As financial professionals and many of us professional accountants, somewhere along the way you came across when you learn accounting. The two different approaches to setting generally accepted accounting principles. The US adopted by the faz be uses a rules driven approach. It's prescriptive in nature and designed to limit the amount of professional judgment and discretion that professional accounts have in classifying, measuring and recording transactions. On the other hand, the ESA be the international standard setting body, they used an approach that was intended to be principles driven. The standards they develop allow for more professional judgment and latitude, but require the practitioner to consider the principle of the standard over the specific rules.

Building your ethical intelligence can be developed the same way using either a principles based approach that you will learn more about In this lesson, or a prescriptive approach which you will learn more about in the lesson. The follows Dr. Bruce Weinstein wrote a book entitled ethical intelligence which attempts to develop a principles based framework for guiding ethical decision making. Ethical intelligence is guided by five principles. The principles themselves are not earth shattering on the surface, you might even consider them to be rather obvious. However, through time, they had been proven to be tremendously difficult to live by. The five principles he identified were, first of all, do no harm.

Secondly, to make things better, third, to respect others. Fourth, to be fair, and fifth to be loving. Let's explore each of these principles a little bit further. First of all, we have do no harm. Some of you may recognize this principle is one of the foundations underpinning the medical profession. When you see a doctor, you should have an expectation that they will not harm you or make matters worse, but the principle is equally valid across all professionals.

Including the finance profession. There's this unwritten expectation of our fellow human beings that they will not inflict physical, emotional and in a financial context, any monetary harm on you, and in return, you will not do likewise to them. One of the easiest ways to avoid doing harm is to simply do nothing. You might think of this as a principle of restraint, do nothing. So for example, don't get yourself involved in conflicts of interest. don't pursue tactics that potentially could harm others, such as misleading advertising, or fraudulent financial reporting.

Simply don't do it. It seems straightforward enough. However, there are a few nuances to this principle that make it a little trickier to apply in practice. Consider the following scenario. You're walking by some railroad tracks and see an oncoming train. There are two workers ahead of the train working on the tracks that are apparently obvious to the oncoming train, you notice a switch nearby which could divert the train safely to another line.

And even though you don't work for the railway Do you pull the switch? assuming that's as easy as flipping a light switch? In this case, your do nothing approach doesn't feel so easy does it? Most of us with some sort of moral conscious and compassion for others are going to pull the switch and save those lives. This is the proverbial Good Samaritan. However, it illustrates in doing no harm, we should also attempt to prevent harm as well.

What other sorts of situations in your work and personal lives might you attempt to prevent her? Well, for example, we don't let others drink and drive it requires us to intervene. We may be someone who comes to someone else's rescue when they're being mugged, or attacked, and in the workplace, standing up and voicing our objections to questionable activities or harassment or blowing the whistle. When we see something that is wrong, are all examples of preventing harm. Let's push this scenario to another ethical level, going back to that oncoming train, it's the same circumstance only this time, there happens to be one worker on the diversion line and two workers in front of the train on its current track. What do you do?

In other words, do you stand by and watch two workers die, or flip the switch, and instead kill one worker? This is a much more difficult because we are actively involved in perhaps the death of a worker and all sorts of ethical issues arise here. How will the law and society judge us? Will we be a hero? Or will we be perceived as a murder? logically, we should recognize that by pulling the switch, it is probably the right thing to do because in doing so, we are minimizing unavoidable harm, which is also an element of this do no harm principle.

That being said, Few of us would pull the switch in situation. And the reason is because there's a difference. There's a difference in our moral mind between situation one and situation two, your moral mind describes more guilt. According to intentional acts, particularly those that are foreshadowing harm. Your moral mind is biased. When it judges the actions viewed as intentional and does so more harshly than it might the omission of action.

So none of us is likely to encounter as train situation in the workplace. But what sort of realistic situations might you expect where this idea of minimizing unavoidable harm becomes a reality? Can you think of any examples? How about situations where you must lay off workers for the company to survive, or perhaps where you must offer a discount to one customer and not others to retain a customer doesn't make you feel much better, but instinctively, you know, it's the right thing to do in the circumstance. The second principle offered by Weinstein is to make things better. This second principle recognizes that ethics comes with an expectation that may be greater than the expectations set by law.

Consider how your decision will impact all of those affected. For example, your company may be looking to open up a mine in a remote community, the choice of mining configuration and the equipment all impacts not only the returns for the shareholders, but the livelihoods of those that live in this remote community, not to mention the environment. making things better often comes with trade offs. And sometimes it's not possible to meet the needs of every single stakeholder. But overall, we need to be mindful of the principles of making things better. This principle has an element of selfishness embedded in it because implicitly We can only uphold this principle if we are looking after our own self interest first, because running an unprofitable mind will only hurt everyone the environment and the local residents in the long run if the mind is not sustainable.

So think of this principle in this way. Flight attendants are always instructing you to put on your own oxygen mask first, before helping someone else. You can't help someone else if you aren't in a position to help in business. That means we need to consider the sustainability of our decisions. The third principle reminds us to respect others, we've ensured that we're making things better but we can't ignore the rights of others. This principle is indoctrinated into most religions Do unto others as you would like them to do unto you.

And then an abiding by this principle, you honor the values, preferences and rights of others, your behaviors and the behaviors of those around you are reinforced by Personal and organizational beliefs and experiences. So in making ethical decisions about what to do, how does this principle apply in real life practice? How can we respect others? Well, think about it. You can keep things private things that are supposed to be confidential should be kept private. You can tell the truth and be transparent with others.

You can keep your promises and follow through with the promises and commitments that you've made. The rights of others can also arise from obligations that are dictated by laws. However, human decency dictates that this is most often a minimal standard that we should be abiding by. In fact, for many third world countries, personal rights and protections are not even described at all. So our ethical decision making must consider universal human rights as we explored in the means and ends rationalizations in a previous course. For example, consider the use of child labor or this Sex trafficking of women and children in some countries, these activities may be illegal, but are they ethical?

Consider unsafe working conditions or consider such issues as offshoring jobs from developed countries to developing countries is the principle of respecting others at play in these decisions. Of course, it is. The fourth principle of ethical intelligence is to be fair, being fair as to give others their due and in an appropriate quantity and proportion. When making an ethical decision, consider what is fair to all the parties involved. The idea of fairness comes up all the time in workplace decision making. consider some of these situations when you promote one person over another when you will award raises when you administer disciplinary actions, when you conduct performance evaluations, how you allocate your time and attention among your staff.

In each of these situations, you need to reflect upon your decisions and consider Whether it's fair, the fifth ethical principle that Weinstein cited was to be loving. And in his words, it's not absolutely necessary, and you couldn't be blamed for not using it. But it sure does make things flow better. And by love, Weinstein was not talking about romance, he was referencing some of the more sympathetic attributes of human interactions, such as being honest, being sincere, being appreciative, being caring and compassionate for others. And in this sense, love establishes connection between people. Think of it as having the best of intentions with your interactions with those you work with.

When you make decisions. With mal intent, often, we're making decisions that lack ethical intelligence. So for finance people factoring love into our decision making may seem a little bit preposterous. So consider a few examples of what loving actually implies that we do in our everyday lives. For instance, looking at the world through other person's eyes, in other words, Words. In other words, using our emotional intelligence, recognizing that it's not usually about you don't take things too personally.

When you're kinder to yourself, it makes it easier to be kinder to others. And if your decision cheers you up before you make that decision, ask yourself whether it does the same for someone else who's affected by your decision. When you begin mastering your ethical intelligence, you learn to repress your all too powerful, emotional mind that right side of your brain, and instead, learn to exercise ethical judgment, which is driven by your logic and the left side of your brain. Buddha once said that before we respond to someone first ask ourselves if what is said is true? Is our response kind and thirdly, is our rebuttal necessary at all. These are all elements of the fifth principle of being loving.

So in reviewing your ethical intelligence using a principle based approach, validate your decision by asking yourself these five questions before You make a decision? Will it avoid causing harm? Will it make things better? Is it respectful? Is it fair? And is it the loving thing to do?

If you answered yes to each one of these five questions, well, then it is the ethical thing to do. And if you can't, what other courses of actions will allow you to do so let's return to that quiz that we did in the previous lesson. And look at each of the five scenarios with these ethical principles in mind. In the first scenario, with Margaret and her joint and Barlow ROM, in this scenario, confronting Margaret helps avoid harm, harm that she could do not only to ourselves, but perhaps to the company, if she is a co worker of yours. It's the loving thing to do to attempt to protect her interest. Many of us would just ignore the post, but to do this as akin to not pulling the switch in the train scenario.

The do no harm principle implores us to prevent and minimize harm as well. liking the photo will most certainly not make things better, and may in fact reflect poorly on your own judgment. Making a copy of the photo with the intention of using it against her in the future is neither respectful or the loving thing to do. In the second scenario, where we're at the pub with our two co workers who like to talk a lot, raising your concern with your two colleagues, addresses the no harm principle. It's respectful of the two colleagues to first approach them before going over their heads. But more importantly, it's respectful to the customer.

Ignoring the situation does not prevent or minimize the harm nor is respectful to the interest of the customer. Telling the supervisor might be appropriate but knowing that the two co workers are also likely to get in trouble might cause harm to the relationship you have with them. And then finally, recording the conversation and using it against them is obviously not a loving thing to do, nor is it respectful, it will likely cause harm and most certainly doesn't make the situation any better. In the third scenario with the sun and the restaurant, this scenario is one that we may come across in our daily lives, particularly if we have young children. It might seem harmless to do the first one the first alternative, but is it respectful of the restaurant? Who has given the customers a free meal for bringing their child?

It's certainly unfair as the restaurant is most certainly losing money on the sale that it's legitimately entitled to. Asking for two adult menus is most obviously the right thing to do. We all know it. But just like speeding how many of us slow down long enough to consider the implications of such a decision? asking your son to lie is disrespectful and counter to the principle of being loving. And finally asking your son to solve this ethical issue is also not fair, because he's unlikely to have the ethical maturity to make this sort of decision.

And the fourth question where one of our Employees is always late. The first decision in a is the most fair because you did the same thing with another employee a few months ago. It's also the most respectful of the other workers as you eliminate the perception of favoritism, and be ignoring the situation violates the fairness and respecting of others principles. And see, you might consider talking to him again, however you risk violating the fairness principle, because you're now applying two different standards to similar behavior. And finally, asking your friend to deal with the situation does not address the fairness principle at all. And finally, in our fifth question of going to work when we are sick, the do no harm principle is at stake when you go to the office with the flu.

So options C and D fail on that principle. But do you stay home and get better or do you stay HUD home and work is better if you can work because that is fair to the company who is paying you However, if by working you're prolonging your illness that an argument could be made just for resting. So in this lesson, you've learned about the five principles of ethical intelligence and how to apply them to simple scenarios. These same principles work equally effectively in complex situations, as you will see when you work through the case studies in later lessons. In our next lesson, we're going to look at the prescriptive approach to dealing with ethical decision making. See you in there