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Ethics V11
‘The Last Lap’
I know what you are thinking
But much like being in IKEA this presentation meanders
Thus testing the accuracy of the Mc Donalds Enthusiasm Curve
Leading to one thinking…..
Before and After Presentation?
Agenda
Things that interest me
What are Ethics
Corporate Ethics
Codes of Conduct
Things we would love to put off ………
If only it were possible
Things that interest me
Income Tax take 2006 €12.4bn approx. 27.20% of total tax take
Income Tax take 2018 €21.40bn approx. 38.20% of total tax take.
Roughly same amount of people employed but tax take up approx. 70%
Same period average hourly pay has increased by €1.40
Over the period low inflation but
Car insurance up 56.20%
Petrol up 17.80% Diesel up 4.80%
Health insurance up 141.30%
Hospital Services up 25.80% Doctor 9.50% Dentist 18.30%
Electricity up 30.90% Gas up 20.90%
Secondary school costs up 26.40% Third level up 84.60%
Sunday Independent Jim Power analysis CSO figures 13/01/2019
Things that interest me
Dirt (35%) V Exit Tax (41%)
Yield 2015 €247M 2017 €165M
Nothing to gain from reduction if investment performance remains poor.
Stated other fees levied irrespective of performance
Investments different from Deposits so no rationale for same rate
CET payment over 20 years for Public Servants
BIK on car parking
Thomas Kenneth Whittaker Often referred to as ‘The man who made modern Ireland’. Irishman of the year
2001.
Min for Finance James Ryan received analysis from Departmental Secretary TK Whittaker (appointed aged 39 in 1956) in a ‘Note’ called ‘The Irish Economy’. Stated that ‘without a sound and progressive economy, political independence would be a crumbling façade’
1949-1955 GNP 10.50% V European average of 36.50%, 2% pf population 60,000 people emigrated.
Protectionism abandoned by Lemass and he became Taoiseach in 1959.
Follow up blue print to ‘Note’ called ‘Economic Development’ held as the foundation blocks in the creation of the modern Irish economy.
White Paper became known as ‘First Programme for Economic Expansion’ was published in 1958 and unusually had his name attributed to it.
Whittaker and his team had worked on plan on a voluntary basis because they felt it had to be done.
Thomas Kenneth Whittaker 1957 helped establish The Institute of Public Administration to improve Public
Servants training and introduced a scholarship system.
Personally elicited a grant from The Ford Foundation to establish the ESRI
In 1960’s spearheaded path towards EEC membership
Governor of The Central Bank 1969 ‘warning light and unpalatable things to say’ and established its independence . 1970’s imposed limits for excessive lending to an overheating housing market, restricted credit to commercial banks and stemmed tide of external capital inflows, balance of payment defecits, galloping spending and excessive pay awards.
Perplexed and appalled at lack of ‘warning light’ and said to Patrick Honohan in 2009 ‘I’m counting on you to save the country from national humiliation.
1971 paper ‘Northern Ireland a possible solution’ the Belfast agreement 30 years later and almost 4,000 deaths later.
Thomas Kenneth Whittaker
Said ‘if you live long enough you would be either canonized or found out and the worst fate is to be found out after you are canonized’.
He posed the following question in the 1980’s ‘Is it little more than a fiction that Parliament and Government are sovereign. Does the States power rest precariously on day to day tolerance of its authority by powerful sectional interests. Are Governments nowadays like the totally deaf Beethoven of later years being allowed go through the motions of conducting the orchestra while the real control is exercised elsewhere?’
Said ‘ there are values moral and intellectual which are higher than mere economics. But it makes for a happier and more contented society if everyone has some basic share in wealth and wellbeing’.
Wellbeing Economics
Jacinda Arden New Zealand Prime Minister and Economics of Kindness with May ‘Wellbeing Budget’ focusing on outcomes other than inputs or outputs and an overall objective of promoting ‘intergenerational wellbeing’. Budget will report against a range of indicators measuring ‘how we support our people, protect our environment and strengthen our communities and people’.
GDP invented by Simon Kuznets a US economist to better understand damage been wrought by the Great Depression. Embraced and refined by John Maynard Keynes. Kuznets argued that spending did not further welfare of society e.g on arms should not be included but he was overruled. Said that GDP and National Income were not measures of economic welfare as not enough to know what income amounted to but how it was distributed.
Robert F Kennedy in 1968 said ‘GNP counts naplam and nuclear warheads but does not allow for the health of our children or the quality of their education it measures everything in short except that which makes life worthwhile’
Wellbeing Economics
GDP hid anomalies like the credit bubble and then we had the crash. Emphasis then on austerity rather than on social recovery and thus worsened impact of the crash. With recovery a rising GDP but incomes of most workers were not. GDP as a measure of economic growth is out of kilter with how most people experience the economy.
Kuznets had said that ‘an economy whose benefits are not widely shared carries within it the germs of its rejection by those who are called to adjust to conditions which are not of their making’.
Joseph Stiglitz paper 2008 commissioned by Nicolas Sarkozy finalized 2018 ‘what matters is not just the size of the pie but how it is divided, the ingredients used in preparation and whether these ingredients will continue to be available in the future’. Measuring a country by GDP is like having a car with only one instrument a speedometer. Said recently that had US focused more on health than GDP decline in life expectancy amongst those without a college education and in the deindustralised regions would have been apparent years earlier.
Wellbeing Economics
Irelands 26% Leprechaun Economics (Paul Krugman NY Times) of 2015. CSO promotes a metric called modified gross national income GNI which strips out distorting effect of globalization. But GDP still the international standard.
Ireland has made small steps in ‘wellbeing budgetary issues’ relating to gender, poverty, human rights etc and social impact assessment.
Arden, Stiglitz, TK Whittaker, Kuznets, Robert F Kennedy and others have said in varying ways ‘the real growth that should be our focus is growth that is equitable and sustainable and anything else is self defeating’
Colin Murphy SBP 27/01/2019 Article More to NZ budget than good vibes.
Things that interest me
Donald Trump 2016-
John Adams 1797-1801. had been a leading light in the American revolution but bad tempered and paranoid with apparently a tyrannical streak. Responsible for Alien and Sedition Acts which hindered immigrants becoming citizens and made it a crime to criticize the government.
Warren Harding 1921-1923. Newspaper owner who appointed friends to positions of power and importance. Many turns out to be incompetent and corrupt. Had two extra marital affairs and one of the women published a book and sold it door to door claiming he was the father of her daughter,
Things that interest me
William Henry Harrison 1841. President for 31 days. Longest inauguration speech in US history at just under 2 hours. Delivered in the middle of a snowstorm without a coat or hat. Died of pneumonia.
John Tyler 1841-1845. Assumed Presidency and became longest running President who was never voted into office. Became known as ‘His Accidency’.
Trivia James Hoban 1792
Things that interest me
Alexander Hamilton first US Secretary of the Treasury 1789-1795
As an aside founded in 1784 Bank of New York
Mortally wounded in a duel with sitting Vice President Aaron Burr in 1804.
In the 18th century strategic value of industrial knowledge treated as a trade secret
English mechanics banned from emigrating in case they took secrets.
Alexander Hamilton sent spies to observe British industry
Offered passage and patents to emigrating British mechanics
History of course always repeats itself.
What are ethics
The principle of conduct – professional ethics
A system or philosophy of conduct
A discipline dealing with what is good and bad- moral duty and obligation
A set of moral principles or values.
Ethics is about how we behave, about the standards we hold ourselves to
Ethics is about how we treat each other (relationships), even those we don’t know
Ethics is…
Not just feelings or conscience
Not the same as religion
Not just following the law
Not following “what everybody does”
Not technology or science—what can be done
How we act as individuals
How we structure our organizations
How we structure our society, our laws, our systems
Ethics is not… Ethics vs. Morals
Ethics and morals are NOT always the same
Morals = personal view of values
i.e. beliefs related to moral issues such as drinking, sex, gambling,
Can reflect influence of religion, culture, family and friends
Ethics = how a moral person should behave
Ethics transcends cultural, religious, and ethnic differences
The Key Question
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to”, said the cat
- Lewis Carroll, Alice in Wonderland
Why are we here today?
It’s Mandatory
Times are changing in society and our industry
Does ‘Ethics’ change with the times???
Ethics, now expected to be at the heart of “Corporate Culture,”.
Some Questions?
Is human nature naturally ethical?
Are Ethics gray?– not black and white.
(In other words, you can’t just say you’re an ethical person–and that’s all there is to it)
Is it difficult to be ethical all of the time?
Surely it’s not that complicated
Difficult been ethical all the time?
Is it easier to do what’s convenient?
Is it easier to conform with the norms?
Is it easier to do what’s profitable?
Is it easier to win if you cheat?
It can be difficult to overcome the challenges of human nature.
Disillusionment
Just this once
Time pressure
Financial pressure
To please the boss
To protect the company
Everybody else is doing it
I’m looking out for those who work for me
To be a team player
I have to, just to keep up
No one will ever know
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Presurised Situation?
The Simple Ethics Test
If you think……
If you have to ask…..
The ‘Duvet Test’
Your Honor
Dr. Seuss teaches us to be true to ourselves.
You have brains in your head.
You have feet in your shoes.
You can steer yourself
Any direction you choose.
You’re on your own.
And you know what you know.
And YOU are the person
Who’ll decide where to go.
Business Ethics???
Business needs to thrive but does
Business needs ethics to thrive ?
Arguments for business ethics
1. Trust is foundational to contracts
2. Customer Satisfaction/loyalty
3. Happy Employees = productive employees
4. Transparency is essential to development
5. Unethical practices ultimately undermine business
6. Many Customers want ethical businesses
7. Ethics is important for branding/marketing
Recognize anyone?
Business Ethics
Must arise from the company’s stated values
Provides guidance for handling ethical challenges
Not just general principles there must be specific provisions otherwise just window dressing and will soon be seen by all as such.
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Ethics must be driven from the top
The ability and willingness to encourage others to behave ethically requires
Developing an organizational climate that fosters ethical behavior
Structuring policies that encourages ethics
Behaving ethically while facing the pressures of leadership Those at the top leading by example. Do managers practice what they
preach? (It’s the perception that counts) “The fish rots from the head down.”
~Sir Andrew Louis Authority is OUT—Influence is IN.
Ethics must be driven from the top
"Let me appeal to your sense of doing things my way"Cartoon by P.C. Vey
Copyright 2004, Harvard Business Review
Stakeholder Theory : Robert Monk’s Americas’ Corporate Capture:
1 The financial power of corporations now controls every stage of politics –Executive, Legislative and Judicial
2 Capture has been further implemented through the extensive lobbying power of corporations.
3 As corporations have captured America, CEOs have captured the power and riches of Americas’ corporations.
4 Having captured corporate power, CEOs are systematically externalising corporate liabilities.
5 Capture has placed the most powerful CEOs above the reach of the law and beyond its effective enforcement.
6 Capture has been further perpetuated through the removal of property ‘offshore’ where it is neither regulated or taxed.
7 In addition, capture extends to the regulatory agencies.
8 Critically CEOs have also captured the terms of the debate about what it means to be good corporate citizens.
(Monks, 2013, KE4-10%)
Ethics must be driven from the top
( Matt Cartoon, Telegraph Newspapers)
Bill and Melinda Gates & Warren Buffett
‘All lives have equal value, we are impatient optimists working to reduce inequality’
Largest private foundation in the US approx. $50bn Aims to globally enhance health care and reduce extreme poverty and in the
US to expand educational opportunities and access to Information Technology.
Bill and Melinda have donated approx. $28bn Warren Buffett announced in 2006 he was giving away his entire fortune
($62bn) with 85% going to the Bill and Melinda Gates Foundation. In 2010 in conjunction with Bill and Melinda they founded ‘The Living
Pledge’ campaign to recruit more wealthy individuals to philanthropic causes
Washington Post September 2014
Average Fortune 500 US CEO remuneration $12.2M, Switzerland next at $7.4M
Ratio between US CEO and average worker pay 354.1 Switzerland next at 148, for information UK at 84 Typical Mc Donald’s and Starbucks employee would need to work 6 months
to earn 1 hours CEO pay Truth is there is nothing really new in this although figures may be greater
than ever before.
“What is the chief end of man? – to get rich. In what way? –dishonestly if we can; honestly if we must.” – Mark Twain 1871
Time of great contradictions
A time of great wealth for some but a time of economic hardship for most
Low wages
Long hours (10-12 hours a day)
6 days a week
Unsafe working conditions
Women and children worked in the factories as well, usually for lower wages.
Worker Hardships
Sweatshops- dirty, dangerous, overheated, bad ventilation, poor lighting
Accidents – faulty equipment & lack of proper training
Strict regulation to ensure productivity
Fines for breaking rules & working slowly
Both parents worked so they brought children to work- kept them off streets- they could earn a wage
Nearly 1 in 5 children between 10 – 16 worked- mines, factories, textiles, canneries, newsboys/messengers
Harsh conditions
Stunted physical & mental growth
Child Labour
Famous
“Girl in Factory”
photograph.
Early 20th century,
USA
Company Towns
Many workers lived in communities owned by business & rented to employees
Forced to buy goods at the company store- goods sold on credit with high interest
Most of wages owed back to employed
“Wage Slavery”- employees couldn’t leave until they repaid loans, or they would be arrested
Created a workforce that was forced to be loyal
Robber Barons vs. Captains of Industry?
Opposing View Points
Captains of Industry
Created Jobs
Increased production
Provided cheap products
Gave money back to the community
Robber Barons
Exploited workers
Corrupted the government
Greedy
John Rockefeller and Standard Oil
Recognized the potential of the oil industry
Very hard worker
Spent all profits from the company to improve production
Philanthropy- gave over $500 million to charities
Made deals with the railroads to charge competitors more
Lowers prices to force other companies out of business-then raised prices
Low pay for workers
Sabotaged competitors
Paid government officials in the Senate
Owned almost 90% of US oil industry in 1890
Justifications for Extreme Wealth
Social Darwinism
Herbert Spencer
Based on Charles Darwin’s theory of evolution
Those who are rich are more fit, than those who are poor
Attempted to use science to explain social classes
Gospel of Wealth
Andrew Carnegie
God gave wealth to the most capable people
It is the duty of the wealthy to give money to help the poor
Carnegie gave millions of dollars away to establish libraries, colleges, and museums
Social Darwinism Defined
Social Darwinism is the (mis)application of and (over) extension of Darwin’s theory to explain human society.
Social Darwinism uses Darwinian ideas like “evolution”, “fitness”, “struggle for survival” to “explain” and “justify” human inequalities in wealth and power. Holds that human society, like nature, is involved in a constant “struggle for survival” between individuals in society.
The individuals may be businessmen competing (“struggling”) against other business men for profits and economic “survival”or may also be individual workers seeking to “survive” by competing (“struggling”) to get hired, earning wages, promotions, etc…
As in Darwin’s theory, the “struggle for survival” assures that only the “fit” survive (“survival of the fittest”)
Social Darwinists claim the continuous selection of fitter (human) individuals, drives “social evolution” and also claim that “social evolution” tends to benefit the overall “good” of the human race.
Social Darwinism & Social Policy
If “social evolution” is for the overall good of society, and if it is driven by continuing “struggle”, then:
nothing should be done to reduce the intensity of the “struggle for survival”.
Thus, laws or government policies benefiting the poor (“the unfit”) should be reduced or eliminated.
Social Darwinism fitted well into the already existing ideas of economic liberalism, laissez-faire and self-help.
Individuals are responsible for their own lives and should not look to anyone else to take care of any of their needs.
The publication of Origin of Species by Darwin in 1859 reinforced the same viewpoint and gave them a supposedly scientific basis.
Herbert Spencer
As on of the founders Spencer coined
the terms “survival of the fittest” and
“struggle for survival” even before
Darwin published Origin.
If they [all people] are sufficiently complete
to live, they do live and it is well they should
live. If they are not sufficiently complete,
they die, and it is well they should die.
- Herbert Spencer, Social Statics
Herbert Spencer (1820-1903)
William Graham Sumner
In the USA, William Graham Sumner (1840-1910), an admirer of Spencer, echoed the same views:
“The millionaires are a product of natural selection…”
Social Darwinism & Economic Liberalism
Spencer and Sumner were also supporters of economic liberalism. This idea dates back to Adam Smith (1723-1790) who argued in his famous Wealth of Nations (1776) against government regulations and monopolies typical of the pre-industrial era.
Adam Smith the intellectual father
of modern industrial capitalism.
Social Darwinism Laissez Faire/Self Help
Laissez-faire, like economic liberalism, opposed government interference in the economy (no taxes, laws and regulations).
Such measures would hinder individual freedom and economic competition, the engine of economic growth (and thus, supposedly, improved conditions for all).Seen as a kind of “self-help” and as such, was the best way to ensure the development of individual freedom and responsibility
Samuel Smiles, one of the most famous proponents of laissez-faire and “self-help”, put it this way in 1859:
'Whatever is done for men or classes, to a certain extent takes away the stimulus and necessity of doing for themselves; and where men are subjected to over-guidance and over-government, the inevitable tendency is to render them comparatively helpless.'
American experience not unique
Britain in the 19th century underwent the Industrial Revolution which transformed Britain from a rural, agricultural, land-based society to an urban, industrial society.
Wealth was now based on the ownership of capital (factories, production) and money rather than on land.
Most did not share in this growth of wealth
In the rapidly growing cities, slums developed where poverty, disease, filth, and oppression were a fact of daily life.
Early in the 19th century, no laws provided for maximum working hours, minimum wage, holidays, health and safety, unemployment or sickness insurance, pensions or child labor.
The Wealth Divide
Gustav Dore “Slum Neigbourhood” (1872)
Child labour during the Industrial Revolution
The Wealth Divide
Punch magazine cartoon
“Capital and Labor”
Business: Its purpose/goal
The purpose of business is to make me money, and increase stockholder value
(Milton Friedman)
A person’s a person, no matter how small!
Horton Hears a Who!
Dr. Seuss helps us care about others.
The Credit Union Movement
Roots are in the cooperative movement
Organized in Rochdale, England in 1844
Goal: Service to members
The credit union idea caught on in Canada in 1901
The United States followed in 1908
Credit Unions
Financial co-operatives, member owned, member operated
Members pool their assets to provide loan funds and other financial services
Not a bank
Not driven by profit
Exist to improve the quality of life for the benefit of their members
Profits returned to members via lower loan rates and higher dividends.
Unpaid volunteers from the membership
Democratic – one member, one vote
Origins of Credit Union Movement
Roots are in the cooperative movement
Goal: Service to members
A group of weavers in Rochdale, England established the Rochdale Society of Equitable Pioneers in 1844.
They sold shares to members to raise capital to buy goods at lower than retail prices, and then they sold the goods at a savings to members.
The credit union idea caught on in Canada in 1901
The United States followed in 1908
All that remains today of the original Toad Lane in
Rochdale---now a conservation area with the original
Rochdale Pioneers' store as a museum.
Hermann Schulze-Delitzsch(Shoolts’-eh-Day’-litch)
Founded the first credit society in 1850 in Germany.
Spent the rest of his life organizing “people’s banks.”
Only nine years after launching his first credit cooperative, there were 183 people’s banks with 18,000 members in the German provinces of East Prussia and Saxony.
Hermann Schulze-Delitzsch
(1808-1883)
Friedrich W. Raiffeisen(Rt’-ft-sen)
Considered the “father of the credit union movement.”
In 1846 organized the Heddesdorf CU in Germany.
Founded rural cooperatives (loan societies) to aid poor farmers.
Organized the first central banking association to meet the liquidity needs of member credit societies.
Formed 425 credit societies.
Said ‘charity does not offer real long term solutions to the economic problems of the poor. Self Help and Unity is the answer’ (1818-1888)
Alphonse Desjardins(Day-zhar-dan’) A reporter outraged by testimony
about lending money with high interest rates.
Operated the first financial cooperative in Canada out of his home.
First deposit was 10 cents, but within six years, the credit union made loans totaling $200,000 without losing a penny.
He continued to organize many credit unions in Canada. By 1914, there were 150 cooperatives.
Said ‘let it never be forgotten that credit unions are an association of people not of dollars’
•Desjardins house and first
Canadian Credit Union.
•Third time ever a Canadian
10-cent coin commemorates a
significant historic event.
Alphonse Desjardins
(1854-1920)
Edward A. Filene
• While traveling in 1907, he discovered financial cooperatives operating in small villages in India.
• Provided the vision and financial support that made the growth of credit unions possible in the United States.
• Personally contributed more than $1 million
Edward A.
Filene
(1860-1937)
The First Irish Credit Unions
Dun Laoighaire Credit Union was Irelands first Credit Union founded in 1957.
Next was Cumann Muintir Dun Oir in 1958
Third Credit Union was in Clones Co Monaghan in December 1959
January 1960 the first vocational Credit Union established in Dublin The Civil Service Credit Union
Next was Munster with Ballyphenane Credit Union July 1960.
Six forward thinking individuals one been John Hume sought a source of reasonable credit for ordinary Derry citizens.
Discovered the fledgling Irish Credit Union movement and the well established international movement.
These six individuals pooled their savings of eight pounds ten shillings and in October 1960 formally established Derry Credit Union the first in Northern Ireland.
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Credit unions worldwide
117 Countries
6 Continents
89,000 Credit Unions
$1.69 Trillion in Savings
$1.50 Trillion in Loans
$2.115 Trillion in Assets
260 Million Members
9.09% Penetration
Business: Its purpose/goal
The purpose of business is to make me money, and increase stockholder value
(Milton Friedman)
Origins of Life Assurance
Ancient Rome had ‘Burial Clubs’ to cover funeral expenses and assist survivors financially
John Graunt first mortality table 1661 showing within his parish 70 born 58 died
Small local provident fund set up by Rev Assheton with premiums based on Graunt’s findings
It soon failed as it had not charged enough, an auspicious start
The Royal Exchange & The London Insurance Companies granted a Royal Charter early 18th century but a slow development and The London issued only 509 policies between 1737 and 1770
1774 Gambling Act introduced two of the foundations of life assurance i.e Insurable Interest and that your insurable interest is limited to the amount you can lose.
Origins of Life Assurance
Dr Richard Price studied mortality rates in Northampton from 1735-1780 and calculated the risk of death at each age by simply totalling the number of deaths above that age. The Northampton Table
Equitable Life founded in 1762 with William Morgan its Actuary (Dr Prices nephew)
Using his Uncles table he produced the worlds first schedule of life assurance premiums the Northampton table. But it contained no population statistics and as population was steadily increasing it was mathematically flawed with too high mortality rates
Result been premiums higher than needed, less death claims than anticipated and Equitable awash with cash
New entrants Eagle Star 1807, Norwich Union 1808, Scottish Widows 1815, Clerical Medical 1824, Standard Life 1825, Scottish Amicable 1826
Origins of Life Assurance
Northampton table contained no population statistics and as population was steadily increasing it was mathematically flawed with too high mortality rates
Result been premiums higher than needed, less death claims than anticipated and Equitable awash with cash
New entrants Eagle Star 1807, Norwich Union 1808, Scottish Widows 1815, Clerical Medical 1824, Standard Life 1825, Scottish Amicable 1826
In 1799 first regular bonus from surplus made by Equitable Life.
In the US Presbyterian Synods in Philadelphia and New York created the Corporation for the ‘relief of poor and distressed widows and children of Presbyterian members in 1759. Episcopalian Priests followed suit in 1769.
1787-1837 over two dozen life insurance companies founded.
1870’s Army and Navy Officers founded AAFMAA & Navy Mutual Association to look after widows and orphans (Battle of Little Big Horn).
The Difference It Makes
‘if I had my own way I would write the word insure on the door of every cottage and
upon the blotting pad of every public man because I am convinced that by
sacrifices which are inconceivably small, which are within the power of the
poorest man in regular work, families can be secured against catastrophes which
otherwise would smash them up forever’
Winston Churchill
Has to be sold
Doing something costs something. Doing nothing costs something. Sometimes doing nothing costs more than doing something.
Ben Feldman, CLU
If you buy term life insurance and never die, maybe you will have made a little mistake. If you don’t buy life insurance and you do die, you will have made a big mistake. Which would you rather make: a little mistake or a big mistake?
It doesn’t matter what the odds of death are. When you die, the odds are 100%.
The premium is not the problem. It is the solution to the problem. The premium is minimal compared to the problem. If you can’t afford the premium, how will your family be able to afford the problem?
The more you are worth, the more you and your family stand to lose. The less you are worth, the less you can afford to lose.
The Difference We Make
By way of illustration two companies in Ireland in 2017 paid out between them almost €300M in protection claims to almost 11,000 claimants.
There are of course other providers.
Behind every claim is a personal story.
2017 1 in 2 adults covered in Ireland, 1.3 M no cover, 3 in 10 parents no cover.
Those who have cover in the majority of cases it had to be sold.
Approx 50% private pension coverage.
These to had to be sold
We as an industry always did and continue to make a tangible difference to the lives of the citizens of this country.
This is a noble profession
Purpose of Professional Codes
Professional codes of ethics are often designed to motivate members of an association to behave in certain ways.
Four primary functions of codes are to:
inspire
guide
educate
discipline the members.
A Code of Ethics
What should it look like?
What should it cover?
How can it be enforced?
What should it look like?
Plenty of sources for inspiration
FCA
FPA
CFP
Professional Bodies
Ourselves
Any Code is only a guide
Should not restrict or replace the matured judgement of Employees in conducting their day to day business.
If in doubt who is point of contact?
Sanctions required.
Driven by example.
Warren Buffet’s rule of thumb for ethical conduct
“…I want employees to ask themselves (when they are in doubt about whether a particular conduct is ethical or not) whether they are willing to have any contemplated act appear the next day on the front page of their local paper – to be read by their spouses, children and friends – with the reporting done by an informed and critical reporter.” [Berkshire Hathaway’s code of ethics]
Potential issues with Ethical Codes
Ethics is basically an "open-ended, reflective, and critical intellectual activity."
Codes introduce confusions with respect to micro-ethics vs. macro-ethics.
By giving codes a disciplinary function does that make them more like legal than ethical rules?
Need to distinguish between
Codes of ethics; which are "aspirational," because they often serve as mission statements for the profession and thus can provide vision and objectives.
Codes of conduct; which are oriented more toward the professional and the professional's attitude and behavior.
Codes of practice; which relate to operational activities within a profession.
Strengths and Weaknesses of Professional Codes
Codes inspire the members of a profession to behave ethically.
Directives included in many codes tend to be too general and too vague.
Codes guide the members of a profession in ethical choices.
Codes are not always helpful when two or more directives conflict.
Codes educate the members of a profession about their professional obligations.
A professional code’s directives are never complete or exhaustive.
Codes discipline members when they violate one or more of the code’s directives.
Codes are ineffective (have no “teeth”) in disciplinary matters.
Codes “sensitize” members of a profession to ethical issues and alert them to ethical aspects they otherwise might overlook.
Codes do not help us distinguish between micro-ethics issues and macro-ethics issues.
Codes inform the public about the nature and roles of the profession.
Directives in codes are sometimes inconsistent with one another.
Codes enhance the profession in the eyes of the public.
Codes can be self-serving for the profession.
Strengths Weaknesses
Behavioural Economics
Behavioural Economics
Why people behave
Predictable and persistent mistakes
Decisions are often intuitive and automatic rather than controlled and deliberitive
Behavioural biases
Not acting rationally
FCA 10 papers since 2013
The Law Case 2015
Andrew & Joanna Law invested €800K in 2007, encashed Oct 2010 €192K loss.
Went to FSO and lost then appealed to High Court Ms Justice Marie Baker 2015.
Held FSO ‘incorrect’ that ultimate issues were the FSP’s procedures & regulatory requirements.
FSO attached great weight to signed declarations that ‘carefully considered and discussed’ their investment requirements.
HC however held signature ‘one factor’ FSO gave it ‘unjustifiable weight’.
FSO looked for ‘objective evidence’ that product missold.
Held not appropriate as matter related to the actual and subjective state of the Law’s understanding & whether actual information given was sufficient for their ‘subjective understanding’
Awarded €192K
Almost the Conclusion…
The Butcher
Selling the last chicken
Customer asks have you anything larger
Returns with chicken to rear of shop
Returns momentarily with same chicken
Chickens metaphorically and literally come home to roost
Customer says I’ll have both
Author Unknown:
“My goal in life is to be
as good of a person
as my dog already thinks I am.”
FCA website (Viewed 03/11/2-03)
FCA: BUSINESS PRINCIPLES‘where morals do not act as a deterrent then the law must step in. It has to make society’s
disapproval clear and give courage to speak out and make things change’ Tracy McDermott, FCA St
Paul’s Institute debate 11/04/2013, (St Pauls Institute/CCLA, 2013 P4)
1. INTEGRITY: We must conduct our business with integrity
2.DUE CARE, SKILL & DILIGENCE: We must conduct our business with due care skill and diligence.
3.RISK MANAGEMENT: We must take reasonable care to organise and control our affairs responsibly and effectively, with adequate risk management systems.
4. FINANCIAL RESOURCES: We must maintain adequate Financial resources.
5.STANDARDS:We must observe proper standards of market conduct.
6. TREATING CLIENTS FAIRLY: We must pay due regard to the interests of our clients and treat them fairly.
7.COMMUNICATION: We must pay due regard to the information needs of our clients, and communicate information to them in a way which is clear, fair and not misleading
8. CONFLICTS OF INTEREST: We must manage conflicts of interest fairly, both between ourself and our clients, and between one client and another.
9.SUITABILITY: We must take reasonable care to ensure the suitability of our advice and discretionary decisions for any client who is entitled to rely upon our judgment.
10. PROTECTION: We must arrange adequate protection for clients assets when we are responsible for them.
11. CONDUCT: We must deal with our regulators in an open and cooperative way, and must tell the FCA promptly anything relating to the firm of which the FCA would reasonably expect prompt notice
FPA of Australia
Three layers of professional regulation
Code of Ethics which outlines the ethical principles for the profession
Practice Standards which describe expectations of practice for FPA members
The Rules of Professional Conduct (‘the rules’) which establish detailed obligations attaching to FPA professional membership
Code of Ethics headings FPA
Client First
Integrity
Objectivity
Fairness
Professionalism
Competence
Confidentiality
Diligence
Practice standards FPA
The practice standards describe expectations of practice for FPA members. 7 practice standards broken down under various headings and underpinned by rules.
Engagement(9)
Collect client information(3)
Analyse and assess client financial status(3)
Develop suitable strategies/recommendations(12)
Implement recommendations(6)
Review and re-evaluate(7)
professional obligations on practitioners.(37)
Rules professional conduct FPA
Engagement broken down as follows 3 headings which are supported by 9 rules
Inform the client about financial planning and the members professional competencies
Determine whether the member can meet the clients needs
Define the scope of the engagement which includes services to be included/excluded, remuneration, client responsibilities, provision for terminating the client engagement
Rules professional conduct FPA
Professional obligations broken down under 3 headings supported by 37 rules
Members conduct themselves in a professional and ethical manner
Members influence others to conduct themselves in a professional and ethical manner
Members present and promote their services fairly and honestly
CFP Board & Code of Ethics
Comprised of 7 Principles and attaching Rules
Integrity (3)
Objectivity (2)
Competence (2)
Fairness (9)
Confidentiality (3)
Professionalism (12)
Diligence (5)
