Edm Slides Public 2013 2

8/11/2019 Edm Slides Public 2013 2

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Webinar is NOT:

60 minutes of Lecture

Regulatory/Compliance Training

Creating a Moral Compass

Graded No Test!


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FINANCIAL SERVICES FARE WORST--AGAIN

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How much do you trust the following industries to do what is right?

79%

66%

64%

62%

60%

59%

56%

53%

51%

47%

45%

Technology

Automotive

Food and Beverage

Consumer Packaged Goods

Telecommunications

Brewing and Spirits

Pharmaceuticals

Energy

Media

Banks

Financial Sevices

2012 Results

77%

69%

66%

65%

62%

62%

59%

58%

53%

50%

50%

Technology

Automoti ve

Food and Beverage

Consumer Packaged Goods

Telecommunications

Brewing and Spirits

Energy

Pharmaceuticals

Media

Banks

Financial Sevices

2013 Results

Source: 2013 Edelman Trust Barometer


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ALIGNMENT OF EXPECTATIONS AND PERFORMANCE

Source: 2013 Edelman Trust Barometer

How important are each of the following actions to building trust?

63%

59%

58%

57%

54%

41%

38%

41%

23%

28%

24%

23%

26%

22%

OFFERS HIGH QUALITY PRODUCTS OR SERVICES

PLACES CUSTOMERS AHEAD OF PROFITS

HAS ETHICAL BUSINESS PRACTICES

HAS TRANSPARENT AND OPEN BUSINESS PRACTICES

COMMUNICATES FREQUENTLY AND HONESTLY ON THESTATE OF ITS BUSINESSS

HAS HIGHLY-REGARDED AND WIDELY ADMIRED TOPLEADERSHIP

DELIVERS CONSISTENT FINANCIAL RETURNS TOINVESTORS

IMPORTANCE PERFORMANCE


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Investor Perceptions

DILBERT Reprinted by permission of United Feature Syndicate, Inc.


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WHICH HAS MORE INFLUENCE ON WHETHER A

PERSON WILL ENGAGE IN UNETHICAL

CONDUCT?

A. Disposition: A persons moral character.B. Situation: Outside circumstances.


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Situational v. Dispositional

Some studies have shown that situational

influences have more to do with a persons ethical

behavior than a persons character.

Under the right conditions good people can be

induced, seduced and initiated to act unethically.

--- Phill ip Zimbardo, Prof. Emer. Stanford University


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WHICH OF THE FOLLOWING SITUATIONAL

CIRCUMSTANCES WILL INFLUENCE A PERSON

TO ENGAGE IN UNETHICAL CONDUCT?

A. Obedience to authority

B. Conformity with others

C. Incrementally engaging in unethical behavior

D. Following group decisions

E. Over confidence in ability to act appropriately

F. Responding to incentives


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Obedience to Authority

We are less likely to take part in unethical actionson our own than when requested by a supervisor.

We want to please authority: may lead us to carry out instructions

without thinking about the ethical implications

Supervisors rarely directly ask us to perform unethical activities, instead

they infer it based on incentives.

Rationalizations:

I want to be a team player, I want to be loyal.

I was just following orders.


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Conformity

We often take our cues from our reference group about the proper way

to act

We become acculturated to behavior and we assume that this behavior

is normal and acceptable

We conform our judgments to the judgments of our reference group

Rationalizations:

Everybody else does it, so it must be okay

Its how you succeed around here


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Incrementalism The Slippery Slope

Unethical behavior often occurs when we subconsciously lower ourstandards over time through small changes in our behavior

Rationalizations:

Just this one time

It doesnt really hurt anyone

Its not a big deal


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Group Think v. Independent Thinking

Being in a group lessens our individual feelingsof accountability and responsibility

Our moral doubts are assuaged by the groups concurrence

Rationalizations:

We are a good and wise group

This is the way it has always been done


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Overconfidence

We tend to believe that we are more honest and

fair-minded than our peers and competitors

This often leads us to make decisions that

have ethical implications without engaging in

serious reflection

Rationalization:

I am more ethical than they are, it wont happen to me


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Framing

Objectives are often framed to focus on one factor (AUM, bonuses,stock price)

We often overlook or justify behavior if it leads to

the achievement of that goal or objective

Rationalizations:

That is the way they do it at Firm X, so it

must be okay

If we do not do it, someone else will

Smart people created the incentive structure,Im just responding to it


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Effective Ethical Thinking Begins with:

Becoming more conscious about your thoughts and

behaviors, to increase the likelihood that you will notice and

act on ethical issues before they become destructive

Recognizing that ethical dilemmas are a normal and

predictable part of most jobs

Discussing approaches for dealing with ethical issues


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Case Studies

Illustrate ethical principles and ethical analysis in real-life scenarios

Prompt discussion and exploration of key concepts and

ideas from differing perspectives

Focus on issue-spotting and analysis rather than correct

or incorrect answers

Develop an ethical framework for decision making


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Developing a Framework forEthical Decisions

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I. Fundamental Ethical Principles

Client interests come first Preservation of confidentiality

Avoid/manage conflicts of interest

Full and fair disclosure Fair dealing

Reasonable care and prudent judgment

Maintain independence and objectivity


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II. Ethical Analysis

What are the important facts?

To whom is a duty owed?

What are the issues?

What are the ethical principles involved?

Are there any conflicts of interest?

How are the conflicts managed?


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Developing a Framework for Ethical

Decisions:

Cases

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You are the assistant to a senior portfolio manager at the firm responsible for

submitting the managers expense reports. Because the manager often doesnot have receipts for minor expenses such as meals and cab fare, you have

learned to override the accounting system when he submits the reports. The

manager recently returned from a trip without receipts for larger expenses.

When you inquire about the receipts, the manager tells you he lost the receipts

and to just override the system like you usually do. You should:

The Expense Report

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A. Submit the report without the receipts.

B. Submit the report for only expenses that are backed up with receipts.

C. Create receipts to back up your bosss expenses this one time but inform the

manager that you will not do so again.

D. Ask the manager of accounting what to do.


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CASES: BREAKOUT DISCUSSIONS

Each Breakout will discuss one case (5 - 6 min.) Use the ethical decision-making framework to

analyze the case (to the right of the case)

Select a spokesperson

When the large group reconvenes, the Breakout

cases will be presented and the large group will

vote on each

After the voting, the spokesman for each Breakoutwill present their analysis


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Resolving Ethical Dilemmas

Ethical issues are normal and predictable.

Be more conscious about thoughts to notice and act

on ethical issues before they become problems.

Be aware of and address negative situational

influences. Apply Ethical Decision-Making Framework.

Live and breath fundamental ethical principles.

Know your duties/gather relevant facts/manageconflicts.

Discuss with colleagues.

Edm Slides Public 2013 2

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