Ethics & Governance Lecture 1: Introduction to Ethics & Governance

1. Ethics & GovernanceLecture 1: Introduction to Ethics & Governance

2. Overview Today • A brief introduction to the course’s management, readings and assessments • Plagiarism – academic integrity • Essay writing – study research techniques • Ethics and morality • Ethics and the law • Ethics in business and corporate governance

3. Readings • There is no prescribed textbook for this subject. • There are essential readings on the myRMIT studies website. • A lot of the material in the course has been developed from these two texts which are excellent references: 1. Mallin, C A, 2010. Corporate Governance, Oxford University Press, UK. 2. Trevino, LK & Nelson, KA (2011) Managing Business Ethics: Straight Talk about How to Do It Right (5th Edition), John Wiley, USA. School of Management

4. Assessment Overview Research Essay (2000 words) 40% Due date: TBA. Exam 60% Scheduled during examinations period All assessment tasks must be submitted to pass & 50% must be attained in order to pass School of Management

5. Assessment 1: Research Essay (2000 words) Choose one of the following three topics: 1. As a manager is it important to be ethical or is it really just important to focus on making money for the firm? And if so why, or why not? 2. Is ethical leadership more important for creating an ethical organisation than having a code of conduct? 3. Is there anything wrong with a company undertaking corporate social responsibility (CSR) activities for instrumental motives rather than for normative reasons? [To assist you to answer this question refer to: Donaldson and Preston (1995) on the learning hub see Course Content Week 2]. School of Management

6. For the essay:- Use at least twelve references: * six academic journal articles peer reviewed & * six other quality references Electronic and Hardcopy submission. Turnitin School of Management

7. Assessment Criteria for the Essay • Key issues relating to the question have been developed • Original and clear argument • Logical and convincing discussion • Ideas and assertions substantiated through use of high quality reference material and key academic perspectives/views used to develop arguments • Appropriate Harvard style referencing (intext and list of references) • Number and quality of references • Clear and comprehensive written style (spelling, grammar, syntax etc.) School of Management

8. The SIM Lecturers will… Comment on what you have done well in this essay & What you need to improve School of Management

9. Assessment 2: Exam There will be a two hour examination covering the whole semester’s work scheduled during the examination period at the end of the semester. The examination will be in two parts. School of Management

10. Exam (continued) • Section A will include three questions that require you to apply theories and concepts from the course. An essential preparation for this section of the exam will require you to be familiar with the content of the Required Readings and the Weekly Review Questions. • Section B will include three questions that require you to apply theory and concepts from the course case studies covered during the semester in your classes and lectures. The case studies are not written in text in the exam. You need to be familiar with each and every one of them School of Management

11. Assessment Criteria for the Exam for Parts A and B • Key issues relating to the question have been developed • Original and clear logical arguments and discussion • Ideas and assertions substantiated through use of high quality reference material and key academic perspectives/views used to develop arguments • Appropriate acknowledgement of theorists in the text of your answers e.g. (Mallin) (Friedman) (Porter) (Drucker) • Clear and comprehensive written style (spelling, grammar, syntax etc.) School of Management

12. Vignettes: School of Management

13. Fake Degree • Cheryl has done a sound job for over a year. Cheryl’s boss learns that she got the job by claiming to have a university degree, although in reality she never graduated • Should her boss dismiss her for submitting a fraudulent resume, or overlook the fake claim since Cheryl has otherwise proved to be conscientious and honourable, and since making an issue of the degree might ruin Cheryl’s career? School of Management

14. Roundabout Pay Rise • When Joe asks for a rise, his boss praises his work but says the company’s rigid budget won’t allow any further merit raises for the time being. Instead the boss suggests that the company “won’t look too closely at your expense accounts for a while” • Should Joe take this as an authorisation to pad his expense account on the grounds that he is simply getting the same money he deserves through a different route, or should he refuse this roundabout “raise”? School of Management

15. Study Skills Section ExamEssay Writing Reading Journals & BooksResearch School of Management

16. Harvard referencing style continued • Harvard is an author-date referencing style widely accepted in scholarly circles. Each reference is indicated in the text by the author and date of the publication cited, sometimes with added information such as page numbers. The full details of these references are listed at the end of the text in a Reference list. Please follow this information given to you by us regarding referencing. School of Management

17. Harvard referencing style continued • You can obtain the following for your RMIT website • Harvard Quick Guide (DOC, 67 KB, 2 pages);  • Harvard Extended Guide (DOC, 161 KB, 14 pages);  School of Management

18. Harvard Referencing continued • Here is another clear guide to show our students and staff how to reference using the Harvard Referencing style. • Harvard Citation Style Examples • Follow this link for a simple and clear way to use Harvard Citation Style Examples – • http://guides.is.uwa.edu.au/content.php?pid=43218&sid=318559 • The PDF for the above url is also on the on MyRMIT Learning Hub for this Course – see Assessment School of Management

19. REFERENCING FROM THE INTERNET You cannotcopy works (text, images, media etc.) off the Internet withoutreferencingyour source. If you are using text, an image or other media from a webpage, you must reference the material. Check with your lecturer or course guides for your course requirements. School of Management 19

20. Hints for planning your essay Break the topic into a series of sub-topics or questions. Read the text and any recommended readings Draft an outline and annotate each section with relevant references Do additional research where you don’t appear to have enough information Start writing as soon as possible School of Management 20

21. Essay assessment criteria • See the Course information Document for assessment criteria for the essay. School of Management 21

22. Referencing tips Understand and follow the criteria for ‘RMIT Business’ referencing on the RMIT web site Include all references used at end of essay Place references ‘in text’ wherever an idea, quotation or extract from another source if used; Use academic reliable sources; no Wikipedia or company websites please School of Management 22

23. BUSM3203 Human Resource Management Additional Study Skills School of Management 23

24. Study Proforma School of Management 24

25. How to put an Essay Together and/or a Study Plan for an Exam School of Management

26. What is Ethics? • Ethics concerns itself with the study and identifications of the behaviours, actions and standards that we as humans ought to pursue to obtain a good life. • Ethics: is concerned with the assessment of moral standards; notions of right and wrong, good and bad. • In general, ethics is concerned with what is right, fair, just or good; about what we ought to do, not just what is the case or what is most acceptable. This distinction between ‘ought’ and ‘is’ signals the need to distinguish ethical claims from factual ones. Facts are descriptive and can be verified as to their truthfulness or falsity. School of Management

27. Ethics vs Morality • Morality reflects a person’s or group’s standards of right and wrong. Moral understanding is usually developed passively. • Ethics is the assessment of moral standards. Ethics is developed actively – through the use of theories and experience. School of Management

28. Nature of Ethics • Variously defined - Difficult to define precisely • Focuses on theories of right & wrong • Concerned with what is right & wrong in:- Relationships, actions, beliefs, attitudes • Process of applying Ethical theory to concrete situations • Business ethics approach (is bribery always wrong?) instead of philosophical approach (is it right to kill one to save oneself?) School of Management

29. Business Ethics? • Business ethics: The principles, norms, and standards of conduct governing an individual or group in work situations (Trevino & Nelson 2006) • Ethics is directly concerned with human interaction and behaviour. It therefore has relevance to the way people behave in organisations. • Factors that influence business ethics include the stage of development of a country, individual characteristics, issue intensity, and School of Management

30. Some questions to consider… • What is moral awareness? • Do all decisions involve ethics? • Does every person have his/her own ethical values? • Am I being ethical if I do not do anything illegal? • Is ethics applicable in business? • Who is responsible for organisational decisions? School of Management

31. Minimum conception of morality • Two criteria (Rachels, 1993): • Reason: a moral decision is based on reasons that are acceptable to other rational persons • Impartiality: the interests of all those affected by a moral decision are taken into account School of Management

32. Relationship between Ethics and the Law • Law establishes minimum standards • Ethics extends beyond legal domain Ethics Ethics Think of a business activity that may be legal but unethical Think of a business activity that may be illegal but ethical How should an organisation deal with an activity that is legal but unethical? Law (Trevino & Nelson, 2006) School of Management

33. Models of Management Morality • Immoral Management • devoid of ethical principles and active opposition to what is ethical. • Moral Management • high standards of ethical behavior. • Amoral Management • Intentional - does not consider ethical factors • Unintentional - casual or careless about ethical considerations in business (Carroll, 2001) School of Management

34. Models of Management Morality Amoral Management Continuum Immoral Management (bad/wrong) Moral Management (good/right) Source: Carroll (2001) School of Management

35. Ethical Organization • One whereby the organization culture promotes the appropriate ethical behaviours among all • Surveys have consistently indicated that employees prefer to work in an ethical organization • Unethical behaviours include bribery, theft, discrimination, harassment, deception and endangerment • Responsibility for ensuring an organization has ethical standards is a duty of management School of Management

36. Vignette: Inflated Salary • An employer finds that the candidate who is by far the best qualified for a job really earned only $48,000 a year in their last job, and not the $58,000 they claimed • Should the employer hire the candidate anyway, or should he choose someone else even though that person will be considerably less qualified? • What would you say if the real salary were $55,000 (only $3,000 less than the amount claimed)? School of Management

37. Not so great Gatsby: • What are the ethical issues of this case? • What moral obligations do you have to Gatsby, yourself, your boss, the workers and the firm? • Are any of these more important or pertinent than the others? • Would it be ethical to do as your boss suggests? • What would you do in this situation?

38. What is Corporate Governance? • This subject largely focuses on private sector (for-profit) corporations. • However governance is important to Private, Public and Not-for-profit sectors. • Governance = How an organisation is governed, which is distinct from management, although some senior management are involved in governance (see Tricker 2009). School of Management

39. Corporate Governance definitions • Corporate governance is the internal means by which corporations are operated and controlled (Cadbury, 1992) • A set of relationships between a company’s management, its board, its shareholders and other stakeholders (OECD, 2004) • It is the relationship among various participants in determining the direction and performance of corporations (Monks and Minow, 2001) School of Management

40. Governance distinguished from Management Governance – the work of the board of directors or other governing body Serve Elect Management – the work of the executive and management team Hire Source: Tricker (2009, p.36) Source: (Tricker 2011) School of Management

41. The board and management Outside, non-executive directors Executive directors Other managers not on the board Serve Elect Hire Source: Tricker (2009, p.36) Source: (Tricker 2011) School of Management

42. Corporate Governance Entities Serve Elect Hire

43. Singapore Code of CG (2 May 2012) • BOARD MATTERS – THE BOARD'S CONDUCT OF AFFAIRS • Principle: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board. • See:http://www.ecgi.org/codes/documents/cg_code_singapore_2may2012_en.pdf School of Management

44. Guidelines: • 1.1 The Board's role is to: • (a) provide entrepreneurial leadership, set strategic objectives, and ensure that the necessary financial and human resources are in place for the company to meet its objectives; • See also (b) to (f) School of Management

45. BOARD COMPOSITION AND GUIDANCE • Principle: • There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board's decision making. School of Management

46. DIRECTORS • 1.2 All directors must objectively discharge their duties and responsibilities at all times as fiduciaries in the interests of the company. Take note of • Page 7 of 33 CHAIRMAN AND CHIEF EXECUTIVE OFFICER • Page 8 of 33 BOARD MEMBERSHIP • BOARD PERFORMANCE etc. • I would read all sections see – again see • http://www.ecgi.org/codes/documents/cg_code_singapore_2may2012_en.pdf School of Management

47. Examples of Unethical Behaviour & Poor Governance • 1. US • Enron • Arthur Anderson • 2. Singapore • NKF • China Aviation Oil School of Management

48. Enron • Failure: Massive accounting fraud • Consequence: Collapse of US$70billion energy trader Enron • Whistle-blower: Sherron Watkins • Penalties: • Chairman: 45 year jail sentence • CEO : 24 year jail sentence, US$50M pay back • CFO: 10 year jail sentence • Accounting Firm: Arthur Andersen dissolved School of Management

49. NKF (watch YouTube) • Failure: Misuse of funds and false declarations • Consequence: Massive public outcry and fallout of donors • Whistle-blower: Susan Leong, The Straits Times • Penalties: • Chairman: 15 month jail sentence • CEO : 3 month jail sentence • Chairman, CEO and 2 Board Members: S$12M pay back School of Management

50. Corporate Collapses Affect us All! • Shareholders: reduce in return or no return at all • Pension funds: loss of retirement funds • Employees: lose their jobs, even the company pension • Taxpayers: it is often taxpayer funds that prop up failing businesses • Suppliers & customers: goods and services to the failed companies • Economy impact: local and international level in which the failed companies operated (e.g. impact of Asian financial crisis in 1997/subprime crisis in 2008, GFC 2008, European debt crisis ongoing) School of Management