The Securities and Exchange Commission (SEC) sanctioned investor-paid rating agency Egan-Jones for falsely stating that it did not know its clients’ investment positions. The SEC’s action against Egan-Jones raises the broad question whether knowledge of clients’ investment positions creates a conflict of interest for investor-paid ratings. In an experimental setting, we find that investor-paid rating agencies are likely to assign credit ratings that are biased in favor of their clients’ positions, and that this effect is attenuated when (...) the rated company has a sophisticated investor base that is expected to scrutinize ratings. The effect is not conditional on the risk profile of the rated companies. Taken together, our findings suggest that a conflict of interest stemming from investors’ preferences is likely to bias ratings under investor-pays business models, but scrutiny by the company’s investor base can counteract this bias. (shrink)

This article examines the risk and return profiles of stock indices composed of companies meeting environmental, social and governance screening criteria [such as the Dow Jones Sustainability Indices ] and conventional composite indices of eight Asian countries from 2002 to 2014. The results indicate that there are no significant differences in the returns or risk-adjusted returns between the ESG indices and the composite indices within countries. The results do reveal that the market volatility of the ESG indices is higher than (...) the market volatility of the conventional indices. Market betas of DJSI and ESG equity indices are significantly lower than betas of the composite equity indices. The overall results indicate that the performance of ESG equity indices of many Asian countries is similar to the performance of conventional indices, suggesting that investors can pursue socially responsible investing objectives without a material difference in portfolio performance from conventional investing. (shrink)

Although the foundation of financial accounting and auditing has traditionally been based upon a rule-based framework, the concept of a principle-based approach has been periodically advocated since being incorporated into the AICPA Code of Conduct in 1989. Recent high profile events indicate that the accountants and auditors involved have followed rule-based ethical perspectives and have failed to protect investors and stakeholders – resulting in a wave of scandals and charges of unethical conduct. In this paper we describe how the (...) rule-based traditions of auditing became a convenient vehicle that perpetuated the unethical conduct of firms such as Enron and Arthur Andersen. We present a model of ten ethical perspectives and briefly describe how these ten ethical perspectives impact rule-based and principle-based ethical conduct for accountants and auditors. We conclude by identifying six specific suggestions that the accounting and auditing profession should consider to restore public trust and to improve the ethical conduct of accountants and auditors. (shrink)

As international trade and business opportunities grow globally, insight into trading partners’ strategies is essential. One of the major strategies that impact trading partners’ relationships is negotiation strategy employed by each partner. These strategies assume even greater importance when these strategies have ethical content. This study examines the effects of marketing executives’ preferred ethical ideologies, opportunism and Machiavellianism on their perceived appropriateness of unethical negotiation tactics. Utilizing a sample of 995 marketing executives from six countries, cluster analysis and multivariate analysis (...) of variance revealed two types of marketing negotiators: principled and corrupt negotiators. Corrupt negotiators tend to be more Machiavellian, more relativist, more opportunistic and less idealistic than their principled counterparts. Principled negotiators tend to perceive unethical negotiation tactics less favorably than their corrupt counterparts. Implications of these results for practitioners and directions for future research are discussed. (shrink)

This essay will argue for ethical procedures governing criminal profiling. A model based upon psychological/behavioral data, witness data, and forensic profiling data is sketched out. This model fits the legitimate uses of criminal profiling as an investigation procedure. Racial profiling as a primary sorting factor does not fit the preferred model and has significant downsides and so is rejected as a primary sorting mechanism in criminal investigation procedure.

The Millennials, people born between 1980 and 2000, are poised to have a profound impact on our society but are often treated as a homogenous generation. While some prior research on generations posits that there are a number of consistencies across a generation, others argue that differences may emerge and distinguish individuals within a generation. Based on prior business ethics literature, this research dissects the Millennial's personal value orientations to explore if demographic differences, such as gender, amount of work (...) experience, business discipline specialization, and academic performance reveal variations in the ethical profile manifested by Millennials. The results from this research show that there are indeed numerous and significant statistical differences within the Millennials' PVO dataset. Variations are found when exploring nearly every demographic variable considered. Implications of these findings are discussed. (shrink)

What do we owe participants in collective pension plans in terms of socially responsible investment (SRI)? This paper draws into question current conventional wisdom on SRI, which considers investor engagement a more effective strategy than divestment to change morally problematic corporate behaviour. More fundamentally, in light of reasonable disagreement about the objective of SRI, the paper argues that participants in collective pension plans are owed some kind of control over their investments. The final section considers four different institutional arrangements (...) to respect this requirement in practice, ranging from democratic decision procedures to the availability of SRI alternatives. (shrink)

This research explores the relationship of variant degrees of a country’s economic freedom to the ethical profiles of millennial business students, specifically an individual’s personal value orientation and post-conventional reasoning. Grounded in Social Identity, Personal Values, and Cognitive Moral Development theories, we construct an ethical profile to compare responses provided by millennial business students from eight countries. Our results suggest that a country’s degree of economic freedom has some association with an individual’s ethical profile, yet we also discuss (...) other national influences on an ethical profile. These results and their implications are discussed in the article. (shrink)

In the Philippines, all transplant centers are mandated by the Department of Health (DOH) to have a Hospital Transplant Ethics Committee (HTEC) to ensure that donations are altruistic, voluntary and free of coercion/commercial transactions. This study was undertaken primarily to describe the organizational and functional profile of existing HTECs and identify areas for improvement. This is a descriptive cross‐sectional study. There was variation in their logistical arrangements (support from hospital, filing systems, office spaces), operations (length and frequency of (...) meetings, number of referrals) and membership (composition, qualifications, occupation, training). The approval rate for donor‐recipient pairs is high with the majority of cases made by living non‐related donors. Appropriate reasons were cited for rejection. The perception of HTECs is that they are competent and confident in their decision‐making. However, there is a need to standardize HTEC composition, provide operating procedures and additional training which can be done by the DOH. (shrink)

While the concept of work ethic has been discussed in the Arab context :35–49, 2009), the significant conceptual and methodological limitations of the existing work ethic and work value research elucidate the need for a more robust investigation of the multidimensional work ethic construct in the Arab context. Multidimensionality of the work ethic concept has gained considerable attention in recent years as researchers attempt to move away from the religiously labeled Islamic and Protestant work ethic conceptualizations. The current study examines (...) the Arab work ethic through the use of the multidimensional work ethic profile on a sample of future business leaders in the United Arab Emirates. A total of 484 business students completed an Arabic version of the MWEP short form. The results show that centrality of work and hard work are the highest scoring work ethics followed by self-reliance, wasted time, and leisure. There are significant differences in work ethic dimensions across gender and categories of family breadwinner. No significant differences in work ethic dimensions are observed across categories of nationality and work preference groups. The findings are discussed in relation to the unique insight they offer on the nature of work ethic in an Arab context. (shrink)

Institutional investors control almost 60% of all assets under management worldwide and encompass a wide variety of organizations. Despite this reach, however, institutional investors have not received the normative scrutiny they merit beyond general discussions around their legally grounded fiduciary obligations to their beneficiaries. This paper offers a discussion of institutional investor ethical obligations in light of their specific attributes. We propose that the different characteristics of institutional investors and the diverse roles they play in the marketplace inform the (...) scope of their activities, and, in turn, the different ways in which their basic ethical obligations can be fulfilled. (shrink)

“Ethical investing” is interpreted in the following paper to be the use of non-financial normative criteria by investors in the choice ofsecurities for their portfolios.Ethical investors may aim at fulfilling duties they feel they have, possibly including increasing the amount of good in society through theconsequences of their buying and selling behavior. The main duties are those of not-profiting from bad corporate behavior and of punishing bad firms. The main consequence desired is that managers manage corporations in a more ethical (...) manner. But ethical investors also aim at receiving returns based on the market risk of their investments.If the aim of managers is to maximize shareholder wealth, then ethical investors can fulfill their duties or achieve their desired consequences only if their trading activities affect shareholder wealth, i.e., share price. A theoretical argument is presented to show that this trading activity will not affect share price or return. In addition, reference is made to results of empirical studies which show that ethical stocks yield market returns, i.e., that the share price of ethical firms is unaffected by the actions of ethical investors.If the trading activity of ethical investors fails to affect share price and return, then these investors fail to fulfill any of their goals or to achieve their ends. (shrink)

Background Hospital ethical climate has important implications for clinical nurses’ service behavior; however, the relationships are complicated by the fact that five types of ethical climate (caring, law and code, rules, instrumental, and independence) can be combined differently according to their level and shape differences. Recent developments in person-centered methods (e.g., latent profile analysis (LPA)) have helped to address these complexities. Aim From a person-centered perspective, this study explored the distinct profiles of hospital ethical climate and then examined the (...) relationships of the profiles with clinical nurses’ service behavior (both in-role and extra-role service behavior). Research design A quantitative study was conducted using cluster random sampling. Latent profile analysis and binary coded hexadecimal (BCH) analysis were conducted using Mplus 8.2. Participants and research context A total of 871 clinical nurses in China were surveyed using the Ethical Climate Scale and Nurses’ Service Behavior Questionnaire. Ethical considerations Ethical approval was obtained from the IRB of the First Affiliated Hospital of Jinan University (No. KY-2020-090). Results A four-profile hospital ethical climate model provided the best fit for the data. The four different profiles not only varied in level, but also in shape: high normative and low egoism (45.8%), high ethical climate (19.9%), low ethical climate (3.6%), and moderate ethical climate (30.8%). These profiles differentially predicted clinical nurses’ overall, in-role, and extra-role service behaviors. Conclusions The results reveal new insights into the nature of hospital ethical climate and how different clinical nurses in these profiles can be best managed to accomplish different forms of service behavior. (shrink)

Investment in financially distressed companies has taken place since the end of the depression. But a new breed of predatory activist investors called "vultures" has emerged in recent years. They take sizable debt positions in insolvent companies with the intention of significantly increasing the value of their investment through aggressive negotiation either in bankruptcy or in pre-bankruptcy restructurings. Predators thrive on adversarial conflict. Vulture investment is legal, but is it morally acceptable? This paper argues that the strategies and tactics of (...) vultures may be very unpleasant, but in themselves these are insufficient grounds for moral censure. (shrink)

In this contribution we will briefly discuss the shareholders' need for social, ethical and environmental information and the efforts of corporations to address this need. Looking at three cases, we will raise some doubt with regard to the adequacy of corporate SEE reporting to meet the needs of shareholders. We will discuss the following three cases: BP's investments in Azerbaijan, Nike's management of its labour conditions, of child labour and security issues, and Monsanto's production of genetically modified seeds.

Since the late 1990s, the number of apologies being offered by CEOs of large companies has exploded. Communication and management scholars have analyzed whether and why some of these apologies are more effective or more ethical than others. Most of these analyses, however, have remained at the anecdotal level. Moreover, the practical, economic consequences of apologies have not been examined. Almost no rigorous or systematic empirical work exists that examines whether stakeholders reward firms whose CEOs give apologies that are more, (...) rather than less, ethical; and punish firms whose corporate apologies are not ethically sound. This lacuna is surprising given that the whole purpose of an apology is to restore trust between the apologizer and the recipients of the apology. It is also surprising, given that stock market participants do appear, in at least some cases, to evaluate and respond to apologies by CEOs. When Johnson and Johnson was hit by the Tylenol poisonings, its stock price plummeted. One day after CEO James Burke’s apology—an apology widely praised for being ethically sound—approximately a half billion dollars of its previously lost stock value was restored. It appears, then, that a good CEO apology may lead to an increased stock value ceteris paribus. But is the Johnson and Johnson case representative of how the market responds in general to CEO apologies? (shrink)

Our research investigates how the inclusion of a company on an independent ethics index affects its attractiveness to institutional investors. Using a sample of 864 U.S. firms over the 2010–2018 period, we find that institutional investors significantly increase their holdings in companies in the quarter that they are included on the ethics index and maintain larger holdings in the four quarters following the inclusion on the Ethisphere list relative to pre-inclusion period, with dedicated institutional investors being more swayed (...) to invest than transient investors. This paper adds to the emerging literature on intermediate signaling by showing that a firm's inclusion on an ethics index reduces information asymmetry with institutional investors. Our evidence suggests that public companies should effectively, rather than ceremonially, adopt sound governance structures and invest in socially responsible activities, as these actions can increase their likelihood of being included on ethics indices. By doing so, these firms send credible signals about their ethical compass, granting them access to valuable institutional investments. (shrink)

The neoclassical paradigm assumes that shareholders'' utility is solely a function of their wealth, and prescribes that management should act in a manner consistent with share price maximization. The stakeholder view also assumes that shareholders'' utility derives from wealth, but prescribes that managers must balance the shareholder wealth maximization objective against the rights of other constituencies. Thus, while neoclassicists and stakeholder theorists have different prescriptives for management behavior, their definitions of the shareholders'' interest are consistent — shareholders are self-interested economic (...) agents whose utility is best served by share price maximization. However, if shareholders are other-interested, and attack importance to ethical and moral values, then both the neoclassical and stakeholder view derive from invalid assumptions. In this paper, I present evidence that much shareholder behavior is ethically motivated. As a result, the basis for both the neoclassical and the stakeholder view are weakened. (shrink)

We present an ideal profile of an emerging organizational function: the Ethics Officer. We argue that the main contribution of an EO is to provide management with a broad perspective of the organization's stakeholders – one that emphasizes the interests of all stakeholders, including those not affiliated with the dominant coalitions in the organization. In order to avoid turning the EO into a rubber stamp for management activities, we suggest that certain conditions prevail to enable the person in (...) this position to exercise impartial, independent judgment. These conditions are embodied in our profile, which maintains that an ideal EO should have appropriate organizational status, functional independence, professionalism, knowledge of organizational issues, and knowledge of ethics theory. We suggest that the function of EO may be performed by a professional who is already employed by the organization, and we use the internal auditor as an example. (shrink)

Monitoring and assistive technologies (MATs) are being used more frequently in healthcare. A central ethical concern is the compatibility of these systems with the moral preferences of their users—an issue especially relevant to participatory approaches within the ethics-by-design debate. However, users’ incapacity to communicate preferences or to participate in design processes, e.g., due to dementia, presents a hurdle for participatory ethics-by-design approaches. In this paper, we explore the question of how the value preferences of users in the field (...) of dementia care can be integrated into AI-based MATs. First, we briefly introduce different ethics-by-design approaches and explain the challenges they face in dementia care. Next, we introduce a novel approach for addressing these challenges. Through a qualitative content analysis of interviews with persons with dementia and their family caregivers (n = 27), we identified multiple ideal–typical value preference profiles. We then applied these profiles in a computer simulation, by which we also introduce the concept of ethical compliance quantification to scale the moral preferences of the interviewees for the simulation. Finally, we discuss study results, the advantages of using computer simulations, and general study limitations before drawing conclusions for further research. The study contributes to the ongoing debate on participatory ethics-by-design by defining on the basis of empirical data ideal–typical value preference frameworks that can be used to guide MAT actions and their outcomes. Going forward, MAT end-users with dementia and other communication-impaired persons could be enabled to choose a value profile that best fits their moral preferences. (shrink)

This essay begins with a current case involving racial profiling and DNA testing. The two combine to raise some troubling issues involving the use of each in police investigation. It is argued that racial profiling is unethical and ought to be avoided and that DNA testing on general populations of innocent people is fraught with dangers.

This essay begins with a current case involving racial profiling and DNA testing. The two combine to raise some troubling issues involving the use of each in police investigation. It is argued that racial profiling is unethical and ought to be avoided and that DNA testing on general populations of innocent people is fraught with dangers.

An important goal of ethical investment is to influence companies to improve their ethical and environmental performance. The principal means that many ethical funds employ is passive market signalling, which may not, on its own, have a significant effect. A much more promising approach may be active engagement. This paper reports on a questionnaire study of a sample of 1146 ethical investors in order to assess whether U.K. ethical investors would support more activist ethical investment and whether they would be (...) prepared to invest in companies which are failing ethically in order to do so. The results show general support for the current practice of passive signalling accompanied by "soft" engagement in the form of lobbying and the development of dialogue in order to improve corporate practice. The "harder" options of investing in companies that err in order to change them is, however, favoured by consistent minorities. (shrink)

Extract: Having spent sixteen years teaching philosophy in Singapore, half a year in Hong Kong, and a few months near Shanghai, the three major financial centres in Cultural China, I have been unwittingly exposed to the brutality and intricacies of the business and financial world. I am particularly interested in the psychology of stock trading which could benefit greatly from Zen and Taoistic cultural resources.

Direct-to-consumer personal genetic profiling services that claim to predict people’s individual disease risks may promise a new era of ‘personalised healthcare’, but a report from the Nuffield Council on Bioethics has found that the results are often inconclusive and more evidence should be provided by the companies who sell them. In September 2008, the Council established a Working Party, which I chaired, to consider the ethical issues raised by developments in medical profiling and online medicine. One of our primary tasks (...) was to investigate the burgeoning market for personal genetic profiling services. Two years on, the Council has published its findings. The resulting report2 raises a number of concerns about personal genetic profiling services and puts forward a series of policy recommendations to address these concerns. (shrink)

The competency profile underlying higher nursing education in the Netherlands states that bachelor-prepared nurses are expected to be able to participate in ethics committees. What knowledge, skills and attitudes are involved in this participation is unclear. In five consecutive years, groups of two to three fourth-year (bachelor) nursing students conducted 8 to 11 semi-structured interviews each with nurses in ethics committees. The question was what competencies these nurses themselves say they need to participate in such committees. This (...) article reports the aggregate of the 52 interviews in these five studies. Regarding knowledge, the article reports on health law, ethics and professional knowledge. Regarding skills, communication is mentioned, as are professional skills and skills for ‘doing ethics’. An open and respectful attitude towards patients and fellow committee members is required, as well as commitment to patient care, committee work and professional ethics. The right attitude for a nurse in an ethics committee is said to include a reflective and perceptive attitude, along with an awareness of one’s own limitations and convictions. A detailed competency profile for nurses’ participation in ethics committees as outlined in the recommendations may serve nursing education, institutional committees and nurses themselves to meet the demands of nurses’ preparation for clinical ethics consultations. (shrink)

The development of cultured meat has gained urgency through the increasing problems associated with meat, but what it might become is still open in many respects. In existing debates, two main moral profiles can be distinguished. Vegetarians and vegans who embrace cultured meat emphasize how it could contribute to the diminishment of animal suffering and exploitation, while in a more mainstream profile cultured meat helps to keep meat eating sustainable and affordable. In this paper we argue that these profiles (...) do not exhaust the options and that feelings as well as imagination are needed to explore possible future options. On the basis of workshops, we present a third moral profile, “the pig in the backyard”. Here cultured meat is imagined as an element of a hybrid community of humans and animals that would allow for both the consumption of animal protein and meaningful relations with domestic animals. Experience in the workshops and elsewhere also illustrates that thinking about cultured meat inspires new thoughts on “normal” meat. In short, the idea of cultured meat opens up new search space in various ways. We suggest that ethics can take an active part in these searches, by fostering a process that integrates feelings, imagination and rational thought and that expands the range of our moral identities. (shrink)

Artificial intelligence (AI) governance and auditing promise to bridge the gap between AI ethics principles and the responsible use of AI systems, but they require assessment mechanisms and metrics. Effective AI governance is not only about legal compliance; organizations can strive to go beyond legal requirements by proactively considering the risks inherent in their AI systems. In the past decade, investors have become increasingly active in advancing corporate social responsibility and sustainability practices. Including nonfinancial information related to environmental, social, (...) and governance (ESG) issues in investment analyses has become mainstream practice among investors. However, the AI auditing literature is mostly silent on the role of investors. The current study addresses two research questions: (1) how companies’ responsible use of AI is included in ESG investment analyses and (2) what connections can be found between principles of responsible AI and ESG ranking criteria. We conducted a series of expert interviews and analyzed the data using thematic analysis. Awareness of AI issues, measuring AI impacts, and governing AI processes emerged as the three main themes in the analysis. The findings indicate that AI is still a relatively unknown topic for investors, and taking the responsible use of AI into account in ESG analyses is not an established practice. However, AI is recognized as a potentially material issue for various industries and companies, indicating that its incorporation into ESG evaluations may be justified. There is a need for standardized metrics for AI responsibility, while critical bottlenecks and asymmetrical knowledge relations must be tackled. (shrink)

Shareholder and investor relations, and the closely related area of corporate governance have been the arenas of much dispute, much of which has not been confined to practical financial matters. Ethical challenges have come as well from persons and groups with widely differing value systems. This paper presents the Corporate Value Exchange Model (CVE) as a framework for analyzing the corporate-shareholder and corporate-investor relationships, and for formulating decisions that can respond ethically to these groups without subordinating the interests (...) of other constituents. (shrink)

I argue that traditional views on which beliefs are subject only to purely epistemic assessment can reject demographic profiling, even when based on seemingly robust evidence. This is because the moral failures involved in demographic profiling can be located in the decision not to suspend judgment, rather than supposing that beliefs themselves are a locus of moral evaluation. A key moral reason to suspend judgment when faced with adverse demographic evidence is to promote social equality—this explains why positive profiling is (...) dubious, along with more familiar cases of negative profiling, and why profiling is suspect even when no particular action is at stake. My suspension-based view, while compatible with revisionary normative positions, does not presuppose them. Philosophers of all stripes can reject demographic profiling both in thought and deed. (shrink)

BackgroundBrazil is among the sixteen countries that conducts the most clinical trials in the world. It has a system to review research ethics with human beings made up by the National Commission on Research Ethics and 779 Research Ethics Committees, in 2017. The RECs are supposed to follow the same rules regarding their membership, although the RECs that review Social Science and Humanities researches must respect Resolution 510/16. There are Brazilian RECs that review SSH and clinical trials. (...) This study aimed to analyze the academic professional profile of the members of the CONEP and Brazilian RECs, their adequacy to the norms, and the challenges faced by the REC’s Chairs to compose their membership. MethodsAll 779 Brazilian RECs’ chairs are invited to fill in a questionnaire informing academic and professional background of the RECs members, and 92 answered. However, eight were excluded for having sent an incomplete questionnaire, leaving a total of 84 participants. The variables were described by absolute and relative frequency. The Chi-square test and ANOVA was used to analyze regional differences related difficulties to compose the committee. The significance level was 95%. ResultsThe results showed a predominance of members from the biomedical area, while 33% were members of the Social Sciences and Humanities and 5.5% were community representatives. As for the academic degree, there were PhD and masters. The divergences in relation to the guidelines result from the difficulties of having participants in some areas and the little interest in the work carried out by the committees.ConclusionThe RECs are partially adequate to the norms and their performance may be compromised by the low participation of community representatives. The organization of REC’s specifics to review biomedical research could improve the ethical review process, ensuring a membership more qualified for these protocols. (shrink)

Existing research suggests people with stronger moral character traits are more inclined to ethical investing. We take a moral foundations framing approach that synthesizes framing theory and moral foundations theory to investigate whether a moral state of mind created by moral foundations frames can also increase retail investors’ ethical investment intention. We also hypothesize how this moral foundations framing effect is moderated by the perceived return performance of the ethical fund. We test our hypotheses through two online experiments with retail (...) investors in the United States. Study 1 demonstrates that the moral foundations framing effect varies by moral foundation. Focusing on the Fairness foundation, Study 2 shows that the framing effect is stronger under the win-win dual objective condition, relative to a conflict of interest condition. This stronger effect indicates that the moral foundations framing effect appears to be more effective when the investor perceives that ethical investments are financially lucrative. Our study provides preliminary evidence for the potential of the moral foundations framing approach and contributes to scholarship in both business ethics and ethical investing. (shrink)

The aim of this study is to analyze investor behavior towards socially responsible mutual funds. The analysis is based on an experimental study where a sample of individuals takes investment decisions under different parameters of information about the investment alternatives and expected returns. In the experiment, each participant decides how to distribute an investment budget between two funds, returns on which are uncertain and change over time. Two treatments are conducted, each providing a different degree of information on the (...) socially responsible (SR) character of one of the two investment alternatives. The results obtained suggest that although individuals’ criteria for investment are essentially guided by returns and diversification, participants invest significantly more in a fund when they are explicitly informed about its SR nature. In particular, participants who declare being concerned about SR actually invest significantly more in the SR alternative. Furthermore, the level of SR faithfulness among a small group of investors is such that they invest the main share of their budget in the SR fund, even when the return differential is highly unfavorable. Providing clear information about the SR characteristics of an investment is crucial to help investors express their preferences. (shrink)

The paper uses questionnaire responses provided by a sample of ethical investors to investigate willingness to sacrifice ethical considerations for financial reward. The paper examines the amount of financial reward necessary to cause an ethical investor to accept a switch from good ethical performance to poor ethical performance. Conjoint analysis is used to allow quantification of the utilities derived from different combinations of ethical and financial performance. Ethical investors are shown to vary in their willingness to sacrifice ethical for (...) financial performance, and hence to display more heterogeneity than the all-encompassing ‘ethical’ label implies. Because of the existence of sub-groups of ethical investors with different attitudes towards financial reward, an attempt has been made to associate observable investors’ characteristics with their level of willingness to trade-off morality for cash. One sub-group of investors in particular appears highly resistant to the idea of accepting higher financial return as compensation for poor ethical performance. This unwillingness casts doubt on Jensen and Meckling’s widely reported claim that trade-off behaviour is ubiquitous in all areas of life. (shrink)

This paper applies insights from behavioral economics and nudge theory to foster sustainable and responsible investment. SRI provides an opportunity to express and promote ethical values via choice of financial instruments. While policy-makers have tried to encourage greater participation in SRI, the majority of retail investors retain a conventional approach to investment. I develop a conceptual framework to improve the effectiveness of SRI policy-making. The first part of the framework comprises a transmission mechanism which emphasizes the role of SRI as (...) a driver for sustainable development. The second part is a model of the individual decision for or against SRI. The framework suggests that low SRI demand is a case of behavioral market failure, and that nudging is a suitable tool for dismantling behavioral barriers to SRI. A specific example of smart choice architecture is used to illustrate the framework’s potential in the design of an SRI nudge. Assuming the nudge stands up to the rigors of empirical testing, it may well provide a feasible alternative for policy-makers. (shrink)

Previous empirical research has found mixed results for the impact of corporate social responsibility (CSR) investments on corporate financial performance (CFP). This paper contributes to the literature by exploring in a two stage investor decision-making model the relationship between a firm’s innovation effort, CSR, and financial performance. We simultaneously examine the impact of CSR on both accounting-based (financial health) and market-based (Tobin’s Q) financial performance measures. From a sample of top corporate citizens, we find that: (1) a firm’s social (...) responsibility commitment (CSR) contributes to its financial performance; (2) after controlling for investment in innovation activities, CSR continues to have a positive impact on a firm’s financial performance; (3) the customer dimension of CSR has a positive effect on both CFP measures, whereas the employee dimension indicates a significant impact only on financial heath; and (4) the community relation dimension of CSR only affects the market-based CFP measure of firms with high innovation intensity. (shrink)

We conduct an experiment with 459 nonprofessional investors to examine whether they evaluate companies differently based on management’s stated purpose for undertaking corporate social responsibility activities in the presence versus absence of a company-specific negative event. Specifically, we vary whether or not management intends to achieve financial returns from CSR activities in addition to promoting social good. We address investors’ decision processes by investigating whether their judgments are mediated by perceptions of future cash flows and/or the underlying ethical culture of (...) the company. Results show that absent a negative event, investment judgments are stronger when CSR activities are intended to achieve financial returns, through expectations of higher future cash flows. However, when a negative event occurs, we find a moderating effect of independent assurance of CSR disclosures. When disclosures are not assured, investors prefer CSR undertaken only for societal benefit, mediated by perceptions of a stronger ethical culture. However, when disclosures are assured, ethical culture is viewed similarly regardless of management’s intention to achieve financial returns from CSR activities. This suggests that management’s willingness to obtain independent assurance on disclosures is viewed as a positive ethical signal. Thus, assurance complements disclosure of CSR activities by contributing to protection against the impact of negative events. (shrink)

In this paper we consider whether one type of individual investor, which we call at risk investors, should be denied access to securities markets to prevent them from suffering serious financial harm. We consider one kind of paternalistic justification for prohibiting at risk investors from participating in securities markets, and argue that it is not successful. We then argue that restricting access to markets is justified in some circumstances to protect the rights of at risk investors. We conclude with (...) some suggestions about how this might be done. (shrink)

This study involved using a mixed method research design to examine the moral philosophy difference between the ethical decision-making process of CEOs in U.S.-led and non-U.S.-led within the luxury goods industry. The study employed a MANOVA to compare the ethical profiles between the two leader types and a phenomenological qualitative process to locate themes that give indication as to the compatibility of the luxury strategy values and practices with the principles and concepts of responsible leadership and conscious capitalism. As the (...) luxury goods industry is facing the first slowdown since 2000, pressure to achieve sales targets in the U.S. to make up for losses in other markets will place these CEOs under extreme pressure from their headquarters. These leaders must possess the ethical decision-making capability to balance legal and moral dilemmas unique to multinational luxury goods organizations while delivering business results in a challenging environment. Results of the study show no evidence of difference in the ethical decision-making profiles between the two groups of leaders. The themes and emergent findings resulting from the qualitative analysis indicate a profound incompatibility between the values informing decision-makers using the luxury strategy and those employed by leaders operating within the principles and parameters of responsible leadership and conscious capitalism. Recommendations for future research include replicating the study with a larger sample, within a different geographic region or comparing leaders using the luxury strategy to those using conscious capitalism. (shrink)

The corporate social responsibility literature has emphasized the importance of both economic and ethical domains of corporate behavior. Analyzing unprecedented survey data from investors in a socially responsible mutual fund, this article considers how economic and ethical concerns shape shareholder investment behavior. In particular, this article analyzes levels of investor fund loyalty, defined as the continued investment in a mutual fund despite the belief that one is earning a lower return on investment. Building upon existing research that shows SR (...) fund assets are more stable than conventional fund assets, this article leverages within respondent comparisons to clarify that dual investors are more loyal to their SR fund than to their conventional fund. This suggests that a corporation’s ethical behavior attracts more patient investment capital, an important consideration for any corporation that is deciding to what degree it should engage in corporate social responsibility. In addition, this article empirically demonstrates that economic motivations reduce SR fund loyalty and that ethical motivations induce SR fund loyalty. This evidence that ethical motivation is associated with fund loyalty advances research on morality in the market by yielding empirical evidence to a largely theoretical debate. (shrink)