7 Oct 2011

The Cass MBA Perspective: Ethics

At Cass, like many other business schools, we have been re-examining our approach to ethics and the role we play in promoting responsible business practice. Since the financial crisis, these issues have rightly taken on a renewed importance in the City and among students who are increasingly concerned about how corporations affect local communities, the lives of their workers and the wider environments they operate in.

In response to this changing mood, Cass appointed Professor Paul Palmer to lead an Ethics Sustainability and Engagement initiative with a brief to review the way we teach ethics and how it is reflected in the content of our curriculum. Since his appointment in 2010, Cass has designed an ethics awareness programme, rolling out a series of workshops on ethics for both professional and academic staff. 

This ambitious and far-reaching review is designed to ensure ethical issues are reflected in the curriculum of our graduate and postgraduate courses. The staff workshops, which will be completed by 2012, involve asking what, if any, are the ethical issues relating to each of our teaching fields and how can we ensure they are represented sufficiently in the course content. Our aim is not to teach ethics – but to equip students with the skills they need to make critical judgements. This means looking at decisions not only in the context of what is most efficient or profitable in the short-term, but also what is right for the long-term.

Companies want talented people but they also want people with good ethics. By ensuring this critical subject is embedded in everything we teach, we aim to develop successful and responsible business leaders who understand their obligations to employers, customers and shareholders, as well as society at large.

Richard Gillingwater
Dean of Cass Business School

Ethics in business? Get real

Ethical standards may at last be rising in the business world, but helping MBA students understand their significance can still be a challenge. As Professor Paul Palmer explains, it means remaining firmly rooted in reality.

In 2007, I gave a lecture to MBA students on irresponsible bank lending. I’d been researching the idea of creating an ethical code for selling financial products, and thought it was important to share my findings with tomorrow’s business leaders. With hindsight, most people today would say that was a timely topic for discussion – but back then, it provoked a barrage of criticism from my audience. Ironically, they accused me of not living in the real world.

Of course, that was before the financial crisis began to unfold, so I didn’t mind the criticism too much. But even now, after we’ve seen so much proof of the trouble a lack of ethics can get us into, I still find myself having to justify why ethical decision-making is important. Talk about strategy or finance, and students are generally enthusiastic. But when it comes to discussing responsibility or sustainability, I have to provoke interest by stressing how vital these issues are to today’s businesses.

Perhaps it’s because ethics sounds like a branch of philosophy – people expect it to be dry and academic. In fact, ethics is more about real-life, everyday judgements than any other part of an MBA programme, so I’m very happy to ‘keep it real’.

How do we do this? Well, business scandals continue to happen with unprecedented frequency, so examples are easy to come by. These can make lively role-play sessions, covering everything from bribery and blackmail to sexual and racial harassment. And we don’t look at these from a politically correct perspective – it’s about hard business decisions, where serious problems can be traced back to fundamental failures of judgement.

Increasingly, our guest speakers are keen to cover ethical topics, giving us yet more real-world examples. And we’ve recently made more of our City connections through a special project where students compete to work with eight leading city firms and organisations. Each successful participant gains direct, hands-on experience of a corporate responsibility issue, carrying out research on a topic of genuine value to the partner and completing a consultancy report.

This focus on the real world comes as a surprise to many students. Some are also surprised to find out how difficult this module is - Ethics is a tough, serious subject.

But my role is more than running this part of the course. As the Dean’s introduction to this eNewsletter says, with my team, I’m running a cross-school review of the ethical business content of all Cass courses – undergrad, postgrad and MBAs. We’ve now completed a pilot, and been encouraged by everyone’s willingness to reassess their areas from an ethical standpoint. As the project rolls out over the coming months, we hope to see its influence spread throughout the school – with possible new course designs and materials.

Most importantly, as ethics is so grounded in the real world, I hope the review will result in yet more practical elements in our teaching. As a business school, we know how to ‘get real’, and this project will make that focus even sharper.

The Only Way Is Ethics

“Predators are just interested in the fast buck, taking what they can out of the business…..It's about different ways of doing business, ways that the rules of our economy can favour or discourage.

Look at what a private equity firm did to the Southern Cross ….They may not have sold their own grandmothers for a fast buck. But they certainly sold yours. They aren't the values of British business.”

Ed Milliband, Labour Party Conference Speech 2011

In June 2011 my partner and I established Denstone Real Estate Advisors. We resolved that we did not want to work with people who did not share our values and we committed to donate 10% of all our profits to charities. This may cost us money, but it is how we want to do business.  If we did this 20 years ago, we would have been seen as radical, but for many of today’s business leaders, the move to integrate our values into our businesses is increasingly important.

Flashback to mid-1990s when we were looking at possible careers. It was clear that those in business made money, whilst those who looked at the charitable sector for a career were tree-huggers and do-gooders.

Indeed, there was a real perception that the majority of all those going through business and management degrees were the type who had pin-stripe suits, mobile phones and a photo of Margaret Thatcher on the wall. Those who chased the MBA designation were the real city slickers, the Gordon Gekko, super-focused type, who from the age of 18 were determined to make partner in their bank, consultancy firm or law firm and destroy all in their path.

As a current MBA and looking back from 2011 with clear hindsight, one of the real achievements of the 90s and 00s is seeing how many people with strong social and ethical responsibilities entered the business world.

In understanding why this shift took place, look back to the 80s. The paradigms of left and right were simple, definable and understood. Today we look at the globalised 21st Century and we have moved full circle, as western nations overtly court Communist China and the prevalent political philosophy can be described as liberal pluralism, where there is no right answer to all problems. How morality is viewed in the global business economy is no different than in all other all aspects of life; it is highly individual.

Look at Fortune 500 companies and we see cases when businesses transcend their core purpose and seek to address global problems as an acknowledgement of their moral obligations. There is evidence of localised programs benefitting workforces in developing countries, where software publishers seek the eradication of disease and mining companies are the regional experts in building hospitals. Closer to home in the UK, we see projects launched to reinvest in the local communities or to develop a sustainability agenda. There are also businesses that contribute nothing tangible, many of whom are household names.

In addition to keeping Mr Miliband happy, the PR people tell companies that engaging with wider society is increasingly good for business. This is seen in the case of Fairtrade, ethical banking and carbon offsetting, proving that an ethical differentiator is a key marketing and sales attribute, and that values based promotion, which generates an emotional response, is the holy grail of marketing.

However, before we declare this the age of “cuddly capitalism”, or commend the UK for being at the forefront of “ethical entrepreneurship”, after 18 months of my MBA I remain a cynic of much of the movement towards corporate ethics.

This year, I was introduced to a new development in ethics and morality, the “off the shelf ethical packages” sold by consultancies like PWC. Yes, for a small fee (actually, probably a large fee) you too can have your very own corporate and social policy, with sound environmental credentials, carbon offsetting, anti-discrimination policies and a full progressive platform to make the most left-wing Labour leader think you should be awarded with that hard-earned peerage.

I spent some time working with an unnamed company earlier this year, which are classic asset strippers, vulture investors and market manipulators. But they take great pride in sponsoring schools and have fantastic community engagement and youth empowerment programmes. I do not doubt that the intentions of the charitable staff are genuine, nor are there any questions of the morals of the principal benefactor, but seeing the company operate from close quarters, their attitude towards business contains zero ethics or morals; as the CEO would say, business is business, charity is charity.

When Ed Miliband cites the “values” of British business, I am not sure what he means. British business exists in a pluralistic market, which the capitalist framework favours, within which businesses should be allowed to operate how they want. For some, the only purpose of entering business is to obtain maximum profit on investment and the ends justify the means. Is this un-British? Is buying in an ethical package to appease shareholders, the British way? Or is the patrician approach, demonstrated by the Lever Brother in Port Sunlight and Robert Owen in New Lanark, more like Milibands’s British way?

I strongly believe that businesses don’t have ethics, people do.

Ethics and morality are personal issues; the values with we choose to lead our life and decisions we make are ours alone. We live in a society where the individual is free to take a job, form a career, and consume as he sees fit. In my own circle, I see personal and business value alignment as being more pronounced than ever and it is routine to see people not applying for jobs or with companies where there is not a value-fit, even in these trying times.

If businesses want to cultivate an ethical core, they must alter their organisational culture, they must recruit away from “the usual subjects” and look outside the box to integrate good practices.

But not all businesses want to. If they are contributing to the economy, paying their taxes and are happy the way that they are, why should they change?

The proposal to use the state to formalise the alignment between business and morality by using the carrot of peerages and with the force of government as the stick, is ill conceived, and will not lead to better people in business, rather, it will lead to the proliferation of suppliers selling “morality out of a box” rather than better business ethics. 

For me, the only way is ethics. If you want to understand the values of a business, look at the people, not just the policies. We developed Denstone because of who we are and how we want our business to be run. In business, like life, I will not impose my beliefs on others- but if I don’t like them, I just won’t work with them!

Oliver Lovat is a current Executive MBA Student, Chartered Surveyor and Partner of Denstone Real Estate Advisors. He began his career working in the Third Sector as Policy Director of the Stone Ashdown Trust, before moving to real estate investment in 2001.

Business ethics in action

Edouard Larpin, Cass Business School alumni and Management Consultant at Ernst & Young, tells us about Cass Ethics, and why he set up the series of video interviews for Cass Knowledge.

Sub-prime mortgages. Bankers’ bonuses. Executive pay. Recent events in the business world have moved the subject of ethics up the corporate agenda. Back in January 2010, when the economic crisis was really hitting home, the papers were full of bad ethical practices. Like many people, I felt really disgusted by these excesses of capitalism.

I remember seeing Roger Steare’s lecture about business ethics. It really inspired me, and a few weeks later Roger kindly agreed to let me interview him about CSR in HR for a class project. This gave me the idea of doing a regular video series on ethics in business.

Cass Ethics is published every two weeks and in each episode I interview a leading academic or practitioner. The focus is on applying ethics to real life business situations. In other words, finding the balance between maximising profit and minimising negative impacts on the wider society.

As well as providing practical advice for managers and professionals, Cass Ethics should be of real interest to Cass students, alumni and other academics. Interviews so far have touched on Business Education, Marketing, Entrepreneurship, Business Ethics tools, life in the City, what we can learn from religion, and ethics in the insurance world. To date, these interviews have been watched nearly 10,500 times.

In upcoming posts (the last two in the series), I’ll publish part two of my interview with controversial ‘City Boy’ author Geraint Anderson, and meet Peter Hahn, now a lecturer in Finance at Cass and previous MD of CitiGroup. To watch these and other interviews, visit Cass Ethics at here

Though I graduated last May, I’ve been asked to consult on the next series, which will have more of a student focus. If you’re interested in taking over the reins, please email me on edouard@larpin.com

Is morality in business a contradiction in terms?

Morality in business is anything but an oxymoron. With the growth of international business and globalism, morality is today not only an international social requirement but a competitive advantage.

While business morality has been all but forgotten in recent decades, contemporary events such as the exponential growth in industrial pollution, the rise of consumerism and the popular reaction to increasing numbers of scandals and corruptions have returned it to the forefront of people’s minds. Modern managers must contemplate the moral implications of business. Morality shall provide the trust necessary for successful transactions and the glue that holds business together.

Firms must be profitable in order to survive, but absolute maximization of profit is not conducive to the type of long-term relationships that create true wealth for individuals, businesses, and economies. In a world where consumers see their purchases as votes for a better world, moral management provides a competitive edge. Additionally, moral management benefits both internal and external customers: Happy employees provide better service and they are motivated to improve the business.

Morality implies a certain value system. It presumes a correct way of doing things, which can vary from person to person. Morality is rooted in religious faith with beliefs and values serving as guiding principles. Ethics, often intended as a synonymous, are more neutral, conscious agreements between people or institutions.

All business decisions have moral implications that have to be considered. Business is personal because it directly affects us: Our lives and our futures. It is also personal because each one of us can use it to choose the sort of world we want to be part of. Google’s informal motto, Don’t Be Evil, is a clear moral stance, even if it was easily forgotten in its last attempt to enter the Chinese market. It is no longer good enough to think “business is just business”. There are ramifications for every dollar we earn and spend, and each of us is accountable.

In an international environment customs and values vary from country to country, from one region of the world to another, and from one religion to another; however, the basic moral rules apply everywhere, despite differences in local customs. As an example, the United Nations Universal Declaration of Human Rights has been ratified by almost every country on earth, and it is used as a standard both by companies and by their critics.

Business as an institution is amoral and, like any other institution, is an artefact rather than a natural person: personae fictae, the Romans called them. Nevertheless, a company is comprised of actual people, and the corporation shall be treated as an entity capable of reason and judgment. A company is a legal construct; it is the people in it that determine whether the business is behaving morally or not.

Key players are the chairman and CEO. They set the tone for the company. The mystical body of business is guided not by a visible head but many leaders and chief executive officers. They are the responsible people in business. Each manager is responsible of the shareholders. While a manager must act in accordance with the law, he/she may go beyond the requirements of the law in order to follow his or her own moral values. And moral law is much easier to find and digest, because it resides in each of us.

The subordinates in the corporation tend to obey the rules and inertia of the bureaucracy, and here it comes once more the responsibility of the manager to act morally. Again, it is the human being, the manager, and not the construct, the corporation, who is the judging agent. Moral people are necessary, even if they are not enough. Ethical structures and enforced legislation are also necessary not only to enable business to develop, but to protect workers, consumers and the environment.

Multinationals shall also consider the impact of their actions on the local scene. They must observe the natural right of other individuals, honour contracts, and avoid fraud and coercion, but also honour representations made to the local community and contemplate the most likely consequences to their actions. Nowhere is written that business comes without responsibility.

Business morality as a field is expanding internationally. Many have come to see that good ethics frequently means good business. Any multinational interested in its own long range reputation and future development and profit should adopt this model.

Morality, of course, involves a cost. This cost may be in money, effort, risk or income forfeited. However, it would be strange indeed if we recognised that all income has to be bought, but the most precious product, morality, to be costless when, in fact, it is a priceless treasure.

Throughout the process of writing this, I am pondering why we entertained a dichotomy between morality-business for so long. Perhaps we did it because we tended to see morality only as a matter of religious belief and therefore outside the bounds of normal business discourse. From a pure profit perspective, maybe we could not see any economic benefits of it. Whether it is one of these, a combination of the two, or some other factor, I am reminded of a quote from Stefan Engeseth, “Just as you choose to be the person you are in life, you can choose how your business acts.” We have the power to decide: Will our business choose to be good or bad?

Emiliano Lazzaro, Dubai EMBA student, has grown an international banking experience for 10+ years in Europe and GCC. He specialised in debt capital markets, distressed asset management and Islamic finance with Blue Chip investment banks including Morgan Stanley, Goldman Sachs, Lehman Brothers and Citi.

Join the debate!

Mars has announced Maltesers are to become “Fairtrade”, providing $1 million in annual Fairtrade premium funds for cocoa farmers. However with this launch coinciding with the product’s 75th anniversary, could this be a marketing move instead of genuine CSR?

Leave your comments below...


Cass Business School Dubai welcomes fifth Executive MBA class

Dubai, UAE, September 25, 2011: Cass Business School Dubai today welcomed the fifth intake of its Executive MBA (EMBA) programme, ranked the 10th best in the world by the Financial Times. The class of 2011-13, comprising 61 students from 24 countries, will study at the Cass Dubai Centre in DIFC.

This year’s EMBA programme began with a four day induction at the Cass Dubai Centre in DIFC, including an introduction to the faculty, the unique Cass virtual learning environment, Moodle, team building and professional development workshops and a social reception hosted by the school at the Capital Club. The students also enjoyed a formal welcome to the course in the presence of DIFC Management and Guy Warrington, HM Consul General.

Abdulla Mohammed Al Awar, CEO of DIFC Authority, said: “We would like to welcome Cass’s fifth intake of its EMBA programme. As part of its mandate to contribute to the development and growth of the financial sector in the region and to UAE’s economy, DIFC supports educational programmes that help in the creation of knowledgeable, experienced and talented professionals. The Cass programme indeed complements this mandate. We look forward to congratulating the new intake on their successful completion of the programme to having their eventual contribution to the growth of the regional financial services industry”.

Professor Roy Batchelor, Associate Dean MBA programmes at Cass, said: “On behalf of everyone at Cass Business School, I welcome the 2011-2013 cohort of students to the Dubai Executive MBA. The group can look forward to two years of world-class business education, delivered by internationally recognised academics, and the opportunity to build their international network of business contacts. With a wide choice of electives, students can tailor the content of the programme, meaning the course will take them wherever they want to go in their career.”
Ehsan Razavizadeh, Regional Director for Middle-East and North Africa said: "In just five years, the Cass EMBA programme has earned an enviable reputation in the UAE and across the region. This reputation is once again reflected in the hugely impressive educational and professional backgrounds of our student intake.  Many of our alumni are already taking major strides in the professional world, and I am confident this year’s class will join them and become the region’s next generation of business leaders.” 


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Cass and Hawkamah partner in Dubai

Cass Business School has signed a Memorandum of Understanding (MoU) with Hawkamah, the Institute for Corporate Governance in Dubai.
The agreement was signed during a ceremony at the Dubai International Financial Centre by Hawkamah Executive Director, Dr. Nasser Saidi, and Cass Regional Director MENA region, Ehsan Razavizadeh.
Cass and Hawkamah will collaborate to raise awareness of corporate governance through the joint hosting of workshops, seminars and networking events. The two organisations will also conduct research into corporate governance in the Middle East, with Hawkamah supporting the work of Cass students with, for example, their dissertations.
According to research by Hawkamah, 56% of the region's listed companies and banks are in emerging or under developed corporate governance practice. However, most of the region's capital market regulators and central banks have issued corporate governance codes, regulations and frameworks that need to be implemented by these companies.
Dr. Saidi said: "Clearly, there is a lot more work that needs to be done that focuses on corporate governance implementation. As a think-and-do-tank devoted to bridging the corporate governance gaps in the Middle East and North Africa region, we are delighted to formalise our partnership with Cass Business School through this MoU. In the past few years, we have been working with Cass professors and their students to bring more focus to corporate governance research on the region, a much needed endeavour in order to further identify current practices and develop policy and practical solutions to push better corporate governance practices. We look forward to further collaborations and engagement with Cass Business School, and are excited about the prospects of our partnership."
Razavizadeh said: "Thanks in great part to the work of Hawkamah, corporate governance in the Middle East has come into sharp focus over recent years. As such, it has become an imperative to ensure business leaders in the Middle East are equipped with the skills and knowledge to implement corporate governance best practice. Aligning our expertise with that of Hawkamah means we will be able to offer students the most comprehensive grounding in corporate governance available anywhere in the region."
Cass Business School and Hawkamah have a longstanding working relationship. Three students from the first Cass Business School Executive MBA programme in 2007 conducted their Business Mastery Project in collaboration with Hawkamah. The project focused on analysing and corroborating the corporate governance practices of Islamic banks and financial institutions, with the research findings providing an important pillar of Hawkamah's Policy Brief on Corporate Governance for Islamic Banks.


Dubai - Guest Speaking events at the Capital Club

The Capital Club and Cass Business School presented a number guest speakers on a variety of topics in the last couple of months. These topics covered insider trading, business models and lessons from the financial crisis, allowing the audience to have an in-depth discussion on current topics of the business world.

14/09/11 Insider Trading: Should the regulators legalise insider trading?

Based on extensive research on the topic, Professor Lasfer lead a debate on Insider trading
considering the importance of insider trading in increasing market efficiency, whilst trying to maintain
and protect the interest of outside/minority shareholders' interests.

26/09/11 What business models do we need for success and how do we get there?

In this evening debate Charles Baden-Fuller explored what the threats are to the current business models: in terms of the way companies need to think about value creation and value capture. And he looked at the challenges to managing business model adoption, and critically, the role of top management and the board of directors in setting the right agenda.

10/10/11 Investment Lessons from the Financial Crisis…
with Steve Thomas

With the crisis entering a new phase and the global economy facing a possible double-dip, why are policymakers so helpless and why has macroeconomics and finance theory been shown to be so lacking in credible solutions? And are there investment strategies which can secure reasonable returns despite the ultra-volatile market environment?

Cass Talks

Dr Sionade Robinson discusses MBA induction