Leadership Forum 2005
Workshop II: Creating an Ethical Asset
Business Education for Creating an Ethical Asset
K. S. Maurice Tse
Associate Dean
Faculty of Business and Economics
University of Hong Kong
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maurice tse, hku
Content
A. Objectives of business ethics education
 What do students want to get out of business ethics education?
B Challenges
 Can business ethics be taught, or learned?
 Cultural differences
 Experience sharing
C. The Core Operating System
 What business schools don’t always teach?
 Essential elements and root qualities of an ethical business leader
D. Environment for Creating an Ethical Individual
 Regulatory and law enforcing bodies
 Business Community
 University/Faculty/Department
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A.
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Objective of business ethics
education
To foster and promote among students their
awareness of the crucial elements for ethical
decision-makings.
Ethics and ethics-related courses offered to both
MBA and Undergraduate Students.
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Practices and activities that are considered importantly
right and wrong
Rules that ought to govern those activities
Values embedded, fostered, or pursued by those
activities and practices
Character traits deserving development in life
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A.
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Objective of business ethics
education
Ask our students what they want to get out of business
ethics education?
In general, their responses can be classified into (not in
order of importance):
 In the process of maximizing profits,
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Be able to identify and signal morally relevant elements in
business situations (moral sensibility)
Be able to give convincing moral reasons for decisions and
action (moral reasoning)
Be aware of moral elements and willing to apply moral
sensibility and reasoning to specific situations (moral
conduct)
Be able to support peers and to direct subordinates in
morally relevant situations (moral leadership)
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B. Challenges
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Can business ethics be taught, or learned?
Cultural differences
Experience sharing
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B. Challenges
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Can business ethics be taught, or learned?
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Yes, students can learn.
We can help promote their awareness.
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Case analysis
Lectures
Questions for discussion to foster experience sharing
News
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Cases: Corporate Accountability

List of US Companies in Trouble
COMPANY
Adelphia
ISSUE
Whether it failed to properly disclose $3.1 billion in
loans and guarantees to its founder's family.
Bristol-Myers
Whether the company improperly inflated revenues by
as much as $1 billion through use of sales incentives.
CMS Energy
Disclosed it overstated revenue in 2000 and 2001 by
including artificial 'round trip' energy trades.
Computer
Associates
Whether it artificially inflated revenue and improperly
rewarded top executives.
AUDITOR
Deloitte & Touche
PricewaterhouseCoopers
Andersen
Ernst & Young
Dynegy
Whether its 'Project Alpha' transactions served primarily
to cut taxes and artificially increase cash flow.
Andersen
Elan
Acknowledged that it created 55 joint ventures to shift
some research and development expenses off its income
statement, while at the same time recording technology
licensing fees from the off-balance sheet entities as
contract revenue
KPMG
Enron
Global
Crossing
Admitted it improperly inflated earnings and hid debt
through business partnerships.
Andersen
Whether it sold its telecom capacity in a way that
artificially boosted its 2001 cash revenue.
Andersen
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Cases: Corporate Accountability

List of US Companies in Trouble
COMPANY
Halliburton
ImClone
Systems
ISSUE
AUDITOR
Whether it improperly recorded revenue
from cost overruns on big construction jobs.
Andersen
Former CEO Samuel Waksal charged with
insider trading.
KPMG
Kmart
Says the SEC is investigating its accounting
and other practices. The company
investigated whether it improperly accounted
for vendor allowances, and since changed its
practice.
PricewaterhouseCoopers
Lucent
Technologies
Adjusted fiscal 2000 revenues by $679
million, spurring SEC investigation. Agency
also investigating whether vendor-financing
played an improper role in its sales.
PricewaterhouseCoopers
Merck
Revealed in an SEC filing that it recorded
$12.4 billion in revenue from the company's
pharmacy-benefits unit over the past three
years that the subsidiary never actually
collected.
Until March 4, 2002: Arthur
Andersen. Currently:
PricewaterhouseCoopers
MicroStrategy
Network
Associates
Settled without admitting wrongdoing an
SEC suit accusing it of backdating sales
contracts to meet quarterly financial
estimates, among other improper revenuerecognition practices.
PricewaterhouseCoopers
Whether it hid expenses or overstated
revenue from 1998 to 2000.
PricewaterhouseCoopers
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Cases: Corporate Accountability

List of US Companies in Trouble
COMPANY
PNC
Financial
Services
Qwest
Reliant
Resources
ISSUE
Restated its 2001 results by $155 million after
regulators raised concerns about how PNC accounted
for a transfer of loans.
Whether it inflated revenue for 2000 and 2001 through
capacity swaps and equipment sales.
Admitted it inflated revenue by counting artificial
'round trip' energy trades.
AUDITOR
Ernst & Young
Andersen
Deloitte & Touche
Rite Aid
Acknowledged overstating net income by $1.6 billion.
Former executives are charged with inflating earnings
to reap rewards tied to financial performance.
KPMG
Tyco
International
Whether it improperly created 'cookie jar' reserves that
were supposed to cover merger costs but instead were
drawn on to boost profits; and whether it improperly
'spring-loaded' earnings from acquisitions by
accelerating their pre-merger outlays.
PricewaterhouseCoopers
Vivendi
Universal
Under investigation by French securities regulators to
determine whether the firm's board withheld
information about short-term liquidity troubles. The
probe follows news that the firm tried and failed to
obtain favorable accounting treatment for a complex
transaction involving British Sky Broadcasting shares
last year.
RSM Salustro Reydel
WorldCom
Admitted to improperly booking $3.8 billion in
expenses as capital expenditures. SEC is also examining
whether it used questionable methods to book sales,
classify assets and account for debts it couldn't collect.
Andersen
Xerox
Fined $10 million without admitting or denying
wrongdoing for inflating revenue and profits from 1997
to 2000 by including future payments on existing
contracts.
KPMG
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日期
30－11－2004
23－11－2004
Financial Frauds
of Listed
Companies in
Hong Kong

Excerpts from
Sing Pao May 3,
2004
9－7－2004
17－6－2004
26－2－2004
5－2－2004
上市公司出事事件簿
公司
事件
創維 數碼（751）
主席黃宏生等董事被廉署拘捕，及後被控
盜取公司資金。
和寶國際 （039）
集團主席黃楚和等人被廉政公署調查，及
後被控 7 項盜竊罪及一項虛假陳述。
先科國際 （724）
主席黃創光等人因涉嫌行賄兩名証卷分析
員，撰寫有利公司報告，被廉政公署拘
捕。
遠東生物制藥（399） 傳有股東被斬倉，股價大瀉 92％，港交
所因未能聯絡管理層而遭勒令停牌，主席
蔡崇真 更因涉私印增值稅發票而被捕，
該股及後更進入臨時清盤狀態。
廣興國際 （1131） 及 廣興 執行董事 李萬德 被廉政公署 拘捕，
利來控股（221）
被指賄賂多名基金經理 及瑞銀華寶分析
員，在相約時間，消息傳出李來高層被
捕，事涉配股事宜中貪污而被捕 。
艾 克國際 （8179） 股價連跌多日，辦事處人去樓空，聯交所
無法聯絡管理層，該股被勒令停牌至今。
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Lecture
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Question:
When faced with an ethical issue, whether at home or
abroad in a different cultural setting, how should we go
about trying to resolve it?
Just whose ethical framework should we use?
Our own, the counterparty’s, the host country’s, or some
compromise?
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Answer?? Very often, very difficult
Different Theories
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Concept of cultural relativism
Concept of cultural absolutism
Relatively new approach by Donaldson and Dunfee (1999):
Integrative Social Contracts Theory (ISCT)….
Ethics as constraints in profit-maximizing formula
Pareto-Optimality notion
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Questions for Discussion &
Experience Sharing
1.
2.
Is business ethics always more important than profits?
What would you do in this situation?
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3.
4.
5.
If you act ethically, you would lose a big deal, and if you
act otherwise, you would win it.
Would you take a bribe, when all the people around you
take such a practice for granted?
For which industry is it easiest to conduct business on a
high ethical level ?
How would you rank the following professionals in terms
of ethical conduct and trustworthiness? Why?
Lawyers; Scientists; Managers; Judges; Medical Doctors;
Priests; Entrepreneurs; Accountants; Engineers;
Journalists; Police.
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Questions for Discussion &
Experience Sharing

The result of an “Ethics Survey” conducted on HKU postgraduate students in 2003 and 2004 is as follows:
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Scientists 95%; Medical Doctors 86%; Judges 80%; Priests 70%;
Engineers 62%; Accountants 61%; Journalists 57%; Police 48%;
Managers 42%; Entrepreneurs 39; Lawyers 37%.
More recently, HKU Career and Placement Centre have
learnt from the major employers in Hong Kong that they
would place “unyielding integrity” at the top of required
managerial attributes.
Why, when the need for ethics/integrity is considered to
be so important by the society, do you rank managers so
low for ethical behavior? And why does respect for
managers appear to be on the decline?
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C. The Core Operating System

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What business schools don’t always teach?
Essential elements and values of an ethical
business leader
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What the many MBA Programs in the world
teach and DON’T’ always teach you
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©
HKU Framework for
Entrepreneurship
by Mr. Po Chung and
Dr. Saimond Yip of the
Centre for Asian
Entrepreneurship and
Business Value
Please visit
www.casebv.com
for the full article.
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What the many MBA Programs in the world
teach and DON’T’ always teach you
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Root Qualities（根 器）??
13 confucian virtues:
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仁: kindness
義: righteousness
禮: respect
智: wisdom
信: trustworthiness
忠: loyalty
勇: courage
廉: uncorrupted-ness
恥: shame
孝: care for the old
悌: care for the young
改: self-correction
恕: forgiveness
©
Some Root Qualities:
•Minimum Passion, focus & dedication
•Minimum luck/blessing factor & health
•Minimum risk tolerance & sleep factor
•Minimum guts & stamina
•Minimum IQ & EQ
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What the many MBA Programs in the world
teach and DON’T’ always teach you
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Chinese Virtues
仁: kindness
義: righteousness
禮: respect
智: wisdom
信: trustworthiness
忠: loyalty
勇: courage
廉: uncorrupted-ness
恥: shame
孝: care for the old
悌: care for the young
改: self-correction
恕: forgiveness
Can they be taught in classroom?
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Probably
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Probably not
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They are usually “acquired”, not
“taught”
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Many are born with these qualities
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Others acquire them naturally in their
upbringing
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Some suddenly get it through an
“enlightenment experience” e.g.
similar to a religious or philosophical
conversion.
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Experiential learning may help (e.g.
adventure-based learning).
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Our objective: Give them a chance,
make them aware,
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Turn these virtues into viruses
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What the many MBA Programs in the world teach
and DON’T’ always teach you
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1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Repellant characters destroy trust and credibility
Ask students. “Would you follow people who are infected
with the following viruses??
Unkind to you
Unfair to you
Rude to you in front of others
Do stupid things and get you in trouble
Lie to you
Betray you
Leave you to face the music
Corrupt
Have no sense of shame
Bad to their parents
Bad to their brothers and sisters
Refuse to correct their mistakes
Hold a grudge against you for months?
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
80%
90%
97%
86%
95%
100%
85%
94%
65%
42%
42%
65%
84%
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D.
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Environment for Creating an
Ethical Individual
Regulatory and law enforcing bodies
Business Community
University/Faculty/Department
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D.
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Environment for Creating an
Ethical Individual
Regulatory and law enforcing bodies
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Talks, lectures, seminars, given by
representatives from ICAC, and Police.
Seminars on code of ethics and ethical
behaviors given by representatives from
the professional bodies in accounting, law,
and engineering etc.
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D.
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Business Community
Other than providing a return to shareholders, business
nowadays is charged with other tasks as well:
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Environment for Creating an
Ethical Individual
Acting lawfully, producing safe products and services at costs
commensurate with quality, minimizing negative social and
environmental impacts etc.
Students often have to deal with complex dilemmas in
global, social, political, ecological, and ethical issues in
business.
For purpose of education, good and ethical corporate
DNAs can be better spread/transmitted to our students
through student projects and internship.
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D.
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University/Faculty/Department
Plagiarism among university students in Hong Kong,
including undergraduate and research (Up to Apr 15, 2005).
2001/02
2002/03
2003/04
2004/05*
33
41
66
22
At HKU:
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Environment for Creating an
Ethical Individual
Time and again students who appeared before the
University Disciplinary Committee alleged that they
did not know what constituted plagiarism.
Policy and guidance needed on what constitutes
plagiarism, why it is wrong, and how to avoid it.
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On Plagiarism
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Pamphlet to all students.
Also available on the University's
website: http://www.hku.hk/plagiarism.
Regulation 5 of the University's
Regulations Governing Conduct at
Examination provides:
"A candidate shall not engage in
plagiarism nor employ nor seek to
employ any other unfair means at an
examination or in any other form of
work submitted for assessment as part
of a University examination. Plagiarism
is defined as the unacknowledged use,
as one's own, of work of another
person, whether or not such work has
been published."
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Pamphlet on Plagiarism
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What is Plagiarism* ?
Introduction
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In this University, plagiarism is a disciplinary offence. Any student who
commits the offence is liable to disciplinary action. …
What constitutes plagiarism?
The most common form of plagiarism
What is proper acknowledgement?
Paraphrasing or adopting an idea or an argument
How much plagiarism is plagiarism?
What if the footnote is also copied?
Does it matter that what is copied is factual information only?
Can I avoid plagiarism by making minor alterations or adding some
remarks of my own?
I didn't intend to cheat....
How to avoid plagiarism?
A Matter of Integrity, Creativity and Originality
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On Plagiarism
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I don't know what plagiarism is. No one
has told me about it before.
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“Ignorance of the law is no defence, for otherwise
anyone can choose not to know the law and have
a defence in committing an offence. The same
applies to plagiarism. The offence is defined in the
University regulations. Many departments have
also provided further guidelines on what plagiarism
is. After all, it is a simple concept of copying
without proper acknowledgement. At the university
level, if you do not know what plagiarism is, it is
your duty to find it out, instead of just waiting to
be told.”
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Plagiarism-Sanction
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Plagiarized work will almost certainly receive a lower or fail grade.
Other possible disciplinary action:
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A warning letter for case of minor plagiarism.
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More serious cases, the students concerned will be referred to the ViceChancellor for referral to the University Disciplinary Committee for disciplinary
action.
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Disciplinary Committee, which comprises 3 members from the Senate and 2
student members, will investigate the complaint and may impose a wide range
of penalties once a student is found guilty of a disciplinary offence.
Penalties include a published reprimand, suspension of study for a
period of time, and even expulsion from the University.
If a student is expelled, he will probably never be able to re-enroll in this
or indeed any university.
Disciplinary action may be taken even after graduation, particularly in
the case of research students who commit plagiarism in their thesis or
dissertation.
If a student lends his work to another student for copying, both students
will be punished.
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Ethical Behaviors
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Experience Sharing
Case 1: HKU IMBA students in Shanghai 2003/04.
With the help of plagiarism-detecting software, three students were
caught having committed plagiarism by means of:
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Copying works done by another student
Copying straight off the websites.
Copying articles without acknowledge
Usual defense arguments as listed above and before.
Appeal to the Dean of School of Management and the President of Fudan
University .
Final judgment by HKU irregardless of the appeals to the other side: All
three students received a fail-grade for the course and had to retake it;
warning letter.
Case 2: MBA applicants in Hong Kong 2003/04.
Two applicants were caught having lied about their salary figures in
their application forms.
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Dismissed before enrolment.
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Conclusion
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Law, regulations and market forces are
necessary, but insufficient guides and
guarantees for ethical conduct.
We have to start from education actively
engaging support by government, lawenforcing bodies, and the business community.
Root Qualities !!
Virtues versus Viruses !!!
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