10/26/2022
MGT602
Decision AnalyticsAssessment Guidelines
Owen Seamons
Module Four – Week 8
10/26/2022
• Your Learning Facilitator
– Owen Seamons
– [email protected]
Introductions
10/26/2022
Submission Instructions
• Only one team member has to submit
• Ensure all team member names are on front
sheet
• Submit as Word Doc
10/26/2022
Thinking About the Future
• Make three estimates.
– Low, medium, high
• Think twice.
– 2 forecasts
• Use premortems.
– Imagine a future failure and explain the cause
• Take an outside view.
– What’s happened elsewhere
10/26/2022
Knowledge Test
• What, to your best knowledge, is more likely: being
killed by a part that has fallen off an aeroplane or
suffering a shark attack?
• The chance of dying from falling airplane parts is 30 times
greater than dying from a shark attack. Because shark
attacks receive more publicity and because they are easier
to imagine (after seeing the film Jaws, for example), most
people rate shark attacks as the more probable cause of
death. Since information about shark attacks is more
readily available, the availability heuristic helps explain why
people overestimate the chances of dying in this unusual
way.
10/26/2022
Knowledge Test
• What, to your best knowledge, is more likely in
USA: dying of stomach cancer or being murdered?
• More Americans die from diabetes and stomach
cancer than from homicide and car accidents, by a
ratio of nearly 2:1. Many people guess homicide and
car accidents, largely due to the publicity they receive
and in turn, their availability in the mind.
• https://youtu.be/2_wkv1Gx2vM
10/26/2022 10/26/2022
Ethical Decision-making
10/26/2022
Case of Katharine Gun
• Leaked a memo exposing an illegal spying operation by
American and British intelligence services to gauge sentiment
of and potentially blackmail United Nations diplomats tasked
to vote on a resolution regarding the 2003 invasion of Iraq
• On the day of the trial, the Crown prosecutor drops all
charges against Katharine on the grounds that prosecuting her
would have shown that the Blair government led the UK into
war on false pretenses.
10/26/2022
Loony Laws
• https://youtu.be/gDhZ_HWMGHc
• Modern Slavery Reporting
• The Modern Slavery Act 2018 (Cth) commenced on 1 January 2021
• This new legislation requires companies with more than $100m revenue in
Australia to provide a public, annual statement on the human rights risks of
forced labour, debt bondage, trafficking and other slavery-like practices in
their operations and supply chains
• Financial Services Royal Commission
• ‘Failings of organisational culture, governance arrangements and
remunerations systems, lie at the heart of much of the misconduct examined
in the Commission’ (Commissioner Hayne, 2019)
• ‘The primary responsibility for misconduct in the financial services industry
lies with the entities concerned and with those who manage and control them:
their boards and senior management’
• Monetary policy is responding to an under-performing economy
Recent Ethics-Related Events
• Royal Commission into Aged Care Quality and Safety
• Looks at how older people are cared for and what needs to change to make
aged care services better
• More than 6,000 submissions were received from aged care consumers,
families, carers, aged care workers, health professionals and providers
• Final report is due by 12 November 2020
Recent Ethics-Related Events continued
The philosophy branch of normative ethics
focuses on deciding what’s right & wrong
https://youtu.be/9TqJrvtt9ws
The three most popular normative ethical theories
https://i1.wp.com/braungardt.trialectics.com/wp-content/uploads/2013/12/ethicalsystems.jpg
Class Tally
12 0 4
10/26/2022
The Moral and Ethical Dimensions
• In a world of big data, major disruptions by technology,
negative impacts on work, nature and society, making good
use of the moral –ethical dimension is becoming important
and pressing
• Morals;
– Internal values and judgements often used to make individual
decisions, how a person behaves
• Ethics:
– theoretical construct that dictates group behaviours and decisions,
how a person should behave
(Terms often used interchangeably-but there are differences.
Individual’s morals not necessarily the same as their ethics)
10/26/2022
Ethical Decision Making and Business
Within the business context, ethical decision making involves
organisations providing direction for people through the use of
the following:
• Codes of practice, values sets, standards of behaviour,
prescribed ways of working, establishing operational ethical
standards and determining norms of behaviour
• Business need to reduce uncertainty on what constitutes
appropriate, ethical behaviour, and by implication unethical
• Many aspects of the ethical dimension to decision making
remain uncertain, particularly for businesses operating
internationally where the ethical dimension is unclear
10/26/2022
The Value of Ethics to Business?
• Laws available covering the ethical dimensions of decision
making at work. Many aspects remain uncertain
• Some legal progress made towards defining what constitutes :
Bribery, corruption, appropriate business-agent relations
• Questions continue to surround the ‘costs’ of being ‘good’.
The expected future value to the business of investing in
ethics training, establishing standards of behaviour
• Read:Eisenbess, S.S., Knippenberg, D,V., & Fahrbach, C.M.
(2015). Doing Well by Doing Good: Analysing the relationship
between CEO Ethical Leadership and Firm Performance.
Journal of Business Ethics, 128, 635-651.Springer
10/26/2022
The Value of Ethics in Firm Performance
• Business ethics and firm economic performance have
traditionally been regarded as mutually exclusive ends.
• This ‘‘either-or’’ belief has been questioned and actions
established on how ethical firm leadership and firm
performance can harmonize well.
• View:Porter, B. (2017). Steps to Ethical Decision Making. YouTube.
Retrieved from https://www.youtube.com/watch?v=LzD1R4XrrTs
• Read: Morales-Sa´nchez, R. & Cabello-Medina, C. (2013). The Role
of Four Universal Moral Competencies in Ethical Decision Making. J
Bus Ethics (2013) 116:717–734.
10/26/2022
Questions on Ethics and Decision Making at Work
• In terms of your organisation’s employee behaviour, would ‘doing no harm’
provide a sufficiently useful ethical decisional framework on which
managerial decisions could be based? Comments?
• Describe the nature of ethical codes or standards of practice in your
organization supporting managers’ decision making, their stakeholders and
on the community at large
• To what extent is training in ethics, morality available to staff? Is ethics,
ethical training seen as a cost or as a benefit to your organisation
• Would descriptions of major decisions made by managers in your
organisation generally attract positive headlines in the press, less positive
ones? Need to improve?
• Describe the qualities of the ethically competent manager-decision maker in
your organization
10/26/2022
What are Ethics?
https://youtu.be/OMGHrKSUb8E **
10/26/2022
The Trolley Problem
https://www.youtube.com/watch?v=yg16u_bzjPE
10/26/2022
Ethics
• Ethics refers to standards of behaviour that tell us how human
beings ought to act in the many situations in which they find
themselves-as friends, parents, children, citizens,
businesspeople, teachers, professionals, and so on.
• The word “ethics” is derived firm the Greek ethicos that means
character or manners. It is related to ethos, the overall sentiment
of a social group.
• Ethics deals with morality – the consideration of moral
questions for individuals and groups.
• Ethics and Culture relationship?
Applied Ethics: Business Ethics
https://qph.fs.quoracdn.net/main-qimg-355635770e9a50f82b26411cc3ad2669.webp
https://youtu.be/T6VIJhCuovI
10/26/2022
Business Ethical Standards
• Ethical standards and values are broadly set by social systems and
evolve slowly as societies grow mature and adapt to changes
around them, including technological change
• Legal systems and ethical standards do not always perfectly align
• Ethical standards of businesses and organisations are under
increasing scrutiny. One response has been the increasing use of
triple bottom line measures in evaluating organisational
performance. Economic performance is being supplemented by
environmental and social measures of corporate success.
• Lapses in ethical standards are having increasingly important
implications for organisational reputations and financial
performance.
10/26/2022
Business Ethics
• http://www.abc.net.au/news/2
017-08-15/cba-updatessettlements-with-clients-andemployees/8805872
• https://youtu.be/dUq9NognISQ
10/26/2022
Understanding Ethics
• To understand Ethics, it is helpful to identify what ethics is NOT:
– Ethics is not the same as feelings.
– Ethics is not religion.
– Ethics is not following the law.
– Ethics is not following culturally accepted norms.
– Ethics is not science.
• There are two fundamental problems in identifying the ethical standards we
are to follow:
– On what do we base our ethical standards?
– How do those standards get applied to specific situations we face?
• If our ethics are not based on feelings, religion, law, accepted social practice, or
science, what are they based on?
• Many philosophers and ethicists have helped us answer this critical question.
10/26/2022
Ethics vs The Law
https://youtu.be/vcibfL2nSBQ
10/26/2022
Your Turn
• What are the sources of ethical standards?
• https://youtu.be/6UrBO-cL27Q **
10/26/2022
Five Sources of Ethical Standards
• 1. The Utilitarian Approach
Some ethicists emphasize that the ethical action is the one that
provides the most good or does the least harm, or, to put it another
way, produces the greatest balance of good over harm. The ethical
corporate action, then, is the one that produces the greatest good and
does the least harm for all who are affected-customers, employees,
| shareholders, the community, and the environment. • 2. The Rights Approach |
Other philosophers and ethicists suggest that the ethical action is the
one that best protects and respects the moral rights of those affected.
This approach starts from the belief that humans have a dignity based
on their human nature per se or on their ability to choose freely what
they do with their lives.
10/26/2022
Five Sources of Ethical Standards
• 3. The Fairness or Justice Approach
Aristotle and other Greek philosophers have
contributed the idea that all equals should be
treated equally. Today we use this idea to say that
ethical actions treat all human beings equally–or if
unequally, then fairly based on some standard
that is defensible. We pay people more based on
| their harder work or the greater amount that they contribute to an organization, and say that is fair. |
Princeps |
But there is a debate over CEO salaries that are
hundreds of times larger than the pay of others;
many ask whether the huge disparity is based on a
defensible standard or whether it is the result of
an imbalance of power and hence is unfair.
10/26/2022
Five Sources of Ethical Standards
• 4. The Common Good Approach
The Greek philosophers have also contributed the notion that
life in community is a good in itself and our actions should
contribute to that life. This approach suggests that the
interlocking relationships of society are the basis of ethical
reasoning and that respect and compassion for all others
especially the vulnerable are requirements of such
reasoning. This approach also calls attention to the common
conditions that are important to the welfare of everyone.
This may be a system of laws, effective police and fire
departments, health care, a public educational system, or
even public recreational areas.
10/26/2022
Five Sources of Ethical Standards
• 5. The Virtue Approach
A very ancient approach to ethics is that ethical actions ought
to be consistent with certain ideal virtues that provide for
the full development of our humanity. These virtues are
dispositions and habits that enable us to act according to the
highest potential of our character and on behalf of values like
truth and beauty. Honesty, courage, compassion, generosity,
tolerance, love, fidelity, integrity, fairness, self-control, and
prudence are all examples of virtues. Virtue ethics asks of
any action, “What kind of person will I become if I do this?” or
“Is this action consistent with my acting at my best?”
10/26/2022
• Putting the Approaches Together
• Each of the approaches helps us determine what
standards of behaviour can be considered ethical.
• There are still problems to be solved, however.
• The first problem is that we may not agree on the
content of some of these specific approaches. We
may not all agree to the same set of human and civil
rights.
• We may not agree on what constitutes the common
good.
• We may not even agree on what is a good and what
is harm.
10/26/2022
• The second problem is that the different approaches may not all answer
the question “What is ethical?” in the same way. Nonetheless, each
approach gives us important information with which to determine what
is ethical in a particular circumstance. And much more often than not,
the different approaches do lead to similar answers.
• Making Decisions
• Making good ethical decisions requires a trained sensitivity to ethical
issues and a practiced method for exploring the ethical aspects of a
decision and weighing the considerations that should impact our choice
of a course of action.
• When practiced regularly, the method becomes so familiar that we
work through it automatically without consulting the specific steps.
• The more novel and difficult the ethical choice we face, the more we
need to rely on discussion and dialogue with others about the dilemma.
10/26/2022
Identifying ethical courses of action
10/26/2022
Ethical Issue Examples
• http://www.bbc.com/news/busin
ess-34324772
https://youtu.be/ixIoDYVfKA0 **
Your Examples?
10/26/2022
Ethical Issues
• Editorial misjudgements misled or deliberately deceived the audience
in 2007 the publicly funded BBC was found guilty of two breaches of
the Broadcasting Code and fined £50.000. The fines related to
phone-in competitions, which gave the appearance, but did not
actually allow, viewer participation in the programmes. The fine was
significant being the first ever fine in over 80 years. However, more
significant was the damage to the BBC’s public reputation for
honesty and excellence. A survey following the revelations showed
that 56% of the public felt their trust had been damaged.
• http://news.bbc.co.uk/1/hi/entertainment/6905095.stm
10/26/2022
Article: 7 Signs of Ethical Collapse
By: Marianne M Jennings, Arizona State University
• What makes a good company go bad? Recognising and remedying the
warning signs of ethical collapse can help prevent accounting scandals
and restore market trust.
• Understanding why corporate fraud occurs is a key to future
prevention.
• A number of warning signs can be detected in advance, including
excessive pressure to meet financial targets and organisational cultures
of silence.
• CEOs who believe their own publicity and behave immorally in their
personal lives may also be a sign of risk.
• The antidotes to ethical failure include a strong and responsible board of
directors, cultures that encourage employees to speak up, and
promoting long-term vision over short-term financial pressure.
Introduces a variable called moral intensity, taking into
account several components
• Magnitude of consequences, social consensus, probability of effect,
temporal immediacy and concentration of effect
• Different people, faced with the same ethical decision, might rightly
come to different decisions because of these components
• A company introducing a dangerous new project has greater moral
intensity than a decision to leave someone’s name off a group
project. Both are unethical decisions, but one has a greater impact
than the other
Issue-Contingent Model By Jones (1991)
https://www.floridatechonline.com/blog/business/3-frameworks-for-ethical-decision-making/
Issue-Contingent Model continued
https://d3i71xaburhd42.cloudfront.net/952eea7c2b1b6ec025f3fbc4866b2b44fab1b640/65-Table11-1.png
• Four steps
• Recognise the issue
• Make a judgment
• Establish the moral intent
• Engage in behaviour
• All the dimensions of moral intensity must be
considered at every step in the process, as well as
organisational influences on decision making
• Group dynamics, authority structures and idea socialisation
• Decision makers must also be able to recognise their
own biases when it comes to gauging moral intensity
• Complex model
Issue-Contingent Model continued
https://www.floridatechonline.com/blog/business/3-frameworks-for-ethical-decision-making/
Issue-Contingent Model continued
https://www.researchgate.net/profile/Juergen_Radel/publication/330221823/figure/fig1/AS:712801035251715@1546956418225/An-Issue-Contingent-Model-of-Ethical-Decision-Making-in-Organizations.ppm
Propositions From The Issue-Contingent
Model
https://d3i71xaburhd42.cloudfront.net/952eea7c2b1b6ec025f3fbc4866b2b44fab1b640/70-Table13-1.png
• Is this decision fair?
• Will I feel better or worse about myself after I
make this decision?
• Does this decision break any organizational
rules?
• Does this decision break any laws?
• How would I feel if this decision were
broadcast on the news?
Questions for assessing the ethics of a
decision
Blanchard and Peale (1988)
10/26/2022
• The Signs
• Sign 1: Pressure to meet numbers
• Sign 2: Fear and Silence
• Sign 3: Sycophantic Executives and Iconic CEO
• “Hire and keep a CEO who spends his or her time at the company with the
employees, not on stage, screen and television”
• Sign 4: A weak board
• Sign 5: Conflicts of interest
• “Organisations at risk of ethical collapse have a distinct atmosphere of
nepotism. Independent judgement becomes clouded with self interest”
• Sign 6: Over-confidence
• Sign 7: Social responsibility is the only measure of goodness
• “Dedication to environmentalism, diversity and other socially responsible
goals do not translate into solid accounting practices. The emphasis on
doing good may well be a cover for what goes on internally”
10/26/2022
IMPLEMENTING ANTIDOTES
1. Pressure to meet numbers
• Set goals with parameters.
• Create incentives that include ethical constraints.
• Place parameters around all goals and incentives.
• Reward those who make correct choices.
2. Fear and silence
• Create internal anonymous reporting systems with effective follow-ups.
• Don’t terminate or discipline employees who raise issues.
• Protect those who raise concerns.
3. Sycophantic executives and an iconic CEO
• Monitor CEO conducts.
• Watch for iconic deference.
10/26/2022
4. A weak board
• Hire experienced board members.
• Recruit board members with expertise.
• Avoid board members with direct and indirect conflicts.
• Eliminate lax attendance.
5. Conflicts of interest
• Create and enforce strong policies on hiring employees and awarding
contracts.
6. Over-confidence
• Place parameters around accounting, financial reporting and conduct.
• Emphasise the basic hard work of business success.
7. Social responsibility is the only measure of goodness
• Encourage basic virtues in company operations and conduct.
• Caution that ends do not justify means.
10/26/2022
HBR Article: Why Ethical People make unethical choices
By: Ron Carucci, July 2016
• Corporate ethical failures have become painfully common, and they aren’t
cheap.
• In the last decade, billions of dollars have been paid in fines by companies
charged with ethical breaches. The most recent National Business Ethics
Survey indicates progress as leaders make concerted efforts to pay holistic
attention to their organization’s systems.
• 41% of workers reported seeing ethical misconduct in the previous 12
months, and 10% felt organizational pressure to compromise ethical
standards.
• It is psychologically unsafe to speak up.
• There is excessive pressure to reach unrealistic performance targets.
• Conflicting goals provoke a sense of unfairness.
• Ethical behaviour is not part of routine conversation.
• A positive example isn’t being set.
10/26/2022
10/26/2022
HBR Article: Why “Good” Managers Make Bad
Choices?
By Ethical Choices by Saul W. Gellerman
• Three Cases
• How could top-level executives at the Manville Corporation have
suppressed evidence for decades that proved that asbestos
inhalation was killing their own employees?
• What could have driven the managers of Continental Illinois Bank
to pursue a course of action that threatened to bankrupt the
institution, ruined its reputation, and cost thousands of innocent
employees and investors their jobs and their savings?
• Why did managers at E.F. Hutton find themselves pleading guilty to
2,000 counts of mail and wire fraud, accepting a fine of $2 million,
and putting up an $8 million fund for restitution to the 400 banks
that the company had systematically bilked?
10/26/2022
Manville Corporation
• ….More than 40 years ago, information began to reach Johns Manville’s medical
department—and through it, the company’s top executives—implicating asbestos
inhalation as a cause of asbestosis, a debilitating lung disease, as well as lung cancer and
mesothelioma, an invariably fatal lung disease. Manville’s managers suppressed the
research. Moreover, as a matter of policy, they apparently decided to conceal the
information from affected employees. The company’s medical staff collaborated in the
cover-up, for reasons we can only guess at.
• Money may have been one motive. In one particularly chilling piece of testimony, a
lawyer recalled how 40 years earlier he had confronted Manville’s corporate counsel
about the company’s policy of concealing chest X-ray results from employees. The lawyer
had asked, “Do you mean to tell me you would let them work until they dropped dead?”
The reply was, “Yes, we save a lot of money that way.”
• Based on such testimony, a California court found that Manville had hidden the asbestos
danger from its employees rather than looking for safer ways to handle it. It was less
expensive to pay workers’ compensation claims than to develop safer working conditions.
A New Jersey court was even blunter: it found that Manville had made a conscious, coldblooded business decision to take no protective or remedial action, in flagrant disregard
of the rights of others…..
10/26/2022
Continental Illinois Bank
• In 1976, Continental’s chairman declared that within five years the magnitude of its lending
would match that of any other bank. The goal was attainable; in fact, for a time, Continental
reached it. But it dictated a shift in strategy away from conservative corporate financing and
toward aggressive pursuit of borrowers. So Continental, with lots of lendable funds, sent its
loan officers into the field to buy loans that had originally been made by smaller banks that had
less money.
• The practice in itself was not necessarily unsound. But some of the smaller banks had done
more than just lend money—they had swallowed hook, line, and sinker the extravagant,
implausible dreams of poorly capitalized oil producers in Oklahoma, and they had begun to bet
enormous sums on those dreams.
• Eventually, a cool billion dollars’ worth of those dreams found their way into Continental’s
portfolio, and a cool billion dollars of depositors’ money flowed out to pay for them. When the
price of oil fell, a lot of dry holes and idle drilling equipment were all that was left to show for
most of the money.
• Continental’s officers had become so entranced by their lending efforts’ spectacular results that
they hadn’t looked deeply into how they had been achieved. Huge sums of money were lent at
fat rates of interest. If the borrowers had been able to repay the loans, Continental might have
become the eighth or even the seventh largest bank in the country. But that was a very big “if.”
Somehow there was a failure of control and judgment at Continental—probably because the
officers who were buying those shaky loans were getting support and praise from their
superiors. Or at least they were not hearing enough tough questions about them.
10/26/2022
E.F. Hutton
• The nation’s second largest independent broker, E.F. Hutton &
Company, recently pleaded guilty to 2,000 counts of mail and
wire fraud. It had systematically bilked 400 of its banks by
drawing against uncollected funds or in some cases against
non-existent sums, which it then covered after having enjoyed
interest-free use of the money. So far, Hutton has agreed to
pay a fine of $2 million as well as the government’s
investigation costs of $750,000. It has set up an $8 million
reserve for restitution to the banks—which may not be
enough. Several officers have lost their jobs, and some
indictments may yet follow.
10/26/2022
Four Rationalisations
• When we look more closely at these cases, we can delineate four
commonly held rationalizations that can lead to misconduct:
• A belief that the activity is within reasonable ethical and legal
limits—that is, that it is not “really” illegal or immoral.
• A belief that the activity is in the individual’s or the corporation’s
best interests—that the individual would somehow be expected
to undertake the activity.
• A belief that the activity is “safe” because it will never be found
out or publicized; the classic crime-and-punishment issue of
discovery.
• A belief that because the activity helps the company the
company will condone it and even protect the person who
engages in it.
10/26/2022
Herron Pharmaceutical Case
• Herron under fire over handling of extortion – ABC
• Man charged over paracetamol extortion case – ABC
• Extortion suspect found dead in prison
• https://pdfs.semanticscholar.org/99e9/362e2249b0730a5e60ac339041f32b3eac5e.pdf
10/26/2022
Australian Ethical Issues
• http://www.abc.net.au/news/201
6-12-16/nurofen-fined-6m-formisleading-consumer/8126450
2003 – 2007
Top issues the public is most concerned about
https://youtu.be/_pLh6bOKbQE
10/26/2022
Standards are not being applied consistently
EY 2017 Asia Pacific Fraud Survey
10/26/2022
10/26/2022
10/26/2022
10/26/2022