Welcome and Introduction • I am Andy Gustafson • I teach Business Ethics at Creighton • Son of a Farmer from Nebraska
Overview of Ethics • Summary: • Ethics Quotes • Business, Ethics, and the Law • Examples involving rationalization, self-deception • Moral Decision Making • Case studies principles • Professional Standards/Industry Paradigms of CPCU • Case Studies applying guidelines • Conclude
Ethics Quotes • Which of these quotes is your favorite, and why? • Which of these quotes seem especially relevant in the insurance business?
ETHICS QUOTES • 1. When I do good, I feel good; when I do bad, I feel bad. That’s my religion. (Abraham Lincoln) • 2. A man does what he must.. in spite of personal consequences, in spite of obstacles and dangers, and pressures.. and that is the basis of all human morality. (JFK) • 3. If you don't have integrity, you have nothing. You can't buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing. (Henry Kravis) • 4. Always do right – this will gratify some and astonish the rest. (Mark Twain) • 5. Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws. (Plato) • 6. Associate with men of good quality, if you esteem your own reputation; for it is better to be alone than in bad company. (George Washington) • 7. To educate a person in mind and not in morals is to educate a menace to society. (Theodore Roosevelt) • 8. A good name is more desirable than great riches; to be esteemed is better than silver or gold. (Pr 22:1) • 9. Two wrongs don’t make a right. (old english proverb) • 10. Its not enough to be busy– so are the ants! The question is– what are we busy about? (thoreau) • 11. What does it profit a man to gain the whole world, yet forfeit his soul? • 12. It takes less time to do a thing right than to explain why you did it wrong. (longfellow) • 13. “Live so that when your children think of fairness and integrity, they think of you.” (H.J. Brown) • 14. “The most important persuasion tool you have in your entire arsenal is integrity” (Zig Zigler) • 15. “A man without ethics is a wild beast loosed upon this world.” (Albert Camus) • 16. Ethics or simple honesty is the building blocks upon which our whole society is based, and business is a part of our society, and it's integral to the practice of being able to conduct business, that you have a set of honest standards. And it's much easier to do business with someone when you look them in the eye and say, "This is what we're going to do," and you understand what you each mean, and you can go away and get it done. (Kerry Stokes) • 17. If you can’t find time to do it right, when will you do it over? (Jeffrey Mayer)
Exemplary Ethics Code: • "As officers and Enron Corp, its subsidiaries, and its affiliated companies, we are responsible for conducting the business affairs of the companies in accordance with all applicable laws and in a moral and honest manner...We want to be proud of Enron and to know that it enjoys a reputation for fairness and honesty and that it is respected."
Exemplary Code Continued: • "Compliance with the law and ethical standards are conditions of employment and violations will result in disciplinary action, which may include termination...in addition to responding to the Act, we are adopting this Policy Statement to avoid even the appearance of improper conduct on the part of anyone employed by or associated with the Company...We have all worked hard over the years to establish our reputation for integrity and ethical conduct. We cannot afford to have it damaged."
Loosing your Moral Aspirations • “Men lose their high aspirations as they lose their intellectual tastes, because they have not time or opportunity for indulging them; and they addict themselves to inferior pleasures, not because they deliberately prefer them, but because they are either the only ones to which they have access, or the only ones which they are any longer capable of enjoying.” – J.S. Mill
Examples: Madoff and Spitzer • Madoff explaining why market is secure • http://www.youtube.com/watch?v=ab1NTIlO-FM • Madoff Critic http://www.youtube.com/watch?v=nlxb5LGX_KI • Spitzer up: http://www.youtube.com/watch?v=BuLtYwT4ZGA&feature=PlayList&p=3265D66A49051026&playnext_from=PL&playnext=1&index=1 • Spitzer down: http://www.youtube.com/watch?v=2jEQKnU87Cg&feature=PlayList&p=3265D66A49051026&playnext_from=PL&playnext=2&index=2
We can lose our moral conscience and concern! • “Capacity for the nobler feeling is in most natures a very tender plant, easily killed, not only by hostile influences, but by mere want of sustenance; and in the majority of young persons it speedily dies away if the occupations to which their position in life has devoted them, and the society into which it has thrown them, are not favourable to keeping that higher capacity in exercise.” --J.S. Mill
Stay Fit! • Being ethical is like staying in shape, you have to be diligent about it and practice to keep it up. If you don’t use it, you will loose it…
ETHICS • QUIZ
Question 1 1. Which of the following has been found to be a true statement regarding ethics and the insurance industry? • a.) On average, insurance practitioners are more likely to act unethically in business practices than in purely personal situations. • b.) More than 50 percent of people in business indicate having observed one or more unethical or illegal acts in the past twelve months. • c.) Insurance practitioners believe that management’s emphasis on the bottom line is one of the main factors leading to unethical decision-making. • d.) All of the above are true statements.
Question 2. A strong organizational culture is one in which there is a high expectation of conformity with the organization’s beliefs, values, and purpose. All of the following are true statements regarding organizational culture EXCEPT: • a.) In general, members of organizations having strong cultures are more likely act ethically. • b.) In general, members in organizations with weak cultures are more likely to base their ethical decisions on the norms and values of small groups within the organization. • c.) In general, members of large organizations feel less responsibility for their actions than those in small organizations. • d.) In general, higher level employees have less ethical beliefs and their ethical decision-making is less than lower level employees.
Question 3. All of the following are true statements EXCEPT: • a.) Individuals see themselves as more ethical than their coworkers or supervisors. • b.) The ethical behavior of supervisors strongly influences the ethical behavior of their subordinates. • c.) In general, supervisors’ and management’s actions have little influence over individuals’ ethical behavior because individuals form their ethical values outside of the work environment. • d.) Supervisors who are successful performers have greater influence over their subordinates’ ethical behavior.
Question 4. Which one of the following is a true statement? • a.) Most employees report that a company’s ethical position is stated in their training courses. • b.) The existence of a formal code of ethics is a strong deterrent to unethical behavior. • c.) The awareness of a formal code of ethics is a strong deterrent to unethical conduct rather than just the mere existence of one. • d.) The most successful ethical training programs are ones that emphasize how to make ethical decisions rather than setting clear, uncompromising rules.
Vocabulary: “Business Ethics” • What is “Business” ? • What is “Ethics” ?
What is Business? • Money Making Opportunity • Social/Cultural Power
“Ethics” isn’t “legal” Difference between the Law and Ethics: • Some legal issues are neither ethical or unethical. • Some ethical issues have no laws to support them.
Legal Route to Ethics • The Insurance Industry is Highly Regulated • Law often tries to encourage ethical behavior: • Federal Sentencing Guidelines • Sarbanes-Oxley Act (SOX) • Better to have self-regulation than more gov’t regulations
Federal Sentencing Guidelines • 1. Having Standards • 2. Assigned Responsibility - Adequate Resources • 3. Due diligence in Hiring • 4. Communications and Training • 5. Monitoring, Auditing, Reporting • 6. Promotion and Enforcement of Ethical Conduct • 7. Reasonable Steps to Prevent Misconduct
Company Ethics • Company Policy often has some basis in the compliance regulations and legal statutes and fine schedules set up by government. • But Personal ethics requires personal decision-making, rooted in values.
How to encourage ethics: • External Sanctions: • Positive: (evaluation criteria, bonuses) • Negative: Regulations, Rules & Enforcement • Internal Sanctions: • Establishing a corporate culture or office Culture through vision and leadership
Your Business is social • Business has its own culture • Paypal, Google, your office • Business Transforms Culture • Financially, community outreach • Business is about relationships • Insurance business is about relationships
Company vs Personal Ethics • Company Policy often has some basis in the compliance regulations and legal statutes and fine schedules set up by government. • But Personal ethics requires personal decision-making, rooted in values.
But ethics is more than just what not to do • Minimal: What we shouldn’t do • Don’t steal, don’t kill, don’t lie • Better: What we should do (justice) • Be fair, Be honest, Fulfill duties, work hard • Best: What we could do to make things excellent for all of us… • Mutual of Omaha Project, Real Estate
Our actions do affect others… • 61% of taxpayers say it's okay to cheat on your taxes • Every person spends $250 more per year due to Auto Insurance Fraud. • Our Nation spent $1.7 TRILLION dollars on health care in 2003. Some estimate that 20-35% of that was fraudulent.
Question: Business & Ethics?? • Can making a healthy profit and being ethical go together? • MUST they go together?? • Do we need Ethical Constraints? Or can free market do it automatically?
Argument: Firms ought to maximize their profits and consumer pressure/market will keep them honest • Because “profit really represents the net contribution that the firm makes to the social good and the profits should therefore be made as large as possible.” • Natural constraints of the market will help keep companies in check. I.E., if a company is known to be dishonest or terrible to their employees, then consumers will not buy from that company!
Why Ethics Won’t Take care of itself (criticisms of hands off approach:) • 1. “Free Market alone” response assumes that forces of competition are sufficiently vigorous—but they aren’t. • 2. Maximizing profits is socially inefficient when costs are not paid for (externalized) • a. ie, time vs pollution • b. ie, traffic congestions
2 more problems with pure free market approach: • 3. Maximizing profits is socially inefficient when seller has great knowledge advantage over buyer • 4. Distribution of income that results from unrestrained profit maximization is very unequal.
Market Interventions to maintain Ethical order: • 1. • 2. • 3. • 4. • 5. • 6.
Moral Psychology: WHY DO PEOPLE DO THE RIGHT THINGS?
Different Types of Motives (kohlberg) • Stage 1: Obedience and Punishment • Stage 2: For self-benefit • Stage 3: For sake of reputation (good boy) • Stage 4: Maintain Social order • Stage 5: Contractual-Legalistic orientation • Stage 6: Conscience/Principle Orientation
Motivation Each of us and each person under us might have different motivations for doing the right thing. Its helpful to realize that and encourage right behavior, however it is motivated.
Moral Psychology WHY DO PEOPLE DO WRONG THINGS?
Moral Development: Why do people do unethical things? • Why did the soccer mom drive like a jerk? • Why did my student cheat on the exam? • Why did people at Enron do unethical things? • Why do insurance professionals cut corners?
Some reasons people do wrong: • Ignorant • In a hurry • Thoughtless • Didn’t plan ahead • Financial difficulties • Pressure from organization • Not clear communication from management • Lazy • Want a quick buck • They are a Bad evil wicked person
Anonymity • “Any environmental or societal conditions that contribute to making some members of society feel that they are anonymous– that no one knows or cares who they are, that no one recognizes their individuality and thus their humanity– makes them potential assassins and vandals, a danger to my person and my property—and to yours. (Zimbardo, 2004, p33)
Cognitive Dissonance: Conflicts between action and knowledge • “I am an ethical person, but I am doing something unethical” • Solutions: • A. stop doing it • B. psychological tricks: • Disengage from your behavior
Ways to disengage from your behavior • 1. Change perception of unethical behavior: its not so bad • 2. Change perception of damaging consequences: no one harmed • 3. Diffuse responsibility– no one in particular is responsible: not my fault • 4. Change perspective on victims– dehumanize vicitim: number, whore
BASICS of Decisionmaking Brief explanation of the 5 classic ethical theories: • Egoism: Do it to benefit YOU • Social Contract: We all covenant… • Utilitarianism: Greater Good • Deontologial: Duty-Based (universalizable?) • Virtue Ethics: Golden Mean/Excellence