An Overview of Ethics

It is important to examine the ethical considerations involved in finance. You will want to be able to differentiate between ethics and morals. Why is it essential for individuals working in the financial sector to keep organizational, professional, and personal ethical behavior front-and-center?

Ethics Training

Moral reasoning is the process in which an individual tries to determine what is right and what is wrong.


Learning Objective

  • Explain the role of ethical/moral reasoning in the business environment

  • Apply the moral skill set to the way in which moral business decisions should be derived


Key Points

  • There are four components of moral behavior: moral sensitivity, moral judgment, moral motivation, and moral character.
  • To make moral assessments, one must first know what an action is intended to accomplish and what its possible consequences will be on others.
  • Studies have uncovered four skill sets that play a decisive role in the exercise of moral expertise: moral imagination, moral creativity, reasonableness, and perseverance.


TERMS

  • goodwill

    The ability of an individual or business to exert influence within a community, club, market, or another type of group, without having to resort to the use of an asset (such as money or property).

  • ethics

    The study of principles relating to right and wrong conduct.

Moral reasoning is the process in which an individual tries to determine the difference between what is right and what is wrong in a personal situation by using logic. To make such an assessment, one must first know what an action is intended to accomplish and what its possible consequences will be on others. People use moral reasoning in an attempt to do the right thing. People are frequently faced with moral choices, such as whether to lie to avoid hurting someone's feelings, or whether to take an action that will benefit some while harming others. Such judgments are made by considering the objective and the likely consequences of an action. Moral reasoning is the consideration of the factors relevant to making these types of assessments.

According to consultant Lynn W. Swaner, moral behavior has four components:

  • Moral sensitivity, which is "the ability to see an ethical dilemma, including how our actions will affect others".
  • Moral judgment, which is "the ability to reason correctly about what 'ought' to be done in a specific situation".
  • Moral motivation, which is "a personal commitment to moral action, accepting responsibility for the outcome".
  • Moral character, which is a "courageous persistence in spite of fatigue or temptations to take the easy way out".

The ability to think through moral issues and dilemmas, then, requires an awareness of a set of moral and ethical values; the capacity to think objectively and rationally about what may be an emotional issue; the willingness to take a stand for what is right, even in the face of opposition; and the fortitude and resilience to maintain one's ethical and moral standards.

Realizing good conduct, being an effective moral agent, and bringing values into one's work, all require skills in addition to a moral inclination. Studies have uncovered four skill sets that play a decisive role in the exercise of moral expertise.

  • Moral imagination: The ability to see the situation through the eyes of others. Moral imagination achieves a balance between becoming lost in the perspectives of others and failing to leave one's own perspective. Adam Smith terms this balance "proportionality", which we can achieve in empathy.
  • Moral creativity: Moral creativity is closely related to moral imagination, but it centers on the ability to frame a situation in different ways.
  • Reasonableness: Reasonableness balances openness to the views of others with a commitment to moral values and other important goals. That is, a reasonable person is open, but not to the extent where he is willing to believe just anything and/or fails to keep fundamental commitments.
  • Perseverance: Perseverance is the ability to decide on a moral plan of action and then to adapt to any barriers that arise in order to continue working toward that goal.

 

Example

William LeMesseur designed the Citicorp Building in New York. When a student identified a critical design flaw in the building during a routine class exercise, LeMesseur responded not by shooting the messenger but by developing an intricate and effective plan for correcting the problem before it resulted in drastic real-world consequences.