BSB111 Workshop 3 Solutions 0318 PDF

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Case 1: Oliver Curtis (a) Virtue ethics How virtue ethics can be applied to the Oliver Curtis case can be examined by considering each of the key aspects in Aristotle’s approach: (1) Function, goals and the good, (2) Flourishing, (3) the Virtues (or excellences), and (4) Developing the virtues. In this case, Oliver Curtis was involved in insider trading (where he made money by trading on the stock exchange using confidential information). Although the case does not indicate what occupation Curtis had, he was clearly an investor on the stock exchange. We can then ask what the function of an investor is, and what excellences are required in order to be a good investor. An investor is someone who buys (and sells) shares with the purpose of making a financial profit. A good investor will need some intellectual excellences as well some character-based virtues/excellences. The case also indicates that Curtis has a wife and children, so he would also need certain intellectual and character-based virtues in order to be a good husband and parent. For Curtis to be flourishing, he would be conducting the various activities in which he is involved in accordance with these virtues. The actual virtues/excellences that Curtis would need to be a good investor includes the intellectual virtue of Knowledge (of the stock market, associated regulations etc), as well as the character-related virtue of Justice (not taking more money than is due to him). Other virtues not mentioned by Aristotle, but which could be relevant include Integrity and Trustworthiness (to abide by regulations and respect the confidentiality of some information). There is clear evidence of several vices, reflected in a number of excesses in Curtis’ behaviour. The vice of Acquisitiveness/Greed is evident where the judge notes how his desire for an extravagant lifestyle motivated the insider trading; and as he then uses confidential information to make more money that he otherwise deserved, there is an absence of Justice. Furthermore, he appears to have wasted the large amounts of money that he obtained on an extravagant lifestyle including skiing holidays. This reflects the vices of Prodigality or Vulgarity, both associated with excessive spending. Lastly, his belief that he couldn’t get caught (even though he knew what he was doing was wrong), possibly reflects Over-ambition or Hubris (excessive pride or self-confidence). In all of these cases, Curtis’s behaviour reflects an excess, which also suggests that he lacks the Practical Wisdom to accurately determine the appropriate (intermediate) behaviour in a given situation. There are also several virtues mentioned, where Curtis’ wife insists that he has Integrity, and is “kind, considerate, honest and reliable”. These virtues, however, may be limited to his role as husband and parent. Regarding how the virtues (and vices) have developed, the case suggests that Curtis grew up in a materially wealthy family (he is the son of a millionaire) and went to a prestigious private school (St Ignatius’ College). While these contexts may have supported the development of the virtues he has displayed as husband and parent, they do not appear to have been sufficient to develop the virtues required to be a good investor (through role models and mentors for example). Instead, it is possible that his peer group (his accomplice is an old friend) and/or work environment may have provided role models that displayed the vices mentioned above. In summary, the Oliver Curtis case provides a useful example of how key aspects of the virtue ethics tradition can be applied to a real-life business scenario.

BSB111 – Week 3: Ethical Agents

(b) Kohlberg’s theory of moral development Kohlberg’s theory of moral development provides a framework of three levels incorporating six stages, according to which moral reasoning skills develop in humans. Although there is not a lot of information in the case regarding Curtis’ moral reasoning, it is clear that he participated in the insider trading in the belief that he would not get caught. This suggests that he may have decided not to conduct the trades if he believed it likely that he would get caught. This reflects Level one, stage one of Kohlberg’s theory, where an agent acts morally in order to avoid punishment (if the punishment can be avoided, then the agent has no reason to act morally). However, the case also indicates that he conducted the trades in order to make lots of money and live extravagantly. This reflects Level one, stage two of Kohlberg’s theory, where the agent acts morally if it is in his/her own interests (i.e. there is some reciprocal benefit). In this case, Curtis considered the material rewards to be greatest by using confidential information to make the trades, and acted accordingly. It therefore appears likely that Curtis’ moral reasoning reflects the ‘Pre-Conventional’ Level one of Kohlberg’s theory (with elements of both stage one and two). There is no indication of any reasoning regarding observing the law, social duties or universal ethical principles. In summary, Kohlberg’s theory provides a framework through which the reasons for moral behaviour can be analysed, and applied to the Oliver Curtis case.

BSB111 – Week 3: Ethical Agents

Case 2: Bernie Madof

(a) Virtue ethics How virtue ethics can be applied to the Bernie Madoff case can be examined by considering each of the key aspects in Aristotle’s approach: (1) Function, goals and the good, (2) Flourishing, (3) the Virtues (or excellences), and (4) Developing the virtues. Madoff established a business involved in brokerage and then the computerisation of trades. The function or goal of being an entrepreneur is to build a business that provides some goods or services that others value, and that provides a return to the entrepreneur. Madoff later conducted business as an investment manager, with the purpose of providing investment advice for clients so that they make a financial return. As with any business role, there are certain virtues/excellences that would be required in order to be a good entrepreneur or investment manager. These virtues/excellences include some that are intellectual and others that are character-based. Madoff would only flourish as an entrepreneur or investment manager if he developed these virtues/excellences, and would only flourish as a human if he developed virtues/excellences such as those identified by Aristotle. One example of an intellectual virtue/excellence that would be required for a good investment manager is Knowledge. This would include having a good understanding of investments, what clients’ needs are, and how the financial markets operate. Character-related virtues that would be relevant are Justice (reflecting the need to give to each client what is due to them), and Right Ambition (enabling an accurate confidence in one’s decisions). Other virtues (although not mentioned by Aristotle) include Integrity, Trustworthiness, having a sense of Perspective and Prudence (not taking unnecessary risks). A good entrepreneur may also require Perseverance, Creativity and Zest. In Madoff’s case, while he may have developed these virtues earlier in his career, as he maintained his fraudulent investment scam certain vices became evident. His scam involved him accumulating funds so that he could maintain his reputation – his defrauding of investors thus reflects an Acquisitiveness such that the investors were not able to receive what was due to them (i.e. a lack of Justice). However, as the case indicates, this was driven not by greed, but by his own excessive Pride (Hubris), which can be considered an excess of ambition. His inability to follow the appropriate amount of Justice or Ambition also indicates that he lacked sufficient Practical Wisdom to accurately determine the appropriate (intermediate) behaviour. The case does not indicate how Madoff’s character may have developed. However, it does suggest that character traits can change over time, and that he was influenced by the increased recognition he was getting. It is possible that role models in this peer group may have influenced what he conceived of as an appropriate ambition. In summary, consideration of the case of Bernie Madoff reveals how all of the key elements of the virtue ethics tradition can be applied, and, in particular, highlights a number of virtues and vices that may be applicable in business contexts.

BSB111 – Week 3: Ethical Agents

(b) Kohlberg’s theory of moral development Kohlberg’s theory of moral development provides a framework of three levels incorporating six stages, according to which moral reasoning skills develop in humans. Before Madoff began his fraudulent scheme he operated a business which had been highly profitable during the increase in computerised trading on stock exchanges, and it is these profits that made Madoff wealthy. Although we don’t have sufficient information regarding his own reasoning during this period, it is possible that, following the ‘normal’ moral development for an adult, he reasoned in Level two, where he would act such as to meet the expectations of his peers and fulfil any social duties expected of him. It appears, however, that the perceptions that others had of him (such as being a ‘guest of honour’) became increasingly important, and the case suggests that it was the desire to please others and maintain a good reputation with them that took precedence over other moral concerns. This reflects Level Two, stage one, where an agent’s moral reasoning focuses on the expectations of one’s peers. There is no evidence that Madoff recognised the duties associated with a social contract, or any universal ethical principles that could have informed his choices. Accordingly it appears that Madoff’s reasoning lies no higher than Level Two, stage one (Conventional). Although there is limited information in the case, Kohlberg’s theory of moral development provides a useful lens through which Bernie Madoff’s behaviour can be interpreted.

BSB111 – Week 3: Ethical Agents...