PROJECT REPORT ON ―A STUDY ON ETHICS IN FINANCE AND SOCIETY‖ BY: MR. ANAND.K. REG NO: C002BB2325AG0AB M B A 4THTRISEM GEMS B SCHOOL MYSORE SUBMITTED TO SOUTH ASIA UNIVERSITY UNDER THE GUIDENCE OF BEEMESH (FACULTY) Certificate This is to certify that the Project work ―Study on Ethics in finance and society‖ is submitted to the college by the Candidate Mr ANAND K bearing RegNOC002BB2325AG0AB. is the product Of bonafide project carried out by the candidate under my supervision in business ethics. (GUIDE ) Beemesh, Professor of business ethics Great Eastern Management School Mysore. ABSTRACT The social characteristics of 809 couples attending a sex preselection clinic have been studied. Their ethnic origins were: Indian 57.8%, European 32.0%, Chinese 3.6% and others 6.8%. The average number of boys and girls per family was 0.09 and 2.70 respectively for couples wanting a boy, and 2.46 and 0.14 for those wanting a girl. The average age of the wives was 34.0 years. These figures were not significantly different in any ethnic subgroup. Out of all the couples, 80.6% stated that they would have had another baby even had sex preselection not been on offer; 37.5% of the couples interviewed have been treated so far. The figures among those treated are substantially the same as those for the whole group. Asian and Middle Eastern couples overwhelmingly wanted boys, whereas European couples showed a slight preference for girls. These results suggest that, given certain guidelines, sex selection is unlikely to lead to a serious distortion of the sex ratio in Britain and other Western societies, but may need careful monitoring in other parts of the world The ―Ibercorp affair‖ was front-page news in Spain at various times between 1992 and 1995. In itself, there was nothing particularly new about it: a newly formed financial group engaged in legally and ethically reprehensible behaviour that eventually came to light in the media, ruining the company (and the careers of those involved). What aroused public interest at the time was the fact that it involved individuals connected with Spanish public and political life, the media and certain business circles. Above all, it demonstrated the personal, economic, social and political consequences of a business culture based on the pursuit of easy profits at any price (what came to be known as the cultura del pelotazo or ―get rich quick culture‖). Again, this is all too familiar in business ethics. But it served to goad Spanish society into a rejection of such behaviour. This article describes the facts and their ethical implications. Why are ethics important? Recent events in corporate America have demonstrated the destructive effects that occur when the leadership of a company does not behave ethically. One might wonder why highly educated, successful, and business savvy corporate professionals at Enron, Tyco, WorldCom, and Adelphia got themselves into such a big mess. The answer lies in a profound lack of ethics. Running a business ethically is good for business. However, "business ethics" if properly interpreted means the standards of conduct of individual business people, not necessarily the standards of business as a whole. Business leader are expected to run their business as profitably as they can. A successful and profitable business in itself can be a tremendous contributor toward the common good of society. But if business leaders or department managers spend their time worrying about ―doing good‖ for society, they will divert attention from their real objective which is profitability and running an efficient and effective organization. Applying ethics in business makes good sense. A business that behaves ethically induces other business associates to behave ethically as well. If a company (or a manager) exercises particular care in meeting all responsibilities to employees, customers and suppliers it usually is awarded with a high degree of loyalty, honesty, quality and productivity. For examples, employees who are treated ethically will more likely behave ethically themselves in dealing with customers and business associates. A supplier who refuses to exploit its advantage during a seller's market retains the loyalty and continued business of its customers when conditions change to those of a buyer's market. A company that refuses to discriminate against older or handicapped employees often discovers that they are fiercely loyal, hard working and productive. It is my firm belief that a ―good man or woman‖ who steadfastly tries to be ethical (i.e. to do the ―right thing", to make appropriate ethical decisions, etc.) somehow always overtakes his immoral or amoral counterpart in the long run. A plausible explanation of this view on ethical behavior is that when individuals operate with a sense of confidence regarding the ethical soundness of their position, their mind and energies are freed for maximum productivity and creativity. On the other hand, when practicing unethical behavior, the individual finds it necessary to engage in exhausting subterfuge, resulting in diminished effectiveness and reduced success. The best way to promote ethical behavior is by setting a good personal example. Teaching an employee ethics is not always effective. One can explain and define ethics to an adult, but understanding ethics does not necessarily result in behaving ethically. Personal values and ethical behavior is taught at an early age by parents and educators. I am quite certain that well-educated business professional like Kenneth Lay, Martha Stewart, Dennis Kozlowski or the former CEO of General Motors who received a multi-million dollar salary and bonus package in 1987 at a time when the company was closing plants and was laying off thousands of people know and understand ethics. They either were too far removed from the ―nitty gritty‖ that ethical standards did not resonate with them or they simply did not care. People at the top of an organization are expected to share the burden of cost reductions and belt- tightening during difficult times. Senior executives of companies who freeze their salaries or take a personal pay cut in a problematic year rather than lay off employees to cut costs deserve our utmost respect. However, this does not mean that a company should lose flexibility in adjusting its cost structure during bad economical times, replace old factories by new ones, or change technology in ways that would require fewer people to do the work. Decisions like that should be made with empathy and support (financially) to those who will be affected by it. Why Are Ethics Important? We have many premium term papers and essays on Why Are Ethics Important?. We also have a wide variety of research papers and book reports available to you for free. You can browse our collection of term papers or use our search engine. Why Are Ethics Important? Why are ethics important? Recent events in corporate America have demonstrated the destructive effects that occur when the leadership of a company does not behave ethically. One might wonder why highly educated, successful, and business savvy corporate professionals at Enron, Tyco, WorldCom, and Adelphia got themselves into such a big mess. The answer lies in a profound lack of ethics. Running a business ethically is good for business. However, "business ethics" if properly interpreted means the standards of conduct of individual business people, not necessarily the standards of business as a whole. Business leader are expected to run their business as profitably as they can. A successful and profitable business in itself can be a tremendous contributor toward the common good of society. But if business leaders or department managers spend their time worrying about ―doing good‖ for society, they will divert attention from their real objective which is profitability and running an efficient and effective organization. Applying ethics in business makes good sense. A business that behaves ethically induces other business associates to behave ethically as well. If a company (or a manager) exercises particular care in meeting all responsibilities to employees, customers and suppliers it usually is awarded with a high degree of loyalty, honesty, quality and productivity. For examples, employees who are treated ethically will more likely behave ethically themselves in dealing with customers and business associates. A supplier who refuses to exploit its advantage during a seller's market retains the loyalty and continued business of its customers when conditions change to those of a buyer's market. A company that refuses to discriminate against older or handicapped employees often discovers that they are fiercely loyal, hard working and productive. It is my firm belief that a ―good man or woman‖ who steadfastly tries to be ethical (i.e. to do the ―right... Code of Ethics in Finance A finance code of ethics help specialists act professionally and responsibly in business deals. A finance code of ethics informs professionals about rules and operating procedures that they must follow to comply with industry standards, corporate policies and government requirements. Ethics rules vary depending on role, industry, company size and transaction. Some professionals (such as public accountants) must meet annual minimum ethical requirements to maintain active licenses. Purpose 1. A finance code of ethics helps top management avoid significant legal problems or regulatory fines. Requiring finance employees to adhere to a code of ethics ensures that they abide by laws and regulations applicable in the industry in which a firm operates. For example, an insurance company may require its accounting, finance and investment staff to take annual ethics classes or attend industry conferences to learn about latest developments in state insurance laws. Function 2. In practice, a finance code of ethics typically prevents employees from engaging in illegal activities or act unprofessionally. An employee who is uncertain whether an activity or a transaction is legal may read ethical requirements and act according to them. For example, a trader at a bank or a hedge fund may review the firm's ethics code to ensure that it is not illegal to provide information to a relative after a company releases its quarterly earnings information. Significance 3. Ethics codes are important in the finance industry because they typically affect how a professional performs duties, interacts with a client or reports financial information. For example, U.S. regulations require a public accountant to maintain ethical values when auditing a company listed on a securities exchange. These regulations are essentially guidelines adopted by the Public Company Accounting Oversight Board (PCAOB) and approved by the Securities and Exchange Commission (SEC). Types 4. There is a variety of ethics codes affecting how finance professionals engage in business activities. A regulated specialist, such as a certified public accountant (CPA) or a chartered financial analyst (CFA), must meet governmental requirements. Other positions, such as certified internal auditors (CIA), may not be regulated but still require professionals to meet minimum ethical standards. For example, the Institute of Internal Auditors (IIA) requires members to comply with internal audit ethical standards such as independence and objectiveness. Misconceptions 5. A finance code of ethics helps an employee perform duties professionally and competently but does not prevent the employee from litigation. For example, a public accountant or a trader cannot claim innocence by showing compliance with ethical requirements; that employee still has to abide by regulations and laws to avoid lawsuits or regulatory fines. For example, a public accountant reviewing a company's controls may discover that the treasurer is secretly stealing money. The accountant must follow applicable laws and ethical standards in reporting this activity. Ethical Issues For Financial Advisors The collapse of Enron and Worldcom brought ethical concerns to the forefront of public scrutiny. Their demise caused thousands of Enron and Worldcom employees to lose all of their retirement savings, and provided a wake-up call to investors across the country who held their entire retirement savings in a single stock. The failure to educate those employees about the importance of diversification was perhaps more than mere corporate or fiduciary oversight. (To learn more about these ethical issues, see What Enron Taught Us About Retirement Plans.) These headline-grabbing collapses are just two examples of how our modern maze of business models, methods of practice and investment strategies has substantially blurred traditional ethical boundaries. Even scrupulously honest financial planners can now face real dilemmas when trying to do the right thing for their clients. Read on as we explore some common dilemmas investment professionals face, and help provide guidance on how you can tackle them. Uncharted Territory A generation ago, both the tax code and the financial products and services available were simpler than they are today. For example, if someone wanted to buy stock, a stockbroker would place the trade. If someone needed permanent life coverage, a whole life policy was issued. But now, planners must decide if this traditional approach is better, or whether the client would be better off buying any number of the diverse modern products available. The modern maze means every financial planner faces an ethical dilemma when trying to do the right thing for a client. The new rules of ethics for CFPs® In light of these dilemmas, the Certified Financial Planner® Board of Standards has issued a substantial revision and upgrade of the ethical requirements that it expects from its certificants. Some of these new requirements include: Putting the client's interests ahead of the CFP® certificant's interests at all times and in all situations. This is conceptually a step up from the previous standard of "reasonable and prudent professional judgment" that was formerly in the code. The change essentially raises the code of conduct for any issue or situation that is not considered to be within the bounds of financial planning services, per se, to a level just below that of a fiduciary. (To learn more, see Is Your Broker Acting In Your Best Interest?) All financial planning services must now be accorded the care of a true fiduciary, as opposed to merely acting in the client's best interest. This also constitutes a major step up in terms of responsibility, as fiduciaries have a strict set of rules and guidelines that must be followed at all times. For clients, this means that their planners are held to a higher legal standard of care than before. (For a breakdown of what's expected of a fiduciary, see Meeting Your Fiduciary Responsibility.) Fees vs. Commissions Regardless of what legal or moral standard they are held to, one of the biggest ethical dilemmas planners face is choosing a method of compensation. The methods of compensation for both sales-driven practitioners and planners are often interchangeable, since each can charge either fees or commissions for their services (provided that they are licensed to do so). However, this flexibility can often present a moral dilemma for planners who must choose one method of compensation over the other. (For more, see Understanding Dishonest Broker Tactics.) A fee-based planner, one who charges clients based on a percentage of their assets, will increase his or her compensation simply by making the client's assets grow. If the planner charges the client a fee of 1% of assets under management, then the annual fee collected from a $100,000 portfolio will be $1,000. Therefore, if the planner is able to make the portfolio grow to $150,000, his or her compensation will increase accordingly. This type of compensation could motivate the planner to employ more aggressive investment strategies than a traditional commission-based broker. A commission-based planner, on the other hand, is compensated for each transaction, regardless of portfolio gains or losses. These brokers face the temptation to generate transactions as a means of revenue, even if they manage to avoid the technical definition of "churning". In this sense, each type of compensation presents its own set of ethical issues. Ultimately, planners will have to be willing to subordinate their own benefit to that of their clients, regardless of what business model is used. Take for example a planner that can work on either an hourly fee or commission basis. If the planner meets with a client that has $2 million earmarked for retirement, then charging by the hour would result in a total fee of perhaps $5,000 - on the very high end. On the other hand, choosing to charge the client a commission-based fee for investing the $2 million in a variable annuity could pay as much as a 7% commission, which would earn the planner $140,000! This extreme variance in compensation could easily sway even the most stalwart planner. The key to remember is that you must act in the best interests of your client, not your wallet. (For related reading, check out Paying Your Investment Advisor - Fees Or Commissions? and Fee-Based Brokerage: The Latest Target For Regulators.) Sales vs. Advice The boundaries between sales and advice in the financial industry are also becoming increasingly blurred as new platforms and methods of doing business continue to emerge. What this usually boils down to is getting clients to do the right thing for the right reason. Many clients will base their financial decisions on emotions rather than what their planner advises. Suppose a 60-year-old woman has her entire savings of $100,000 in certificates of deposit (CDs), and is terrified of risking her principal. If she lives for another 25 years, her savings will likely be depleted long before she dies, since these low-risk investments pay a tiny rate of return that will be offset by inflation over time. As a planner, you obviously need to get your client to diversify her holdings with a sensible asset allocation, or perhaps at least consider some sort of immediate annuity option. But how far should you go in encouraging her to do this? Is it okay for you to use aggressive, fear-based sales tactics, or even bend the truth a little, in order to help this client? After all, it clearly is in her best interest to do this. Besides, if no action is taken, you could be held legally liable for failure to provide adequate advice. In this case, the definition of "fear-based" sales tactics is also somewhat subjective; if the planner shows the client a graphic illustration revealing how she will be bankrupt in less than 10 years, is that using fear as a tactic, or is it merely a revelation of reality? The argument can be made that it is both at once. (For advice on how to handle this situation, see Manage Your Clients' Expectationsand Deal Effectively With Difficult Clients.) Luckily, planners do have help in these types of situations. If a client refuses to take your advice, you can present your client with a written disclaimer that states the client or prospect is refusing to follow the recommendations presented by the planner. If your 60-year-old client wants her CDs and she's signed this disclaimer, then you are in the clear. Problems with the System The fact is that there is no central ethical resource that is available for all types of financial planners. Commission-based brokers can consult their supervisors or compliance departments on certain matters, but they are likely to get "corporate" answers to many of their questions - answers that may allow the planner to create a profitable transaction without incurring liability, but may not address what is truly best for the client. CFP® practitioners may consult the CFP® Board with ethical questions, and other accredited planners may have ethical codes of conduct to refer to as well. But non-credentialed planners are essentially on their own for all practical purposes, as the rules imposed by the regulatory agencies are not designed to address many day-to-day issues that planners face in their jobs. Bottom Line Despite the onslaught of legislation and regulations aimed at curbing unethical practices (such as the Sarbanes-Oxley Act of 2002), financial planning in today's world depends more than ever upon understanding a client's individual situation and objectives, and being willing to do right for them. The correct application of ethics in modern financial planning essentially boils down to having the client understand exactly what they are doing and why, with full knowledge of the costs and risks involved. An ethical transaction occurs when a client trulyunderstands the ramifications of the advisor's recommendations and is willing to go forward, assuming that all pertinent laws and regulations are being obeyed. After all is said and done, ethics can still be viewed as simply knowing the right thing to do, and then doing it. Social Ethics There's a lot said about humans being social animals and all that, but do all human beings know correctly how to live in society? We all know the answer to that is doubtful. Here are the basic tenets of social ethics. Check out if you fall short anywhere. What is CSR? Corporate Social Responsibility. Responsibility for the environment. www.tikspac.eu You can remove a man from society but you cannot remove society from the man. Truer words have never been said. Even if you are shipwrecked and lonely on an island à la Robinson Crusoe, you will be straitjacketed about doing your morning business out there in the open. But that is how we human beings are created. We learnt the meaning of modesty right there in the Garden of Eden, and it has hounded us ever since. Of course, the depth to which social consciousness exists in the human race varies from person to person, but it exists in everyone, without a doubt. And yet, it is almost embarrassing to see how many people we meet everyday are totally ignorant of social ethics. They are conscious about society, all right, but they are simply baboon-like when it comes to obeying the unwritten social ethics that society has laid down since Genesis. Why the differences? Simply because everyone is not made aware of social ethics in the same manner. Social ethics are a part of a person's cumulative education, and that, of course, depends on observation. Different people observe in different measures, and that‘s the reason everyone has a different notion of social ethics. Let us embark on a mammoth task now. Standardizing social ethics. Learning the right kind of social ethics. That's one thing that has never been attempted before. But let me try. We have to begin somewhere – this could be a good precursor to all the Neanderthals out there, a sort of launching pad. Don't worry; I'll make this quick and painless ;-). Social Ethics Principle # 1: Share John: There's a hungry man outside, Mamma. Asking for food. Mother: Give him your sandwich, dearie. I'll make you another. Father: Yeah, all right. Just make sure you don‘t give him anything more from the larder. And ask if he can help me mow the lawn. We are creatures living in a very symbiotic society. As such, we need to share. Give and take. And that becomes the first social ethic we need to learn. When you give something to a deserving person, it does come back to you in some way or the other. It's not necessary to give something material. Sometimes a smile or a pat on the shoulder could be the best gift you could give. But remember to give within limits. Too many gifts can spoil a person. And you will be perennially hounded for more and more help. Give, but within limits; and when you have given, do expect some kind of repayment, directly or indirectly. Social Ethics Principle # 2: Acknowledge Mother: How did school go today, John? John: Oh, it was fun! Mrs. March actually praised my show-and-tell. Mother: God bless her soul! Father: Certainly! I am sure little Johnnie will be getting much more schoolwork done now. If only that big boss of mine would appreciate what I chip in for his firm… Society is built when people begin praising each other's talents. Whether we are talking about the President or a newspaper boy, they are giving something to make this society roll. That is why it is extremely important to give everyone their due credit. I don't know about you, but when someone praises me for an article I write, I am just egged on to write a better one. So, whether it is a schoolboy or your grandma, they need their acknowledgment to work better for you. Social Ethics Principle # 3: Participate John: Mamma, Justin's folks are having a garage sale this Saturday. Mother: Yes, I know. Gina told me. I am baking some cookies for the sale, John. John: Can I be with Justin on Saturday? There's no school as it is. Mother: Sure! I'll be there too, anyways. Father: Hope I can do something useful too. Now let me see what… Living is fun when you live together. I am not speaking just about family, but the whole society, in general. Helping the Joneses out in their events is always fun, especially if you know that they will help out with yours too. Of course, we must not be meddlesome, and must understand when we are not required. Being human, you will have an inner sense of understanding that. Participation is required on a national and global level also. We must be aware of our politics and civics, know our rights and duties, and perform them wholeheartedly. Social ethics demands that we make a collective effort at success, like ants lifting a heavy tidbit of food. That‘s how companies and nations succeed – doesn‘t matter what size they are. Unity is strength. Social Ethics Principle # 4: Assert John: It's Rupert again, Mamma. Mother: What did he do now? John: He ran away with my lunchbox and emptied it behind a tree. Father: So, did you fight him back, or simply came running here to mamma? Mother: Peter! It's like driving on the freeway. Even if you are sure you are driving like a real good taxpaying and law-abiding citizen, some speed maniac might come and mutilate your rear fender. Or the front hood if you are not so lucky. Is it worth being a Sad Sack about it? Not at all! We must at least have a tongue to speak out that we are in the right. And prove that to the authorities. Of course, we must not go the mafia way about it – that will only compound matters and snowball into unbearable things – but we must at least assert when we haven‘t done anything wrong. When our nation's integrity is threatened by outside forces, what do we do? Sit back and watch Nickelodeon? No, we give it back every bit. However, in the routine walk of life, we do not actually fight, but we must surely Get up, stand up… Stand up for your rights… (thanks, Bob, you said it for me.) Social Ethics Principle # 5: Accept John: I won the elocution too, Mamma. Here's the medal. Mother: Lovely, John! Really! Father: Wish someone would give me something for busting my bottom too. Mother: Peter, why don‘t you learn to be a bit more optimistic and less grumpy about things? I think you are getting old. Father: Ah! Let's not put back our snorkeling vacation any more then. Tell me frankly, how many weeping willows do you meet in a day? I am talking about those typical people who always carry some sort of complaint on their shirt sleeve. The government is going to the dogs, the traffic is gone bonkers, elections are a whole lot of garbage, bureaucracy is sickeningly crazy, etc. etc. Don't you just get tired of just listening to these grievances? But then, you will be surprised at how many times you complain yourself. What we must actually do is, put our hands together and try, in whatever small way we can, to better the society to live in. Do anything we can. Plant a tree for all it takes. But do something to improve the quality of life. And, miraculously enough, when we actually do something constructive – I mean, something socially benefiting for which we are not paid any greenbucks – we will be amazed to see how much more acceptable we become of the society we live in. Social ethics are a very complex subject, and there cannot be any parallels drawn in the way different people must behave. But it does pay to be responsible for the society we live in, and endeavor to make a better place to live in The Role Of Ethics In Society "When I do good, I feel good; when I do bad, I feel bad. That's my religion." Abraham Lincoln To live morally in society i.e. to live with humane characteristics, to treat those we meet on a daily basis with respect. A personal code of ethics to live by should come natural to us. However living in society with rules and regulations, we are forced to uphold and to socialize with some people who certainly show or use very little ethical behavior in their lives. Ethical Culture is a nontheistic ( nontheism ) religion established by Felix Alder in 1876. The Ethical Culture Movement is an ethical, educational, and religious movement. Individual chapter organizations are generically referred to as Ethical Societies, though their names may include "Ethical Society," "Ethical Culture Society," "Society for Ethical Culture," or other variations on the theme of "Ethical." Ethical Culture is premised on the idea that honoring and living in accordance with ethical principles is central to what it takes to live meaningful and fulfilling lives, and to creating a world that is good for all. It is observed that ethics is at the heart of all religions. Practitioners of Ethical Culture focus on supporting one another in becoming better people, and on doing good in the world. Ethical perspective While Ethical Culturists generally share common beliefs about what constitutes ethical behavior and the Goodness and value theory good, individuals are encouraged to develop their own personal understanding of these ideas. This does not mean that Ethical Culturists condone "moral relativism," which would relegate ethics to mere preferences or social conventions. Ethical principles are viewed as being related to deep truths about the way the world works and hence not arbitrary. However, it is recognized that complexities render the understanding of ethical nuances subject to continued dialogue, exploration, and learning. While the founder of Ethical Culture, Felix Adler (Society for Ethical Culture) Felix Adler, was a transcendentalist, Ethical Culturists may have a variety of understandings as to the theoretical origins of ethics. Key to the founding of Ethical Culture was the observation that too often disputes over religious or philosophical doctrines have distracted people from actually living ethically and doing good. Consequently, ''" Deed before creed"'' has long been a motto of the movement. Religious aspect Functionally, Ethical Societies are similar to churches or synagogues. Ethical Societies typically have Sunday morning meetings, offer moral instruction for children and teens, and do charitable work and social action. They may offer a variety of educational and other programs. They conduct weddings, Domestic partnership commitment ceremonies, baby namings, and memorial services. Individual Ethical Society members may or may not believe in a deity or regard Ethical Culture as their religion. In this regard, Ethical Culture is similar to traditional religions such as Buddhism andTaoism, about whose practitioner's similar statements could be made. Felix Adler said, "Ethical Culture is religious to those who are religiously minded, and merely ethical to those who are not so minded." The movement does consider itself a religion in the sense that ''Religion is that set of beliefs and/or institutions, behaviors and emotions which bind human beings to something beyond their individual selves and foster in its adherents a sense of humility and gratitude that, in turn, sets the tone of one's world-view and requires certain behavioral dispositions relative to that which transcends personal interests.'' The Ethical Culture 2003 ethical identity statement states: ''It is a chief belief of Ethical religion that if we relate to others in a way that brings out their best, we will at the same time elicit the best in ourselves. By the "best" in each person, we refer to his or her unique talents and abilities that affirm and nurture life. We use the term "spirit" to refer to a person's unique personality and to the love, hope, and empathy that exists in human beings. When we act to elicit the best in others, we encourage the growing edge of their ethical development, their perhaps as-yet untapped but inexhaustible Human dignity worth.'' Since around 1950, the Ethical Culture movement has been increasingly identified as part of the modern Humanism Humanist movement. Specifically, in 1952, the '''American Ethical Union''', the national umbrella organization for Ethical Culture societies in the United States, became one of the founding member organizations of the International Humanist and Ethical Union. Note from the author: I was born and raised with strict religious beliefs. However, living by God's supposed laws was very difficult to comprehend when the rest of the world certainly was not living by the golden rule. Religion can sometimes turn a moral and ethical person against the teachings of any religion. Sometime bad behavior is a way of striking back at the hypocrisy in society. I believe there would be less violence and crime in the streets if more people would open their minds and their hearts to their fellow man. "A man's ethical behavior should be based effectually on sympathy, education, and social ties; no religious basis is necessary. Man would indeed be in a poor way if he had to be restrained by fear of punishment and hope of reward after death." Albert Einstein The role of ethics in daily life as we choose between ... Right and Wrong The Golden Rule, the Ten Commandments, Poor Richard's Almanac, and Aesop's Fables provide simple concepts about right and wrong that lubricate society by reducing friction. Trouble is, temptations tease us into wanting more, whether we're a guy stealing television sets in soggy New Orleans, a teenager downloading music, or a governor failing to report gifts from his rich cronies. "Ethics is very much concerned with the effects of our behavior on others," says Randy Cohen, author of The Good, the Bad & the Difference: How to Tell Right from Wrong in Everyday Situations (Doubleday, 2002). Many ethicists believe the guidelines for figuring out the best actions are shared by most cultures, and include respect, trustworthiness, responsibility, compassion, citizenship, and fairness. To that list Cohen would add actions that discourage human suffering, and that promote happiness, an egalitarian society, and the greatest good for the greatest number of people. A fair deal, he says, is something like the way kids divide a cookie: one cuts and the other picks. In Ohio, politics at the highest level collided with ethics in August, when Gov. Bob Taft was convicted of four first-degree misdemeanor ethics violations for knowingly failing to disclose dozens of golf outings and other gifts valued at above $75 that he received from lobbyists and businessmen. An avalanche of problems caused by the unethical actions of individuals, unhealthy institutions, and poorly supervised situations seem to exist at every turn. "It's almost like a shell shock of what's going to be next," says Michael Josephson, president of the Joseph and Edna Institute of Ethics. "There's a heightened interest in everybody regarding ethics," Name an aspect of contemporary life and an ethicist can point out transgressions - Hurricane Katrina (a lack of leadership, an inadequate evacuation plan for the underclass), sports (steroid use), religion (the Catholic church's cover up of sex abuse), the military (torture of people at Abu Ghraib prison), journalism (Jayson Blair's fabricated articles for the New York Times). Mr. Josephson notes other eye-opening examples: w 2002 was a banner year for business scandals according to Wikipedia, the online encyclopedia. WorldCom, Tyco, Halliburton, and Adelphia were among 27 huge corporations that admitted they misstated their accounts, often to the tune of billions of dollars. The previous year carried a single entry: Enron. Many of the most prominent accounting firms, including Arthur Andersen, had audited and approved the accounts. w The sheriff's department in Florida's populous Broward County was discovered this year to have falsified crime statistics by reclassifying scores of unsolved crimes as solved, and by downgrading hundreds of other crimes, such as burglaries, to minor offenses. w High school principals in Houston, pressured by their superintendent to comply with tough No Child Left Behind standards, reported drop-out rates so low, the district was dubbed the "Texas Miracle." But after an administrator blew the whistle on fraudulent figures, 14 of the 16 schools that earned "best" classification were demoted to "failed." Mr. Josephson says problems will continue until citizens elect people who have higher standards. "[Supreme Court Justice Louis} Brandeis said every citizen in a democracy is a public official. ●…● How about demanding that competence be part of the credentials of leaders?" When voting, people should consider candidates' overall skills, he adds, not whether they agree with you on one or two issues. "I think ethics is how we treat people face to face, day after day, over time," says Al Gini, a philosophy professor at Loyola University Chicago and author of Why It's Hard to be Good, due out in November. "Should I extend myself for others, or should I do anything that's not in my best interest?" Facing the biggest temptations and susceptible to the arrogance of power, are people with money, power, and fame. "It's not brain surgery. It's about the difficulty of standing outside of the shadow of self, to reach out to others, to not be self-absorbed; whether this is about business or taking $10 from your parents," Professor Gini says. When Randy Cohen undertook an ethics column for the New York Times Magazine in 1999, he figured ethics meant how an individual acts in a moment of crisis. "If you encounter a homeless person and they ask you for money, you make a choice about how to act," he says. Eventually, he realized what's often more important than whether you give a buck to the poor fellow is what you do to change poverty and homelessness, for example, when you get home. Laws, he notes, such as those permitting the ownership of slaves, are not always ethical. And sometimes lying might be the most ethical action. If you worked on the Underground Railroad in the 1850s and were asked the whereabouts of an escaped slave, would you lie? How about those sticky little instances such as, "Does this make me look fat?" A sideways response ("That is your color.") is probably preferable to a bruising "yes." "Ethics often requires you to be an anthropologist and work out what the other person's behavior means," says Mr. Cohen. Mr. Cohen wasn't formally schooled in ethics. He wrote comedy for David Letterman and Rosie O'Donnell. "When they (the New York Times) were starting the column, the topic sounded a bit off-putting," he says. "I have an analytical mind and can write a lively sentence." But sometimes, reasonable values bang into each other: truth versus loyalty, justice against mercy, short-term against long-term, and individual versus community good. "People would like it if these were simple matters. It's much harder than that," he says. "You often have conflicting claims. These are often questions about which honorable people may differ." Technology's role Downloading music was a favorite use of the home computer for years but was ruled to be a copyright violation. "It turned millions of otherwise law-abiding people into criminals," says Mr. Cohen. "The music industry were brutes." However, if you give people an easy way to download music ethically, they'll do it, he says. "Globally, technology opens up the potential for unethical behavior in ways we've never had before," says Rushland Kidder, president of the Institute for Global Ethics and author of Moral Courage (HarperCollins, 2005). The institute publishes Ethics Newsline, a review of current ethical stories around the world (www.globalethics.org). With just a few keystrokes, almost anybody can create havoc. The notorious Love Bug virus that flooded computers around the world in 2000 was created by a pair of 20-somethings in a Phillipines apartment. And the proliferation of bloggers makes keeping secrets harder than ever. In the 1930s, if a U.S. company was making shoes in a Third World country and paying its 12-year-old employees pennies a day, there wasn't much a critic could do, he says. With computers, corporate and political behaviors are more transparent. Moreover, the public voice becomes more meaningful. Mr. Kidder advocates a preemptive approach to the ethics of technology rather than reacting when problems surface. What about the technology of Global Positioning Systems that will be able to track a car anywhere, or drugs that will make us feel good all the time? "We need to think about those things beforehand," he says, noting an exemplary approach by the Human Genome Project. It set aside 5 percent of its budget to examine its related ethical, legal, and social implications. Concerns about declining ethics isn't new. "People have been complaining about political corruption for more than 2,000 years. "And how the younger generation doesn't have the values we used to have, for more than 2,000 years," says Chris MacDonald, president of the Canadian Society for the Study of Practical Ethics and operator of a well-stocked online ethics bookstore. Whenever people's interests are at stake or someone has a choice about who gets what, ethics come into play, says Mr. MacDonald, an assistant professor of philosophy at Saint Mary's University in Halifax, Nova Scotia. Several years ago, Sidney Ribeau was watching people squabble on a televised news show. He realized they weren't listening to each other. "There were different values," says Mr. Ribeau, president of Bowling Green State University. "It seemed that we should as a university help students early on to think critically about their values. What leads them to believe that academic dishonesty is wrong? Or about a genetic issue? How do they reach conclusions that are good for more than just the individual?" What should a student do if her or his friend is drinking heavily? "In terms of values, do you value your friendship with your friend more than their well-being?" Mr. Ribeau asked faculty to devise a plan that would open the conversation with students. Four years ago, a pilot program was introduced, and it reached full bloom in August when all 3,600 freshmen took part in the values-focused BGeXperience for three days before classes began. "There are issues we're dealing with as a society that are very, very complex. "What's missing is that reflective step where people can step back and look at their decisions," says Mr. Ribeau. Ethics in Finance Ethics in general is concerned with human behavior that is acceptable or "right" and that is not acceptable or "wrong" based on conventional morality. General ethical norms encompass truthfulness, honesty, integrity, respect for others, fairness, and justice. They relate to all aspects of life, including business and finance. Financial ethics is, therefore, a subset of general ethics. Ethical norms are essential for maintaining stability and harmony in social life, where people interact with one another. Recognition of others' needs and aspirations, fairness, and cooperative efforts to deal with common issues are, for example, aspects of social behavior that contribute to social stability. In the process of social evolution, we have developed not only an instinct to care for ourselves but also a conscience to care for others. There may arise situations in which the need to care for ourselves runs into conflict with the need to care for others. In such situations, ethical norms are needed to guide our behavior. As Demsey (1999) puts it: "Ethics represents the attempt to resolve the conflict between selfishness and selflessness; between our material needs and our conscience." Ethical dilemmas and ethical violations in finance can be attributed to an inconsistency in the conceptual framework of modern financial-economic theory and the widespread use of a principal-agent model of relationship in financial transactions. The financial-economic theory that underlies the modern capitalist system is based on the rational-maximizer paradigm, which holds that individuals are self-seeking (egoistic) and that they behave rationally when they seek to maximize their own interests. The principal-agent model of relationships refers to an arrangement whereby one party, acting as an agent for another, carries out certain functions on behalf of that other. Such arrangements are an integral part of the modern economic and financial system, and it is difficult to imagine it functioning without them. The behavioral assumption of the modern financial-economic theory runs counter to the ideas of trustworthiness, loyalty, fidelity, stewardship, and concern for others that underlie the traditional principal-agent relationship. The traditional concept of agency is based on moral values. But if human beings are rational maximizers, then agency on behalf of others in the traditional sense is impossible. As Duska (1992) explains it: "To do something for another in a system geared to maximize self-interest is foolish. Such an answer, though, points out an inconsistency at the heart of the system, for a system that has rules requiring agents to look out for others while encouraging individuals to look out only for themselves, destroys the practice of looking out for others" (p. 61). The ethical dilemma presented by the problem of conflicting interests has been addressed in some areas of finance, such as corporate governance, by converting the agency relationship into a purely contractual relationship that uses a carrot-and-stick approach to ensure ethical behavior by agents. In corporate governance, the problem of conflict between management (agent) and stockholders (principal) is described as an agency problem. Economists have developed an agency theory to deal with this problem. The agency theory assumes that both the agent and the principal are self-interested and aim to maximize their gain in their relationship. A simple example would be the case of a store manager acting as an agent for the owner of the store. The store manager wants as much pay as possible for as little work as possible, and the store owner wants as much work from the manager for as little pay as possible. This theory is value-free because it does not pass judgment on whether the maximization behavior is good or bad and is not concerned with what a just pay for the manager might be. It drops the ideas of honesty and loyalty from the agency relationship because of their incompatibility with the fundamental assumption of rational maximization. "The job of agency theory is to help devise techniques for describing the conflict inherent in the principal-agent relationship and controlling the situations so that the agent, acting from self-interest, does as little harm as possible to the principal's interest" (DeGeorge, 1992). The agency theory turns the traditional concept of agency relationship into a structured (contractual) relationship in which the principal can influence the actions of agents through incentives, motivations, and punishment schemes. The principal essentially uses monetary rewards, punishments, and the agency laws to command loyalty from the agent. Most of our needs for financial services— management of retirement savings, stock and bond investing, and protection against unfore-seen events, to name a few—are such that they are better entrusted to others because we have neither the ability nor the time to carry them out effectively. The corporate device of contractualization of the agency relationship is, however, too difficult to apply to the multitude of financial dealings between individuals and institutions that take place in the financial market every day. Individuals are not as well organized as stockholders, and they are often unaware of the agency problem. Lack of information also limits their ability to monitor an agent's behavior. Therefore, what we have in our complex modern economic system is a paradoxical situation: the ever-increasing need for getting things done by others on the one hand, and the description of human nature that emphasizes selfish behavior on the other. This paradoxical situation, or the inconsistency in the foundation of the modern capitalist system, can explain most of the ethical problems and declining morality in the modern business and finance arena. ETHICAL VIOLATIONS The most frequently occurring ethical violations in finance relate to insider trading, stakeholder interest versus stockholder interest, investment management, and campaign financing. Business in general and financial markets in particular are replete with examples of violations of trust and loyalty in both public and private dealings. Fraudulent financial dealings, influence peddling and corruption in governments, brokers not maintaining proper records of customer trading, cheating customers of their trading profits, unauthorized transactions, insider trading, misuse of customer funds for personal gain, mispricing customer trades, and corruption and larceny in banking have become common occurrences. Insider trading is perhaps one of the most publicized unethical behaviors by traders. Insider trading refers to trading in the securities of a company to take advantage of material "inside" information about the company that is not available to the public. Such a trade is motivated by the possibility of generating extraordinary gain with the help of nonpublic information (information not yet made public). It gives the trader an unfair advantage over other traders in the same security. Insider trading was legal in some European countries until recently. In the United States, the 1984 Trading Sanctions Act made it illegal to trade in a security while in the possession of material nonpublic information. The law applies to both the insiders, who have access to nonpublic information, and the people with whom they share such information. Campaign financing in the United States has been a major source of concern to the public because it raises the issue of conflict of interest for elected officials in relation to the people or lobbying groups that have financed their campaigns. The United States has a long history of campaign finance reform. The Federal Election Commission (FEC) administers and enforces the federal campaign finance statutes enacted by the Congress from time to time. Many states have also passed lobbying and campaign finance laws and established ethics commissions to enforce these statutes. ETHICAL CODES Approaches to dealing with ethical problems in finance range from establishing ethical codes for financial professionals to efforts to replace the rational-maximizer (egoistic) paradigm that underlies the modern capitalist system by one in which individuals are assumed to be altruistic, honest, and basically virtuous. It is not uncommon to find established ethical codes and ethical offices in American corporations and in financial markets. Ethical codes for financial markets are established by the official regulatory agencies and self-regulating organizations to ensure ethically responsible behavior on the part of the operatives in the financial markets. One of the most important and powerful official regulatory agencies for the securities industry in the United States is the Securities and Exchange Commission (SEC). It is in charge of implementing federal securities laws, and, as such, it sets up rules and regulations for the proper conduct of professionals operating within its regulatory jurisdiction. Many professionals play a role within the securities industry, among the most important of which are accountants, broker- dealers, investment advisers, and investment companies. Any improper or unethical conduct on the part of these professionals is of great concern to the SEC, whose primary responsibility is to protect investor interests and maintain the integrity of the securities market. The SEC can censure, suspend, or bar professionals who practice within its regulatory domain for lack of requisite qualifications or unethical and improper conduct. The SEC also oversees self-regulatory organizations (SROs), which include stock exchanges, the National Association of Security Dealers (NASD), the Municipal Securities Rulemaking Board (MSRB), clearing agencies, transfer agents, and securities information processors. An SRO is a membership organization that makes and enforces rules for its members based on the federal securities laws. The SEC has the responsibility of reviewing and approving the rules made by SROs. Other rule-making agencies include the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and state finance authorities. Congress has entrusted to the Federal Reserve Board the responsibility of implementing laws pertaining to a wide range of banking and financial activities, a task that it carries out through its regulations. One such regulation has to do with unfair or deceptive acts or practices. The FDIC has its own rules and regulations for the banking industry, and it also draws its power to regulate from various banking laws passed by Congress. In addition to federal and state regulatory agencies, various professional associations set their own rules of good conduct for their members. The American Institute of Certified Public Accountants (AICPA), the American Institute of Certified Planners (AICP), the Investment Company Institute (ICI), the American Society of Chartered Life Underwriters (ASCLU), the Institute of Chartered Financial Analysts (ICFA), the National Association of Bank Loan and Credit Officers (also known as Robert Morris Associates), and the Association for Investment Management and Research (AIMR) are some of the professional associations that have well- publicized codes of ethics. TOWARD A PARADIGM SHIFT There has been an effort to address the ethical problems in business and finance by reexamining the conceptual foundation of the modern capitalist system and changing it to one that is consistent with the traditional model of agency relationship. The proponents of a paradigm shift question the rational-maximizer assumption that underlies the modern financial-economic theory and reject the idea that all human actions are motivated by self-interest. They embrace an alternative assumption—that human beings are to some degree ethical and altruistic—and emphasize the role of the traditional principal-agent relationship based on honesty, loyalty, and trust. Duska (1992) argues: "Clearly, there is an extent to which [Adam] Smith and the economists are right. Human beings are self-interested and will not always look out for the interest of others. But there are times they will set aside their interests to act on behalf of others. Agency situations were presumably set up to guarantee those times." The idea that human beings can be honest and altruistic is an empirically valid assumption; it is not hard to find examples of honesty and altruism in both private and public dealings. There is no reason this idea should not be embraced and nurtured. As Bowie (1991) points out: "Looking out for oneself is a natural, powerful motive that needs little, if any, social reinforcement. . . . Altruistic motives, even if they too are natural, are not as powerful: they need to be socially reinforced and nurtured" (p. 19). If the financial-economic theory accepts the fact that behavioral motivations other than that of wealth maximization are both realistic and desirable, then the agency problem that economists try to deal with will be a nonproblem. For Dobson (1993), the true role of ethics in finance is to be found in the acceptance of "internal good" ("good" in the sense of "right" rather than in the sense of "physical product"), which, he adds, is what classical philosophers describe as "virtue"—that is, the internal good toward which all human endeavor should strive. He contends: "If the attainment of internal goods were to become generally accepted as the ultimate objective of all human endeavor, both personal and professional, then financial markets would become truly ethical" Ethics in Accounting Ethics in accounting is of utmost importance to accounting professionals and those who rely on their services. Certified Public Accountants (CPAs) and other accounting professionals know that people who use their services, especially decision makers using financial statements, expect them to be highly competent, reliable, and objective. Those who work in the field of accounting must not only be well qualified but must also possess a high degree of professional integrity. A professional's good reputation is one of his or her most important possessions. The general ethical standards of society apply to people in professions such as medicine and accounting just as much as to anyone else. However, society places even higher expectations on professionals. People need to have confidence in the quality of the complex services provided by professionals. Because of these high expectations, professions have adopted codes of ethics, also known as codes of professional conduct. These ethical codes call for their members to maintain a level of self-discipline that goes beyond the requirements of laws and regulations. CODES OF ETHICS By joining their professional organizations, people who work in the field of accounting agree to uphold the high ethical standards of their profession. Each of the major professional associations for accountants has a code of ethics. The Code of Professional Conduct of the American Institute of CPAs (AICPA), the national professional association for CPAs, sets forth ethical principles and rules of conduct for its members. The principles are positively stated and provide general guidelines that CPAs (or any professionals, for that matter) should strive to follow. The rules of conduct are much more explicit as to specific actions that should or should not be taken. The Institute of Management Accountants (IMA) Standards of Ethical Conduct applies to practitioners of management accounting and financial management, and the Institute of Internal Auditors (IIA) Code of Ethics applies to its members and to Certified Internal Auditors (CIAs). ETHICAL RESPONSIBILITIES A distinguishing mark of professions such as medicine and accounting is acceptance of their responsibilities to the public. The AICPA Code of Professional Conduct describes the accounting profession's public as consisting of "clients, credit grantors, governments, employers, investors, the business and financial community, and others who rely on the objectivity and integrity of CPAs to maintain the orderly functioning of commerce." Many, but not all, CPAs work in firms that provide accounting, auditing, and other services to the general public; these CPAs are said to be in public practice. Regardless of where CPAs work, the AICPA Code applies to their professional conduct, although there are some special provisions for those in public practice. Internal auditors, management accountants, and financial managers most commonly are employees of the organizations to which they provide these services; but, as professionals, they, too, must also be mindful of their obligations to the public. The responsibilities placed on accounting professionals by the three ethics codes and the related professional standards have many similarities. All three require professional competence, confidentiality, integrity, and objectivity. Accounting professionals should only undertake tasks that they can complete with professional competence, and they must carry out their responsibilities with sufficient care and diligence, usually referred to as due professional care or due care. The codes of ethics of the AICPA, IMA, and IIA all require that confidential information known to accounting professionals not be disclosed to outsiders. The most significant exception to the confidentiality rules is that accounting professionals' work papers are subject to subpoena by a court; nothing analogous to attorney-client privilege exists. INDEPENDENCE Maintaining integrity and objectivity calls for avoiding both actual and apparent conflicts of interest. This notion is termed independence. Being independent in fact and in appearance means that one not only is unbiased, impartial, and objective but also is perceived to be that way by others. While applicable to all accounting professionals, independence is especially important for CPAs in public practice. The AICPA's rules pertaining to independence for CPAs who perform audits are detailed and technical. For instance, a CPA lacks independence and thus may not audit a company if he or she (or the spouse or dependents) owns stock in that company and/or has certain other financial or employment relationships with the client. ETHICS ENFORCEMENT To a large extent, the accounting profession is self-regulated through various professional associations rather than being regulated by the government. The AICPA, the IMA, and the IIA have internal means to enforce the codes of ethics. Furthermore, the professional organizations for CPAs in each state, known as state societies of CPAs, have mechanisms for enforcing their codes of ethics, which are usually very similar to the AICPA Code. Violations of ethical standards can lead to a person's being publicly expelled from the professional organization. Because of the extreme importance of a professional accountant's reputation, expulsion is a strong disciplinary measure. However, ethical violations can lead to even more adverse consequences for CPAs because of state and federal laws. The state government issues a CPA's license to practice, usually through an organization known as the state board of accountancy. Since state laws governing the practice of accountancy typically include important parts of the AICPA Code, the Code thus gains legal enforceability. Consequently, ethical violations can result in the state's revoking a CPA's license to practice on a temporary or even permanent basis. Because a licensed CPA is also likely to belong to the AICPA and the state society of CPAs, investigations of ethics violations may be carried out jointly by the AICPA, the state society, and the state board of accountancy. CPAs in public practice who audit the financial statements of public corporations are subject to federal securities laws and regulations, including the Securities Exchange Act of 1934. The Securities and Exchange Commission (SEC), which administers these laws, has broad powers to regulate corporations that sell their stock to the public. One important SEC requirement is that these corporations' financial statements be audited by an independent CPA. The SEC has the authority to establish and enforce auditing standards and procedures, including what constitutes independence for a CPA. The SEC has largely delegated standard setting to the private sector but retains oversight and enforcement responsibilities. In 1998 the SEC and the AICPA jointly announced the creation of the Independence Standards Board (ISB), a private-sector body whose mission is to improve auditor independence standards. In announcing the formation of the ISB, the SEC reaffirmed the crucial importance of the CPA's independence: "[M]aintaining the independence of auditors of financial statements … is crucial to the credibility of financial reporting and, in turn, to the capital formation process" (SEC Release FRR-50,1998). What is Ethics in Research & Why is It Important? When most people think of ethics (or morals), they think of rules for distinguishing between right and wrong, such as the Golden Rule ("Do unto others as you would have them do unto you"), a code of professional conduct like the Hippocratic Oath ("First of all, do no harm"), a religious creed like the Ten Commandments ("Thou Shalt not kill..."), or a wise aphorisms like the sayings of Confucius. This is the most common way of defining "ethics": norms for conduct that distinguish between acceptable and unacceptable behavior. Most people learn ethical norms at home, at school, in church, or in other social settings. Although most people acquire their sense of right and wrong during childhood, moral development occurs throughout life and human beings pass through different stages of growth as they mature. Ethical norms are so ubiquitous that one might be tempted to regard them as simple commonsense. On the other hand, if morality were nothing more than commonsense, then why are there so many ethical disputes and issues in our society? One plausible explanation of these disagreements is that all people recognize some common ethical norms but different individuals interpret, apply, and balance these norms in different ways in light of their own values and life experiences. Most societies also have legal rules that govern behavior, but ethical norms tend to be broader and more informal than laws. Although most societies use laws to enforce widely accepted moral standards and ethical and legal rules use similar concepts, it is important to remember that ethics and law are not the same. An action may be legal but unethical or illegal but ethical. We can also use ethical concepts and principles to criticize, evaluate, propose, or interpret laws. Indeed, in the last century, many social reformers urged citizens to disobey laws in order to protest what they regarded as immoral or unjust laws. Peaceful civil disobedience is an ethical way of expressing political viewpoints. Another way of defining 'ethics' focuses on the disciplines that study standards of conduct, such as philosophy, theology, law, psychology, or sociology. For example, a "medical ethicist" is someone who studies ethical standards in medicine. One may also define ethics as a method, procedure, or perspective for deciding how to act and for analyzing complex problems and issues. For instance, in considering a complex issue like global warming, one may take an economic, ecological, political, or ethical perspective on the problem. While an economist might examine the cost and benefits of various policies related to global warming, an environmental ethicist could examine the ethical values and principles at stake. Many different disciplines, institutions, and professions have norms for behavior that suit their particular aims and goals. These norms also help members of the discipline to coordinate their actions or activities and to establish the public's trust of the discipline. For instance, ethical norms govern conduct in medicine, law, engineering, and business. Ethical norms also serve the aims or goals of research and apply to people who conduct scientific research or other scholarly or creative activities. There is even a specialized discipline, research ethics, which studies these norms. There are several reasons why it is important to adhere to ethical norms in research. First, norms promote the aims of research, such as knowledge, truth, and avoidance of error. For example, prohibitions against fabricating, falsifying, or misrepresenting research data promote the truth and avoid error. Second, since research often involves a great deal of cooperation and coordination among many different people in different disciplines and institutions, ethical standards promote the values that are essential to collaborative work, such as trust, accountability, mutual respect, and fairness. For example, many ethical norms in research, such as guidelines for authorship, copyright and patenting policies, data sharing policies, and confidentiality rules in peer review, are designed to protect intellectual property interests while encouraging collaboration. Most researchers want to receive credit for their contributions and do not want to have their ideas stolen or disclosed prematurely. Third, many of the ethical norms help to ensure that researchers can be held accountable to the public. For instance, federal policies on research misconduct, conflicts of interest, the human subjects protections, and animal care and use are necessary in order to make sure that researchers who are funded by public money can be held accountable to the public. Fourth, ethical norms in research also help to build public support for research. People more likely to fund research project if they can trust the quality and integrity of research. Finally, many of the norms of research promote a variety of other important moral and social values, such as social responsibility, human rights, animal welfare, compliance with the law, and health and safety. Ethical lapses in research can significantly harm human and animal subjects, students, and the public. For example, a researcher who fabricates data in a clinical trial may harm or even kill patients, and a researcher who fails to abide by regulations and guidelines relating to radiation or biological safety may jeopardize his health and safety or the health and safety of staff and students. Codes and Policies for Research Ethics Given the importance of ethics for the conduct of research, it should come as no surprise that many different professional associations, government agencies, and universities have adopted specific codes, rules, and policies relating to research ethics. Many government agencies, such as the National Institutes of Health (NIH), the National Science Foundation (NSF), the Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), and the US Department of Agriculture (USDA) have ethics rules for funded researchers. Other influential research ethics policies include the Uniform Requirements for Manuscripts Submitted to Biomedical Journals (International Committee of Medical Journal Editors), the Chemist's Code of Conduct (American Chemical Society), Code of Ethics (American Society for Clinical Laboratory Science) Ethical Principles of Psychologists (American Psychological Association), Statements on Ethics and Professional Responsibility (American Anthropological Association), Statement on Professional Ethics (American Association of University Professors), the Nuremberg Code and the Declaration of Helsinki (World Medical Association). The following is a rough and general summary of some ethical principals that various codes address*: Honesty Strive for honesty in all scientific communications. Honestly report data, results, methods and procedures, and publication status. Do not fabricate, falsify, or misrepresent data. Do not deceive colleagues, granting agencies, or the public. Objectivity Strive to avoid bias in experimental design, data analysis, data interpretation, peer review, personnel decisions, grant writing, expert testimony, and other aspects of research where objectivity is expected or required. Avoid or minimize bias or self-deception. Disclose personal or financial interests that may affect research. Integrity Keep your promises and agreements; act with sincerity; strive for consistency of thought and action. Carefulness Avoid careless errors and negligence; carefully and critically examine your own work and the work of your peers. Keep good records of research activities, such as data collection, research design, and correspondence with agencies or journals. Openness Share data, results, ideas, tools, resources. Be open to criticism and new ideas. Respect for Intellectual Property Honor patents, copyrights, and other forms of intellectual property. Do not use unpublished data, methods, or results without permission. Give credit where credit is due. Give proper acknowledgement or credit for all contributions to research. Never plagiarize. Confidentiality Protect confidential communications, such as papers or grants submitted for publication, personnel records, trade or military secrets, and patient records. Responsible Publication Publish in order to advance research and scholarship, not to advance just your own career. Avoid wasteful and duplicative publication. Responsible Mentoring Help to educate, mentor, and advise students. Promote their welfare and allow them to make their own decisions. Respect for colleagues Respect your colleagues and treat them fairly. Social Responsibility Strive to promote social good and prevent or mitigate social harms through research, public education, and advocacy. Non-Discrimination Avoid discrimination against colleagues or students on the basis of sex, race, ethnicity, or other factors that are not related to their scientific competence and integrity. Competence Maintain and improve your own professional competence and expertise through lifelong education and learning; take steps to promote competence in science as a whole. Legality Know and obey relevant laws and institutional and governmental policies. Animal Care Show proper respect and care for animals when using them in research. Do not conduct unnecessary or poorly designed animal experiments. Human Subjects Protection When conducting research on human subjects, minimize harms and risks and maximize benefits; respect human dignity, privacy, and autonomy; take special precautions with vulnerable populations; and strive to distribute the benefits and burdens of research fairly. * Adapted from Shamoo A and Resnik D. 2009. Responsible Conduct of Research, 2nd ed. (New York: Oxford University Press). Ethical Decision Making in Research Although codes, policies, and principals are very important and useful, like any set of rules, they do not cover every situation, they often conflict, and they require considerable interpretation. It is therefore important for researchers to learn how to interpret, assess, and apply various research rules and how to make decisions and to act in various situations. The vast majority of decisions involve the straightforward application of ethical rules. For example, consider the following case, Case 1: The research protocol for a study of a drug on hypertension requires the administration of the drug at different doses to 50 laboratory mice, with chemical and behavioral tests to determine toxic effects. Tom has almost finished the experiment for Dr. Q. He has only 5 mice left to test. However, he really wants to finish his work in time to go to Florida on spring break with his friends, who are leaving tonight. He has injected the drug in all 50 mice but has not completed all of the tests. He therefore decides to extrapolate from the 45 completed results to produce the 5 additional results. Many different research ethics policies would hold that Tom has acted unethically by fabricating data. If this study were sponsored by a federal agency, such as the NIH, his actions would constitute a form of research misconduct, which the government defines as "fabrication, falsification, or plagiarism" (or FFP). Actions that nearly all researchers classify as unethical are viewed as misconduct. It is important to remember, however, that misconduct occurs only when researchers intend to deceive: honest errors related to sloppiness, poor record keeping, miscalculations, bias, self-deception, and even negligence do not constitute misconduct. Also, reasonable disagreements about research methods, procedures, and interpretations do not constitute research misconduct. Consider the following case: Case 2: Dr. T has just discovered a mathematical error in a paper that has been accepted for publication in a journal. The error does not affect the overall results of his research, but it is potentially misleading. The journal has just gone to press, so it is too late to catch the error before it appears in print. In order to avoid embarrassment, Dr. T decides to ignore the error. Dr. T's error is not misconduct nor is his decision to take no action to correct the error. Most researchers, as well as many different policies and codes, including ECU's policies, would say that Dr. T should tell the journal about the error and consider publishing a correction or errata. Failing to publish a correction would be unethical because it would violate norms relating to honesty and objectivity in research. There are many other activities that the government does not define as "misconduct" but which are still regarded by most researchers as unethical. These are called "other deviations" from acceptable research practices and include: Publishing the same paper in two different journals without telling the editors Submitting the same paper to different journals without telling the editors Not informing a collaborator of your intent to file a patent in order to make sure that you are the sole inventor Including a colleague as an author on a paper in return for a favor even though the colleague did not make a serious contribution to the paper Discussing with your colleagues confidential data from a paper that you are reviewing for a journal Trimming outliers from a data set without discussing your reasons in paper Using an inappropriate statistical technique in order to enhance the significance of your research Bypassing the peer review process and announcing your results through a press conference without giving peers adequate information to review your work Conducting a review of the literature that fails to acknowledge the contributions of other people in the field or relevant prior work Stretching the truth on a grant application in order to convince reviewers that your project will make a significant contribution to the field Stretching the truth on a job application or curriculum vita Giving the same research project to two graduate students in order to see who can do it the fastest Overworking, neglecting, or exploiting graduate or post-doctoral students Failing to keep good research records Failing to maintain research data for a reasonable period of time Making derogatory comments and personal attacks in your review of author's submission Promising a student a better grade for sexual favors Using a racist epithet in the laboratory Making significant deviations from the research protocol approved by your institution's Animal Care and Use Committee or Institutional Review Board for Human Subjects Research without telling the committee or the board Not reporting an adverse event in a human research experiment Wasting animals in research Exposing students and staff to biological risks in violation of your institution's biosafety rules Rejecting a manuscript for publication without even reading it Sabotaging someone's work Stealing supplies, books, or data Rigging an experiment so you know how it will turn out Making unauthorized copies of data, papers, or computer programs Owning over $10,000 in stock in a company that sponsors your research and not disclosing this financial interest Deliberately overestimating the clinical significance of a new drug in order to obtain economic benefits These actions would be regarded as unethical by most scientists and some might even be illegal. Most of these would also violate different professional ethics codes or institutional policies. However, they do not fall into the narrow category of actions that the government classifies as research misconduct. Indeed, there has been considerable debate about the definition of "research misconduct" and many researchers and policy makers are not satisfied with the government's narrow definition that focuses on FFP. However, given the huge list of potential offenses that might fall into the category "other serious deviations," and the practical problems with defining and policing these other deviations, it is understandable why government officials have chosen to limit their focus. Finally, situations frequently arise in research in which different people disagree about the proper course of action and there is no broad consensus about what should be done. In these situations, there may be good arguments on both sides of the issue and different ethical principles may conflict. These situations create difficult decisions for research known as ethical dilemmas. Consider the following case: Case 3: Dr. Wexford is the principal investigator of a large, epidemiological study on the health of 5,000 agricultural workers. She has an impressive dataset that includes information on demographics, environmental exposures, diet, genetics, and various disease outcomes such as cancer, Parkinson‘s disease (PD), and ALS. She has just published a paper on the relationship between pesticide exposure and PD in a prestigious journal. She is planning to publish many other papers from her dataset. She receives a request from another research team that wants access to her complete dataset. They are interested in examining the relationship between pesticide exposures and skin cancer. Dr. Wexford was planning to conduct a study on this topic. Dr. Wexford faces a difficult choice. On the one hand, the ethical norm of openness obliges her to share data with the other research team. Her funding agency may also have rules that obligate her to share data. On the other hand, if she shares data with the other team, they may publish results that she was planning to publish, thus depriving her (and her team) of recognition and priority. It seems that there are good arguments on both sides of this issue and Dr. Wexford needs to take some time to think about what she should do. One possible option is to share data, provided that the investigators sign a data use agreement. The agreement could define allowable uses of the data, publication plans, authorship, etc. The following are some step that researchers, such as Dr. Wexford, can take to deal with ethical dilemmas in research: What is the problem or issue? It is always important to get a clear statement of the problem. In this case, the issue is whether to share information with the other research team. What is the relevant information? Many bad decisions are made as a result of poor information. To know what to do, Dr. Wexford needs to have more information concerning such matters as university or funding agency policies that may apply to this situation, the team's intellectual property interests, the possibility of negotiating some kind of agreement with the other team, whether the other team also has some information it is willing to share, etc. Will the public/science be better served by the additional research? What are the different options? People may fail to see different options due to a limited imagination, bias, ignorance, or fear. In this case, there may be another choice besides 'share' or 'don't share,' such as 'negotiate an agreement.' How do ethical codes or policies as well as legal rules apply to these different options? The university or funding agency may have policies on data management that apply to this case. Broader ethical rules, such as openness and respect for credit and intellectual property, may also apply to this case. Laws relating to intellectual property may be relevant. Are there any people who can offer ethical advice? It may be useful to seek advice from a colleague, a senior researcher, your department chair, or anyone else you can trust (?). In the case, Dr. Wexford might want to talk to her supervisor and research team before making a decision. After considering these questions, a person facing an ethical dilemma may decide to ask more questions, gather more information, explore different options, or consider other ethical rules. However, at some point he or she will have to make a decision and then take action. Ideally, a person who makes a decision in an ethical dilemma should be able to justify his or her decision to himself or herself, as well as colleagues, administrators, and other people who might be affected by the decision. He or she should be able to articulate reasons for his or her conduct and should consider the following questions in order to explain how he or she arrived at his or her decision: . Which choice could stand up to further publicity and scrutiny? Which choice could you not live with? Think of the wisest person you know. What would he or she do in this situation? Which choice would be the most just, fair, or responsible? Which choice will probably have the best overall consequences? After considering all of these questions, one still might find it difficult to decide what to do. If this is the case, then it may be appropriate to consider others ways of making the decision, such as going with one's gut feeling, seeking guidance through prayer or meditation, or even flipping a coin. Endorsing these methods in this context need not imply that ethical decisions are irrational or that these other methods should be used only as a last resort. The main point is that human reasoning plays a pivotal role in ethical decision-making but there are limits to its ability to solve all ethical dilemmas in a finite amount of time. Promoting Ethical Conduct in Science Many of you may be wondering why you are required to have training in research ethics. You may believe that you are highly ethical and know the difference between right and wrong. You would never fabricate or falsify data or plagiarize. Indeed, you also may believe that most of your colleagues are highly ethical and that there is no ethics problem in research. If you feel this way, relax. No one is accusing you of acting unethically. Indeed, the best evidence we have shows that misconduct is a very rare occurrence in research, although there is considerable variation among various estimates. The rate of misconduct has been estimated to be as low as 0.01% of researchers per year (based on confirmed cases of misconduct in federally funded research) to as high as 1% of researchers per year (based on self-reports of misconduct on anonymous surveys). See Shamoo and Resnik (2009), cited above. Clearly, it would be useful to have more data on this topic, but so far there is no evidence that science has become ethically corrupt. However, even if misconduct is rare, it can have a tremendous impact on research. Consider an analogy with crime: it does not take many murders or rapes in a town to erode the community's sense of trust and increase the community's fear and paranoia. The same is true with the most serious crimes in science, i.e. fabrication, falsification, and plagiarism. However, most of the crimes committed in science probably are not tantamount to murder or rape, but ethically significant misdeeds that are classified by the government as 'deviations.' Moreover, there are many situations in research that pose genuine ethical dilemmas. Will training and education in research ethics help reduce the rate of misconduct in science? It is too early to tell. The answer to this question depends, in part, on how one understands the causes of misconduct. There are two main theories about why researchers commit misconduct. According to the "bad apple" theory, most scientists are highly ethical. Only researchers who are morally corrupt, economically desperate, or psychologically disturbed commit misconduct. Moreover, only a fool would commit misconduct because science's peer review system and self- correcting mechanisms will eventually catch those who try to cheat the system. In any case, a course in research ethics will have little impact on "bad apples," one might argue. According to the "stressful" or "imperfect" environment theory, misconduct occurs because various institutional pressures, incentives, and constraints encourage people to commit misconduct, such as pressures to publish or obtain grants or contracts, career ambitions, the pursuit of profit or fame, poor supervision of students and trainees, and poor oversight of researchers. Moreover, defenders of the stressful environment theory point out that science's peer review system is far from perfect and that it is relatively easy to cheat the system. Erroneous or fraudulent research often enters the public record without being detected for years. To the extent that research environment is an important factor in misconduct, a course in research ethics is likely to help people get a better understanding of these stresses, sensitize people to ethical concerns, and improve ethical judgment and decision making. Misconduct probably results from environmental and individual causes, i.e. when people who are morally weak, ignorant, or insensitive are placed in stressful or imperfect environments. In any case, a course in research ethics is useful in helping to prevent deviations from norms even if it does not prevent misconduct. Many of the deviations that occur in research may occur because researchers simple do not know or have never thought seriously about some of the ethical norms of research. For example, some unethical authorship practices probably reflect years of tradition in the research community that have not been questioned seriously until recently. If the director of a lab is named as an author on every paper that comes from his lab, even if he does not make a significant contribution, what could be wrong with that? That's just the way it's done, one might argue. If a drug company uses ghostwriters to write papers "authored" by its physician- employees, what's wrong about this practice? Ghost writers help write all sorts of books these days, so what's wrong with using ghostwriters in research? Another example where there may be some ignorance or mistaken traditions is conflicts of interest in research. A researcher may think that a "normal" or "traditional" financial relationship, such as accepting stock or a consulting fee from a drug company that sponsors her research, raises no serious ethical issues. Or perhaps a university administrator sees no ethical problem in taking a large gift with strings attached from a pharmaceutical company. Maybe a physician thinks that it is perfectly appropriate to receive a $300 finder‘s fee for referring patients into a clinical trial. If "deviations" from ethical conduct occur in research as a result of ignorance or a failure to reflect critically on problematic traditions, then a course in research ethics may help reduce the rate of serious deviations by improving the researcher's understanding of ethics and by sensitizing him or her to the issues. Finally, training in research ethics should be able to help researchers grapple with ethical dilemmas by introducing researchers to important concepts, tools, principles, and methods that can be useful in resolving these dilemmas. In fact, the issues have become so important that the NIH and NSF have mandated training in research ethics for graduate students. Alcohol, Ethics & Society-Daily Summary Alcohol, Ethics & Society: An International Conference on Rights and Responsibilities opened today at the new campus of the National College of Ireland (NCI) in Dublin. The conference, sponsored jointly by the International Center for Alcohol Policies (ICAP) and NCI, seeks to explore the roles of key players in the alcohol debate. It is intended to provide a framework for constructive dialogue and to explore the rights and responsibilities, shared values and partnership potential among all relevant stakeholders. The opening session of the conference was chaired jointly by Prof. Joyce O‘Connor, President of NCI, and Mr. Marcus Grant, President of ICAP, who introduced the session by providing a historical backdrop of the relationship between the two organizations and their ongoing work in the area of corporate social responsibility. In 1998, the partnership between NCI and ICAP produced the Dublin Principles, a framework to guide the relationship between the beverage alcohol industry and the research community. Opening Address Setting the stage for the discussion about partnership in the development of sound alcohol policies, the conference was opened by Minister Michael McDowell TD, Ireland‘s Minister for Justice, Equality and Law Reform. The Minister focused on the current national debate in Ireland about how best to address the harms that result from the abuse of alcohol. To date, no clear consensus has emerged on how to deal with the changing patterns in the consumption of alcohol among the Irish and the resulting problems. This changing trend in consumption, according to the Minister is attributable to ―societal changes, changing lifestyles and expectations, more disposable income, the lessening of parental control on young people and a strong focus on consumerism.‖ ―This suggests to me that simplistic solutions will not work‖, continued Minister McDowell. ―Effective action will involve partnership and dialogue.‖ The conference, in his view, will assist in the process of identifying common ground. In the specific case of Ireland, reform of licensing laws by the Commission on Liquor Licensing, will go a long way towards addressing some of these issues, provided they are based on clear legislation and its enforcement and an open and transparent decision-making process. This process will involve partnerships, both between different government entities and between government, public health, and a responsible industry. The Minister‘s opening address was followed by eminent speakers from the international arena who represent the broad reach of the conference and its inclusion of all those with a stake in the dialogue on rights and responsibilities in the alcohol field. ―Corporate Social Responsibility – A Context for Alcohol Policy‖ Mr. Peter Coors, Chairman of the Coors Brewing Company, one of the largest breweries in the United States, confronted directly the issue of corporate social responsibility. Using the case of his own company as an example, Mr. Coors examined the rationale behind the increasing commitment by companies to making corporate social responsibility an essential part of their business mission, strategy and operations. Coors, he said, supports this approach, for ―(s)upporting sound alcohol policies is the right thing to do.‖ Along with good corporate citizenship, there are several other elements that should be combined in this effort -- personal accountability, understanding cultural context, and working in partnership. ICAP, he said, through its activities, had broken new ground within this area, ―moving from dialogue to action.‖ While skeptics will always exist, their criticism can be constructive if it ―encourages us to relentlessly examine our efforts to improve our communities.‖ Mr. Coors concluded, ―Our progress should not be impaired or distracted by debate about WHO is right, but rather fueled by discussion about WHAT is right.‖ ―Through a Looking Glass: Corporate Social Responsibility and the Use of Alcohol‖ His remarks were echoed by Prof. Joyce O‘Connor, President of NCI, who addressed the need for corporate social responsibility to include an interaction between social, economic and environmental issues. The core of corporate responsibility, she added, rests on openness and honesty. Alcohol in Ireland, said Prof. O‘Connor, is an integral part of society and a highly emotional issue, which has not changed significantly since the 18th century. While much of Irish drinking is centered around social interaction, fun and enjoyment. Addressing the close relationship between alcohol and Irish society, most importantly, relies on the integration of issues. Key elements in the strategy must include a balance between individuals‘ right to choose and the right of society to protect the community from harm. The process is one that needs leadership from government, business, parent groups and others. Prof. O‘Connor‘s challenge to the conference, ―Let the dialogue begin.‖ ―Alcohol in Ireland: A Lot of Damage Done, More To Do‖ Providing a context to the role of alcohol in Ireland and a public health perspective on the ethical debate to that particular country was Dr. Joseph Barry, Senior Lecturer in Public Health at Trinity College, Dublin. In his presentation, Dr. Barry addressed the rising alcohol consumption in Ireland and the efforts of the government to address the associated harm resulting from misuse. In its interim report, the Strategic Task Force on Alcohol has recommended approaches to reducing the social and health costs in Ireland, many of which have been opposed by the alcohol industry in Ireland. Approaches that have proven effective, according to Dr. Barry, involve regulation of alcohol. Education on alcohol issues, he said, have not proven successful. What is needed is an approach that addresses the emotional aspects of alcohol in Ireland, and the myriad factors that are part of it. While ―drinking is an individual act, individuals do not make their choices in a vacuum.‖ GOVERNMENT REGULATION, INDUSTRY SELF-REGULATION AND PERSONAL PLEASURE \ Where do the rights of the consumer end and those of government begin? Who decides what ―responsible drinking‖ means? The first thematic session of the conference was designed to explore two questions central to the alcohol debate: Where do the rights of the consumer end and those of government begin? Who decides what ―responsible drinking‖ means? The session was chaired by Ms. Jodie Bernstein, former Director of Consumer Protection at the U.S. Federal Trade Commission, the government body charged with overseeing regulatory issues. ―Government Regulation, Corporate Responsibility and Personal Pleasure: A Public Health Perspective From New Zealand‖ Dr. Mike MacAvoy, CEO of the Alcohol Advisory Council of New Zealand (ALAC), offered a perspective on an ideal society in which alcohol consumption is a source of individual pleasure, yet where its consumption is responsible and the rights and wellbeing of individuals are safeguarded. The presentation addressed various players and issues that must be considered in order to achieve this end: ―the rights and responsibilities of the individual; the role of government in regulating those rights and responsibilities, whilst preserving the freedom of the individual as far as is possible; and the responsibility of the alcohol industry to ensure that communities, at the very least, are not harmed by alcohol in the drive for market share and shareholder satisfaction.‖ At the heart of the debate is society‘s inability to form a balanced view of what an ideal society in which alcohol is present might look like. ―History has taught us the folly of many attempts to prohibit alcohol, particularly where there are no compelling cultural, religious or moral beliefs to support such an approach. The reality is that alcohol will remain an intrinsic part of most societies in which it has found a niche. Therefore, the debate should be about how to live harmoniously with alcohol rather than how to battle to live without it.‖ ―Why Doctors Should Not Interfere In Their Patients‘ Drinking Habits‖ The health profession, in particular primary care physicians, has long been encouraged to guide their patients‘ drinking behavior. From the perspective of a primary care physician, Dr. Michael Fitzpatrick, author of ―The Tyranny of Health‖, examined the role of physicians to in determining the drinking behavior of their patients. The criteria for such recommendations rely on a ‗population strategy‘, that attempts to offer blanket advice to the general populus. This approach, according to Fitzpatrick, is ineffective and not of much use. Rather, a role for the physician is called for only when a patient is clearly in need of help with his or her drinking. ―God, Country and the Spirit of Man‖ Drawing upon the historical context for the debate on alcohol between those who would allow it and those who would seek its prohibition, Dr. Vijay Mallya, Chairman of the United Breweries of India, offered the perspective of the beverage alcohol industry in society‘s quest for the ―golden mean‖ in alcohol consumption. The key to the quest lies ―not in regulation but in education, it lies not in prohibition, but in moderation, not in confrontation but a mutual appreciation of (…) viewpoints and cooperation.‖ Using the example of India with its democratic tradition, its multicultural and multilingual society and the integral presence of prohibition in its Constitution, Dr. Mallya described the juxtaposition of industry and government in alcohol issues. Excessive regulation and taxation, he said, lead to abuse and evasion. The proper approach to alcohol issues is one that focuses on misuse, with the industry as a platform for educating consumers. People must have the freedom to do what they will, he said, but must be warned about its ill effects. ―Alcohol Policy through Partnership: Is the Glass Half-Empty or Half-Full?‖ The closing presentation of the day was delivered by Mr. Marcus Grant, President of ICAP, one of the conference sponsors, who focused on the theme of partnership in developing sound alcohol policies. According to Grant, ―Partnership is not a goal but a way to achieve a goal. The goal is defining the role of alcohol in a society so that benefits are maximized and problems are minimized.‖ Any effective partnership must be based on the general principles developed by the World Health Organization, ―mutual respect, trust, transparency, and shared benefits‖ Drawing upon the results of an international survey of key policymakers conducted by ICAP, Mr. Grant addressed priorities and directions for partnerships in alcohol policy development. While existing partnerships with the industry are more common in mature industrialized countries than in developing countries, the world, according to the survey, is evenly divided between those who view them as desirable and those who do not. For those who would favor such partnerships, public education about alcohol is clearly the main priority for action. The challenge remains how best to respond to the need for better education – it is a challenge for the beverage alcohol industry, for educators and health advocates, for researchers and for governments alike. ―Is the financial health of the beverage alcohol industry incompatible with the good health of the drinking population?‖ asks Grant. The proof of the pudding may well lie in partnership. Alcohol, Ethics & Society-Daily Summary The second day of the conference continued the attempt to establish an ethical framework for alcohol policy development. Addressing the role of research and education, the morning session posed some critical questions: When it comes to research, does the source of funding always create bias? Who has the responsibility to educate the public about the ―good‖ and ―bad‖ aspects of drinking? Chairing the session was Mr. Graeme Willersdorf, Senor Vice President for Corporate Affairs at Foster‘s Group and Chairman of ICAP‘s Board of Directors. This session, said Mr. Willersdorf, is an extension of the work already done by the sponsoring organizations in the area of research and education, particularly the Dublin Principles and the Geneva Partnership on Alcohol: Towards a Global Charter. These two consensus documents addressing the issues of research and education can be found on the ICAP website. ―Approaches to Primary Prevention of Alcohol Use: Research and Ethical Questions‖ Dr. Mark Morgan, Head of the Education Department of St. Patrick‘s College of Education in Dublin and a founding member of the ESPAD study on alcohol, reviewed a range of approaches to prevent alcohol problems among young people that have been applied in many countries around the world. The basic dichotomy in approaches that are implemented in schools lies the choice of reducing demand versus reducing supply. According to Dr. Morgan, while the former has shown but modest success, the latter holds considerable promise as an effective tool. School education programs, said Dr. Morgan, can be effective under certain circumstances: where there is active participation by the learners, those at whom the program is directed; where there is understanding of the social influences that are at work; where parental influences are involved; where there is an emphasis on health, not on punitive measure; where the program is an integral part of the curriculum. However, ―(o)ne major conclusion is that no policy can be effective unless it is accompanied by enforcement and there is awareness on the part of the intended targets of both the policy and the enforcement efforts.‖ ―Campus-Community Collaboration – A Practical Approach to Curbing Alcohol Abuse on Campus" Bringing with him the experience from university campuses on the other side of the Atlantic, Dr. Peter Cressy, President and CEO of the Distilled Spirits Council of the United States (DISCUS), reviewed the problem of alcohol misuse currently facing college administrators and students in that country. The presentation focused on the drinking behavior on university campuses in the United States and examined the dilemma faced by universities in their responsibility for a student body largely under the legal drinking age. Dr. Cressy addressed some of the approaches that have been implemented to solve this dilemma and to change students‘ drinking behaviors that are associated with harm. In particular, Dr. Cressy‘s presentation focused on an industry–campus–community partnership effort that is being carried out in several regions of the United States with considerable success. The ―American Campus and Alcohol Conference‖ involves all relevant sectors at all stages of its execution, from planning to funding. In this approach, all partners involved work in tandem towards a common goal. According to Dr. Cressy, the lessons learned include that ―the industry must be at the table and seen as part of the solution‖. In addition, it is especially important to ―pay attention to dangerous consequences associated with risky and abusive drinking.‖ ―The Promise of Partnership for Research and Education‖ Adding a different perspective, Dr. John Luik from the Niagara Institute in Canada, examined the three arguments fundamental to the case that is often made against partnerships including the beverage alcohol industry. First, there is the notion that the alcohol industry, on the one hand, and the public health community on the other are each dominated by irreconcilable interests – increased profit versus public good. The second argument is that the industry manipulates the ―‗ideological climate‘ by an idea and research agenda that is founded on questionable science.‖ Third, the ―essential tension‖ that ensues makes partnership impracticable. According to Dr. Luik, these three arguments ―present a misconceived debate about the nature of industry science‖, ignoring the significant promise partnership holds. Conflicts of interest need not arise exclusively from commercial organizations, but can equally stem from government and other entities with their own agendas. ―The public health community‘s interests are thus not necessarily right, either in part or in whole, they enjoy no privileged status; rather they must be argued for in the same fashion as any other interests.‖ Partnerships in the alcohol filed require that three principles be respected – a recognition of the benefits of moderate drinking, a focus on the reduction of problematic drinking, and the use of the best available science to determine the root causes of problems. It is possible for all parties in a partnership to accept each other‘s core interests, according to Dr. Luik. In fact, disagreement on some core interests need not be an obstacle to agreement on others. In developing such partnerships, ―(w) hat starts out as ‗sleeping with the enemy‘ may over time lead to setting up a home and having a family.‖ ―Drinking Education: Minimizing Negatives and Optimizing Positives‖ The pleasurable aspects of alcohol consumption have been chronicled over time and across cultures, yet not all cultures view alcohol as a source of pleasure. Focusing on the element of pleasure that often accompanies alcohol consumption, the last presenter in this session, Dr. Stanton Peele, author and addiction expert from the U.S., offered ―The Joy of Drinking‖ as a positive model that can promote successful drinking patterns. While most people, asked individually about their views of alcohol and its effects, would place pleasure foremost, public health groups place harms foremost, particularly as they relate to young people. Yet, according to Dr. Peele, ―ignoring health and pleasure benefits while referring only to the danger and harm associated with alcohol may delay – even permanently impair – people‘s ability to adopt sensible and pleasurable drinking practices.‖ It is therefore important that, as young people learn about drinking, they be taught about both the potential harms and the benefits – physiological and psychological – to be derived from alcohol. The goal should be to learn moderate drinking. ―The development of moderate drinking is both possible and beneficial; it is beneficial for the individual and for those around the person as well as for the society at large. In other words, people should learn as an ethical tenet that excessive drinking and antisocial behavior while drinking is wrong.‖ ADVERTISING, MARKETING AND SALES (2pm to 3:30pm) At the heart of the debate around ethical practices and corporate social responsibility lies the issue of advertising and marketing of consumer products. In relation to alcohol, this debate has broader implications that extend into the realm of public health. Is it enough that advertising should be ―truthful, honest and decent,‖ or are higher ethical standards needed for beverage alcohol? Who should have the last word? The session was chaired by Mr. Jose Domingo Gomez Castallo, Chairman of the European Advertising Standards Authority, who positioned the session within the context of alcohol abuse among young people. This issue, he said, is the collective responsibility of society, however, the industry, too, must accept its share. ―Drinking It In: Findings of the Valencia Meeting on Marketing and Promotion of Alcohol to Young People‖ Ms. Leanne Riley, Scientist at the World Health Organization‘s Headquarters in Geneva, presented the conclusions and recommendations of a meeting held earlier in 2002 to address the effect of alcohol marketing and advertising on young people around the world. While alcohol advertising is not the sole factor responsible for alcohol misuse among young people, its highly visible role makes it an important one. Alcohol misuse is a key contributor to morbidity and mortality, and is increasing among young people the world over. The involvement of beverage alcohol advertising, according to Ms. Riley, is an influence on changing beliefs and expectations among young people about drinking, which is generally portrayed in advertising as positive, desirable, and the norm in most societies. These portrayals are problematic and make the environment a hostile one to public health messages. Current responses to marketing – codes, warnings, restrictions and counter-advertising – are inadequate to deal with the new forms of advertising and new products that are on the market and have appeal for young people. WHO has developed recommendations for these issues, which should be implemented in countries around the world. In addition, partnerships and the input of the beverage alcohol industry are to be encouraged. In Ms. Riley‘s words, WHO‘s challenge to the industry is that it ―can be part of the problem or part of the solution.‖ ―Are Alcohol Advertisers Drinking In the Last Chance Saloon?‖ Speaking from three differing perspectives, that of an adman who has spent thirty years in advertising, many of them working on alcohol brands, that of a regulator within the UK‘s Advertising Standards Authority, and that of a parent of a teenage son, Mr. Hugh Burkitt offered a critique of alcohol advertising in the United Kingdom. While rules on the advertising of alcohol exist, according to Burkitt, they are largely being ignored, particularly on television. The three main issues that need particular attention in this regard are targeting of young drinkers, binge drinking and depictions of sexual success in advertising. Using examples of existing television commercials to illustrate his point, Mr. Burkitt offered a response to one of the key questions addressed in this session -- higher ethical standards are needed for alcohol than the standard rules on truth and decency, for ―(a)lcohol brings great pleasure to an enormous number of people. But it is also dangerous, and I would agree with myself – in all three of my roles – that young people, in particular, need to learn how to drink it sensibly.‖ ―Alcohol Advertising and Promotions: The Good, the Bad and the Ugly?‖ Professor Ann Roche, Director of the National Centre for Education and Training on Addiction at Flinders University in Australia, discussed the contentious field of alcohol advertising and the disparate and often adversarial views held on the subject by the beverage alcohol industry and the public health field. The presentation was an attempt to lay the groundwork for what constitutes good and bad, or inappropriate, advertising, as well as responsible consumption and discussed the ambivalence that bedevils both its consumption and its advertising and promotion. Using examples, Prof. Roche illustrated both the good and the bad, the responsible and irresponsible in alcohol advertising. New products whose packaging or delivery raises concerns regarding responsible serving and consumption were highlighted. Another area for particular concern, according to the speaker, includes the sale, promotion and distribution of beverage alcohol through the internet. However, there also exists a large body of advertising that is acceptable from a public health perspective. Many of these ―depict images that reflect low risk drinking patterns, place drinking in the context of eating food, or, more specifically, consuming good quality food with good quality alcohol.‖ Prof. Roche concluded her remarks with an assessment of the current state of advertising of beverage alcohol. In its efforts, she said, the industry is misreading today‘s culture and pushing the envelope beyond acceptable limits of taste. The limit to advertising is clearly marked around several ―hands-off‖ areas – youth, the objectification of women, sex, risky behavior, and sports. ―Setting the Standards for Responsible Consumer Marketing‖ The final presentation in the session was delivered by Mr. Chris Britton, Global Marketing Director for Diageo plc. In an overview of marketing practice in general, Mr. Britton stressed the role of the consumer in driving the market. Marketing, he said, is based on insight into the values, attitudes and preferences of consumers. In the alcohol field, as in others, it is consumers who drive the business. However, ―great brands have to be produced and marketed to the highest standards of social acceptability and responsibility.‖ This tenet must lie at the very core of the advertising and marketing process. In setting the standards for responsible marketing, Diageo has pledged to take a leading role towards developing the concept of ―drinking well‖. Responsible consumer marketing, he said, should not be a constraint, but a positive driver linked to company performance and the creation of the educated consumer. As a demonstration of this commitment, Mr. Britton announced publicly that Diageo has signed on to the U.N. Global Compact on corporate social responsibility, making it the first drinks company to do so. Yet at the end of the day, it should be borne in mind that ―(j)ust as the brand owner must market responsibly, so the consumer has a responsibility to drink responsibly.‖ ALCOHOL, ETHICS & SOCIETY-DAILY SUMMARY Who are the stakeholders in the alcohol debate? What are the rights and responsibilities of each? How do we put abstract principles into real-world action? The final session of the Alcohol, Ethics & Society conference began with an address by the President of the European Parliament, who, on the eve of the Irish referendum on the Nice Treaty emphasized the important role played by civil society in the transformation that has been ongoing in Europe over the last two decades. Corporate social responsibility, he stressed, is an important factor in the debate around sustainability in which Europe needs to engage. Presentation of General Conclusions The dialogue initiated at the conference opened the door to the exchange of diverse points of view. However, there were several areas in which there was consensus and which hold promise for the development of future partnerships. While these do not represent a consensus statement to ensue from the conference, they are areas of agreement upon which future dialogue can be built. Professor Hurst Hannum, Professor of International Law at Tufts University and Mr. David Logan, Director, the Corporate Citizenship Company in the U.K., and Adjunct Professor at the National College of Ireland.and Mr. David Logan summarized the points on which agreement was apparent. • The development of an appropriate alcohol policy requires complex solutions. However, they must include honesty and transparency between partners and an understanding of the role of social and cultural norms. • There must also be agreement on what the goals of appropriate alcohol policies should be. While there is consensus that the reduction of harm should be a key goal, there is less consensus on whether this should be the only goal, and, if it is not, what other goals should be. • Education is necessary, but not sufficient for promoting the responsible consumption of alcohol. It should also be borne in mind that there are two components to education – the provision of information and the inculcation of social values. These two components must be kept separate. • Everyone has responsibilities around alcohol – individuals, families, communities, the industry and government. • Partnerships are not only possible, but necessary to achieve goals and for successful implementation. There are several additional issues that should be considered in the implementation of partnerships. No single entity can be held solely responsible. Partnerships require the willing participation of all entities. However, not all groups need participate in all partnerships, and not all issues can or should be addressed – each sector should examine its own capacity and what it is able to do. It is also important to understand that the pace of partnership must depend on the willingness of the parties involved and should be appropriate. Finally, each party must have an appreciation of the culture and taboos of the others. ―Aligning Business Interests and Corporate Social Responsibility: Congress‘ Perspective‖ Senator Joe O‘Toole, President, Irish Congress of Trade Unions offered another perspective on the place of alcohol in Irish society and the approaches that are useful in addressing problems and minimizing harm. According to Senator O‘Toole, any alcohol strategy aimed at the supply side is doomed to failure. A more effective approach is one that focuses on demand and the reasons people drink and how they drink. Success can only be achieved if societal attitudes are changed. However, any policy and its objectives must be reasonable, sensible, and attainable. The end goal in alcohol policy should be moderation, making drinking ―part of a social occasion, rather than the social occasion itself. ―Aligning Business Interests and Corporate Social Responsibility: An Employers‘ Perspective‖ Corporate responsibility and accountability have increasingly gained importance in aspects of corporate life, influencing most aspects of business. Mr. Maurice Pratt, President of the Irish Business and Employers Confederation (IBEC), discussed how this change has manifested itself in the initiatives undertaken by the Drinks Industry Group of Ireland. In response to the need for greater social responsibility around alcohol, a new organization was founded, its mandate reflected in its name, Meaningful Enjoyment of Alcohol in Society (MEAS). The general message of the organization is ―that the reasonable and responsible consumption of alcohol is fine.‖ Its vision reflects the notion that the balanced understanding of alcohol issues, the promotion of sensible drinking and the reduction of alcohol related harm are achievable through partnership. The member companies of MEAS, including some of the major producers of beverage alcohol active in Ireland, presents a unified voice for the beverage alcohol industry on social responsibility and drinking. Its creation ―is a statement of responsibility. We are responsible people working in a responsible industry accepting our responsibilities to society. In return, we expect a fair debate about the issues we all face relating to the social aspects of alcohol.‖ Closing Speech ―A Fresh Look on the Role of NGOs: How Secure is Our Financial Future?‖ In a changing economic and political world, with increasing pressures and diminishing availability of funding, the very existence of many non-governmental organizations (NGOs) is threatened. As a result, ―NGOs must begin to develop at least some degree of self-sufficiency if they are to have any medium to long-term plans and aspirations.‖ Using the Population and Community Development Association (PDA) of Thailand as an illustration, Senator Mechai Viravaidya, the organization‘s founder, described the partnerships that PDA has forged with the private sector to promote sustainable and stem population growth in rural and urban communities throughout that country. The plan for action developed can serve as a module that can easily be adapted and changed for a range of circumstances. It relies on the establishment of for-profit companies, each serving as a source of funding for a not-for-profit. These would rely, in the first instance on private donors, then also involve the business sector. PDA has established 16 for-profit companies in Thailand, including the well-known Cabbages and Condoms Restaurants that provide a source of funding for the NGOs own activities. A world stage for developing alcohol policy Developing effective policy is a dynamic process fostered by meaningful dialogue. This conference served as a crucial step in building consensus among diverse experts, thus paving the way for putting theories about alcohol policy into practice. Alcohol, Ethics and Society was attended by leaders from around the world, including representatives and officials from the government, commercial and nongovernmental sectors, as well as consumers, clinicians, and educators. Participants included professionals from the following areas: Advertising Beverage Alcohol Producers Education Government Health Intergovernmental Organizations Law Enforcement Media Nongovernmental Organizations Public Policy Research Retail Conclusion Ethics are important not only in business but in all aspects of life because it is an essential part of the foundation on which of a civilized society is build. A business or society that lacks ethical principles is bound to fail sooner or later.
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