Business ethics

Activity 11 -. Loss Av ersion

1. Introduction:

The objectiv e of this video isto introduce students to the concept of loss aversion so that

they can realize how it is one of a series of psychological forcesthat can cause them to act unethically, almost without realizing it. It

is a phenomenon that must be guarded against.

People can relate to the notion that loss av ersion has an impact on tax cheating. People

will cheat more to avoid a loss than to secure a gain. So, if they have over-withheld, they are less likely to cheat in orderto obtain a
larger tax refund (which they view as a gain) than they are to cheat if they have under-withheld and are trying to avoid making a tax
payment (which they view as a loss).

The two keythings about loss av ersion are that people hate losses more than they enjoy gains and

that they will take risks (including unethical actions) to avoid Iossesthat they would nottake to secure gains. Students can usually grasp
this idea and relate to it in their everyday lives. Astudent is more likely to c eatto avoid flunking out o school (a loss) than to move
from a B to an A(a gain), unless she has a 4.0 GPA and views the potential B as a loss. In one experiment, subjects were more likely to be
in fav or of gathering “insider information” and more likely to lie in a negotiation if facing a loss ratherthan a potential gain. In real

life, loss aversion meansthat peoplewho have made mistakes and perhaps even violated the lawthrough carelessness orinattention often
will, upon realizing that fact,take their first consciously wrongful step in order to attempt to ensure that the mistake is not discovered

and they do not lose their job ortheir reputation. They will lie, they will shred, and they will obstructjustice. Martha Stewart was not
convicted of insidertrading, but of obstructing justice to prevent financial, reputational, and other lossesthatwould come from an

insider trading conviction. Frank Quattrone, Wall Street’s most influential investment banker during the dot.com boom, wasnot convicted
of securities raud but of inducing subordinatesto destroy e-mails that would have created the Io ss that follows such a conviction.

Loss

aversion also meansthatfirmsthat are performing well, but not as well asthey expected to or as other expected them to,may engage in
unethical behavior because they frame their act of profiting (but not profiting as much as expected) as a loss rather than a gain.

Task – Watch the following video:

https://www.youtube.com/watch?v=oFbwPcsOI1A

3. Activity:

1. Studies show that people hate

lossestwice as much as they enjoy gains? Is that consistent with your experience?

2. Have you ever been caught off guard doing something

you probably shouldn’t have been doing (eating the last cookie in the cookie jar, peeking in someone’s diary, touching your mother’s
jewelry) and when surprised with the question: ‘What are you doing?”, quickly and almost automatically (and falsely) said: “Nothing!”

Are cent studyfound that when people were undertime pressure, they were more willing to cheat to av oid losses (“losing the sale”) than to
accrue gains (“getting the sale”). Do you thinkthat is how you would react?

4. Can you think of any situations where you or someone you

know may hav e made decisions affected by loss aversion?

5. What steps can people take to minimize the chance that loss aversion will help

lead them to act unethically?

Activity 123 Moral Agent &MoraI Subject

1. Introduction:

Written and Narrated by Professor Deni

Elliott

More than 2000 years ago Aristotle and other wealthy Athenian men decided how people like themselves should treat one another.

Ev eryone should be free to pursue their own idea ofthe good life as long asthat person’s choice did not interfere with somebody else’s
Elll1I:ISUIt oLthe good life. That idea of “don’t cause unjustified harm”was prob ablythe first statement of Western Moral

iosop y.

It’s only natural that we should first begin our ethical inquiry by thinking about ourselv es, and how we want to be treated

bIythe people around us. Take a few minutes to watch children on a playground. You don’t have to wait long before you hear somebod[y yell,
hat’s notfair!” or “Che ater.” By the time that kids are about 5, they begin to make rulesfor howto take turns and howto give specia
privilege to those younger or less able. These children are practicing moral agency.

The difference between a moral agent and a subject

of moral worth isthis: Amoral agent is someone who hasthe powerto intentionally cause harm to another. A subject of moral worth is any
being or natural system that is vulnerable – it can be harmed. It’s easy to see that children, pets, and even natural resources like

water are all subjects of moral worth. They are all clearly vulnerable to harms caused bythose who have power over them.

Throughout our . j H

history and across cultures, there have been people who were stripped of their ability to have moral agency or sometimes ev en to count as
subjects of moral worth because of inescapable characteristics. That includes people from minority ethnic, racial or religious groups,
women, people who are lesbian, gay, or transgendered, and people with disabilities. The moral obligation of moral agents is to use their
power with care and never, intentionally cause unjustified harm.

2. Task – Watch the following

videos:

https://www.youtube.com/watch?v=dMv GONPM2zo

3. Activity:

1. Name some abilities that are essential for someone to be a

moral agent.

2. What is necessary for someone to be a subject of moral worth?

3. What isthe difference between someone. being a

subject of moral worth and someone being inclu ed in the moral community?

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