Course description

Name of course

Ethics in Finance

Course code


Academic year

2020 - 2021


Number of credits


Number of hours







Language of instruction


Main teacher

DUMAS Christel

Objectifs et contribution de l'Unité d'Enseignement au programme

The Ethics in finance course pursues the following objectives:
• Provide students with a sound knowledge of ethics in finance, providing them with tools to move beyond an intuitive conception of ethics
• Apply theoretical concepts studied in class to concrete cases, teaching students to make ethical decisions.
• Train students to analyze ethical dilemmas in the news.
• Develop a critical perspective on ethics in finance, without being naive and/or cynical.
• Analyze “ethical dilemmas” in the news
• Develop future managers’ social skills within corporations: sense of consensus, negotiation skills, argumentation.
• Express and communicate one's thoughts in a coherent and structured way
• Formulate problems correctly and suggest potential solutions referring to different theoretical models

Furthermore, as it prepares students for the CFA exam, it has the following learning goals. The student should be able to:
1. explain ethics (level I);
2. describe the role of a code of ethics in defining a profession (level I);
3. identify challenges to ethical behavior (level I);
4. describe the need for high ethical standards in the investment industry (level I);
5. distinguish between ethical and legal standards (level I);
6. describe and apply a framework for ethical decision making (level I)
7. compare interests of key stakeholder groups and explain the purpose of a stakeholder impact analysis (level II);
8. discuss problems that can arise in principal–agent relationships and mechanisms that may mitigate such problems (level II);
9. discuss roots of unethical behavior and how managers might ensure that ethical issues are considered in business decision making (level II);
10. compare the Friedman doctrine, Utilitarianism, Kantian Ethics, and Rights and Justice Theories as approaches to ethical decision making (level II);
11. describe the structure of the CFA Institute Professional Conduct Program and the disciplinary review process for the enforcement of the CFA Institute Code of Ethics and Standards of Professional Conduct (level III);
12. explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each standard (level III)

Prerequisites and co-requisites


Content description

Topic 1: What is ethics in finance? Definition, purpose, ethical decision-making theories and frameworks (weeks 1 & 2)

Topic 2: Why do financial scandals occur? The roots of unethical behavior, Agency theory, conflicts of interests, cognitive biases and stakeholder analysis. (weeks 3 & 4)

Topic 3: How to prevent unethical behaviour/financial scandals? (weeks 5 & 6)

Part 4 – What are the most common ethical challenges in Personal / retail finance (weeks 7)
Part 4 – WHAT are the most common ethical challenges in Financial markets. Insider trading, hostile takeovers, derivaties, HFT…(weeks 8)
Part 4 – WHAT are the most common ethical challenges in the Investment industry? Fund management, SRI, microfinance,…(weeks 9)
Part 4 – WHAT are the most common ethical challenges in corporate governance. Commitment to Ethics by Firms, Hiring and Promotion, Organizational Culture and Leadership, Decision-Making Processes, Strong Corporate Governance, Moral Courage, Ethics Officers (weeks 10)

Teaching methods

Students will receive theoretical content before hand (slides, videos, articles) such that our time in class is devoted to discussions and debate, in particular regarding ethical financial dilemmas.

Evaluation mode

Students are assessed on
1. Participation in the classroom (case study, ethical question, debates)
2. Case study
3. Exam : open questions with small practical cases


E. Freeman, Strategic Management: A Stakeholder Approach (Boston: Pitman Press, 1984).
.W.L. Hill and T. M. Jones, “Stakeholder-Agency Theory,” Journal of Management Studies 29 (1992): 131–154; J. G. March and H. A. Simon, Organizations (New York: Wiley, 1958).
Hill and Jones, “Stakeholder-Agency Theory”; C. Eesley and M. J. Lenox, “Firm Responses to Secondary Stakeholder Action,” Strategic Management Journal 27 (2006) 13–24.
Macmillan and P.E. Jones, Strategy Formulation: Power and Politics (St. Paul, Minn.: West, 1986).
Tom Copeland, Tim Koller, and Jack Murrin, Valuation: Measuring and Managing the Value of Companies (New York: Wiley, 1996).
Kaplan and D. P. Norton, Strategy Maps (Boston: Harvard Business School Press, 2004).
Velocci, D. A. Fulghum, and R. Wall, “Damage Control,” Aviation Week (December 1, 2003): 26–27.
Jensen and W. H. Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure,” Journal of Financial Economics 3 (1976): 305–360; E. F. Fama, “Agency Problems and the Theory of the Firm,” Journal of Political Economy 88 (1980): 375–390.
Hill and Jones, “Stakeholder-Agency Theory.”
R. Marris, The Economic Theory of Managerial Capitalism (London: Macmillan, 1964); and J. K. Galbraith, The New Industrial State (Boston: Houghton Mifflin, 1970).
Fama, “Agency Problems and the Theory of the Firm.”
A. Rappaport, “New Thinking on How to Link Executive Pay with Performance,” Harvard Business Review (March–April 1999): 91–105.
R. Kirkland, “The Real CEO Pay Problem,” Fortune (July 10, 2006): 78–82.
D. Henry and D. Stead, “Worker vs CEO: Room to Run,” Business Week (October 30, 2006): 13.
M. C. Jensen and K. J. Murphy, “Performance Pay and Top Management Incentives,” Journal of Political Economy 98 (1990): 225–264;
Charles W. L. Hill and Phillip Phan, “CEO Tenure as a Determinant of CEO Pay,” Academy of Management Journal 34 (1991): 707–717;
H. L. Tosi and L. R. Gomez-Mejia, “CEO Compensation Monitoring and Firm Performance,” Academy of Management Journal 37 (1994): 1002–1016;
Joseph F. Porac, James B. Wade, and Timothy G. Pollock, “Industry Categories and the Politics of the Comparable Firm in CEO Compensation,” Administrative Science Quarterly 44 (1999): 112–144.
Andrew Ward, “Home Depot Investors Stage a Revolt,” Financial Times (May 26, 2006): 20.
R. Kirkland, “The Real CEO Pay Problem,” Fortune (July 10, 2006): 78–82.
Peter J. Lane, A. A. Cannella, and M. H. Lubatkin, “Agency Problems and Antecedents to Unrelated Mergers and Diversification: Amihud and Lev Reconsidered,” Strategic Management Journal 19 (1998): 555–578.
E. T. Penrose, The Theory of the Growth of the Firm (London: Macmillan, 1958).
G. Edmonson and L. Cohn, “How Parmalat Went Sour,” Business Week (January 12, 2004): 46–50; “Another Enron? Royal Dutch Shell,” Economist (March 13, 2004): 71.
Timet, “Boeing Settle Lawsuit,” Metal Center News 41 (June 2001): 38–39.
N. King, “Halliburton Tells the Pentagon Workers Took Iraq Deal Kickbacks,” Wall Street Journal (January 23, 2004): A1; “Whistleblowers Say Company Routinely Overcharged,” Reuters, February 12, 2004; R. Gold and J. R. Wilke; “Data Sought in Halliburton Inquiry,” Wall Street Journal (February 5, 2004): A6.
Saul W. Gellerman, “Why Good Managers Make Bad Ethical Choices,” Ethics in Practice: Managing the Moral Corporation, ed. Kenneth R. Andrews (Cambridge, Mass.: Harvard Business School Press, 1989).
Tom L. Beauchamp and Norman E. Bowie, Ethical Theory and Business, 7th ed. (New York: Pearson, Prentice Hall, 2001), 17–23.
Thomas Donaldson, The Ethics of International Business (Oxford: Oxford University Press, 1989).
John Rawles, A Theory of Justice, rev. ed. (Cambridge, Mass.: Belknap Press, 1999, original edition 1971).
CFA Institute and Edelman, “Investor Trust Study” (2013):
Economist Intelligence Unit, “A Crisis of Culture: Valuing Ethics and Knowledge in Financial Services,” Economist Intelligence Unit Report sponsored by CFA Institute (2013).
CFA Institute and Edelman, “Investor Trust Study” (2013):
Max H. Bazerman and Don A. Moore, Judgment in Managerial Decision Making, 8th ed. (Hoboken, NJ: John Wiley & Sons, 2013).
Lee Ross and Richard E. Nisbett, The Person and the Situation: Perspectives of Social Psychology (New York: McGraw-Hill, 1991).
Stanley Milgram, Obedience to Authority: An Experimental View (New York: Harper & Row, 1974).
7Philip G. Zimbardo, The Power and Pathology of Imprisonment: Hearings Before Subcommittee No. 3 of the Committee on the Judiciary, 92nd Congress, Corrections: Part II, Prisons, Prison Reform, and Prisoners’ Rights Congressional Record (Serial No. 15, 25 October 1971).
John M. Darley and C. Daniel Batson, “From Jerusalem to Jericho: A Study of Situational and Dispositional Variables in Helping Behavior,” Journal of Personality and Social Psychology, vol., 27, no. 1 (1973): 100–108.
Varda Liberman, Steven M. Samuels, and Lee Ross, “The Name of the Game: Predictive Power of Reputations versus Situational Labels in Determining Prisoner’s Dilemma Game Moves,” Personality and Social Psychology Bulletin, vol. 30, no. 9 (September 2004): 1175–1185.