
rare blood type when the donor fondled her breast. Peggy jumped back and began
to cry. Joe, a male colleague, sprang to Peggy’s defense and told the donor to leave
the premises. To Mary’s horror, the male donor was a senior manager with the
corporation.
Case Study Questions
♦ What is the ethical dilemma in this case?
♦ What values are in conflict?
♦ How should Mary deal with Peggy, Joe, the donor, and representatives
of the corporation?
Ford Pinto Case Study on Moodle with Tutorial
Questions
How it felt to be a reca l coordinator…
“The recall coordinator’s job was serious business. The scripts
associated with it influenced me more than I influenced [it]. Before I
went to Ford I would have argued strongly that Ford had an ethical
obligation to recall.
After I left Ford, I now argue and teach that Ford had an ethical
obligation
to recall. But, while I was there, I perceived no obligation to recall and I
remember no strong ethical overtones to the case whatsoever. It was
a very straightforward decision, driven by dominant scripts for the time,
place, and context.”
Dennis Gioia, former recall coordinator at Ford
Any last minute questions
♦ If not, this is the last slide for today
♦ I look forward to seeing you online next Friday
♦ Keep well and safe and please follow the governments rules to keep
you safe from Covig19
♦ Thank you for your attendance today

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CC BY-SA
 Next Week 2
♦ Code of ethics for professional accounting
♦ Thank you for your attention & participation and look forward to
seeing you online next Friday