Transcript Chapter 11: MARKETING

CHAPTER 4: BUSINESS ETHICS AND SOCIAL
RESPONSIBILITY
Doing Well by Doing Good
ETHICS AND SOCIAL RESPONSIBILITY
ETHICS
Beliefs about
right and wrong.
SOCIAL
RESPONSIBILITY
The obligation of a business
to contribute to society.
A Close Relationship, but Not the Same
ETHICS/PERSONAL CHARACTER
A study of 43,000 high school students revealed:
59% admitted that they cheated on a test at school within
the past 12 months – 38% admitted doing so two or more times.
62% admitted that they copied another’s homework two or more times
within the past 12 months.
18% admitted that they stole something from a friend within
the past 12 months.
28% admitted that they stole something from a store within
the past 12 months.
39% believe that a person has to lie or cheat sometimes in
order to succeed.
A 2011 Study conducted by Josephson Institute of Ethics
ETHICS: MURKIER THAN YOU THINK
Legal and Unethical
Legal and Ethical
Promoting R-rated movies to young teens
Producing high quality products
Producing products that you know will break before
their time
Rewarding integrity
Paying non-living wages to workers in developing
countries
Leading by example
Consumer goods-producing companies subcontract to
factories overseas in India, China, and Southeast Asia
where there is use of child and sweatshop labor
Treating employees fairly
Taking up an employee’s time to ask questions about a
product with the intent to purchase it elsewhere
Contributing to the community
Illegal and Unethical
Illegal and Ethical
Embezzling money
Providing rock-bottom prices only to distributors in
underserved areas
Engaging in sexual harassment
Collaborating with other medical clinics to guarantee
low prices in low-income countries (collusion)
Practicing Collusion with competitors
Stopping at a red light at a deserted intersection, out in
the country, where you can see that there are no cars for
miles, and then proceeding through the red light.
Encouraging fraudulent accounting
Smuggling of medicines into war- and disease-stricken
areas
UNIVERSAL ETHICAL STANDARDS
Trustworthiness
Respect
Responsibility
Fairness
Caring
Citizenship
• Be honest
• Don’t deceive, cheat, or steal
• Do what you say you’ll do
• Treat others how you’d like to be treated
• Be considerate
• Be tolerant of differences
• Persevere
• Be self-controlled and self-disciplined
• Be accountable for your choices
• Provide equal opportunity
• Be open-minded
• Don’t take advantage of others
• Be kind
• Be compassionate
• Express gratitude
• Contribute to the community
• Protect the environment
• Cooperate where feasible
Developed by
Character Counts,
a nonpartisan
organization of
educators,
community leaders,
and ethicists.
BUSINESS ETHICS: NOT AN OXYMORON
Ethical Dilemma
Ethical Dilemma
Negative
Consequences
Negative Consequences
Two unfavorable
options
Two
unfavorable
options
Ethical Lapse
Clear misconduct
Most challenging business
decisions seem to arise
when values are in conflict
Business Ethics – the application
Business
– the application
of right Ethics
and wrong
in the
of right and wrong in the workplace
workplace.
Ethical Dilemma:
You’ve just done a great job on a recent project at your
company. Your boss has been very vocal about acknowledging
your work and the increased revenue that resulted from it.
Privately, she said that you clearly earned a bonus of at least
10%, but due to company politics, she was unable to secure the
bonus for you. She also implied that if you were to submit
inflated expense reports for the next few months, she would
look the other way and you could pocket the extra cash as
well-deserved compensation for your contribution.
Ethical Dilemma:
One of the engineers on your staff has an excellent job offer from
another company and asks your advice on whether or not to accept
the position.
You need him to complete a project that is crucial to your company
(and to your own career). You also have been told --- in strictest
confidence by senior management --- that when the project is
complete, the company will lay off all internal engineers.
If you advise him to stay, he would lose the opportunity and end up
without a job. If you advise him to go, you would violate the
company’s trust and jeopardize your career.
Ethical Dilemma:
As a successful entrepreneur, you see a new technology ready to
be launched that is really good for the growth of your company
and the clients. But, adopting the technology would mean
reducing the man power of the company.
You have to think about the betterment of the clients and provide
them with the best of services, but on the other hand, you also
have to think about the employees who have contributed in the
growth of the company.
If you think about your employees and reject the technology then
are you doing justice with your clients? And if you accept the
technology are you then betraying the employees?
Ethical Dilemma:
Mary works as a secretary in a department within a branch of a large
corporation. The branch director has decided that the job of her department
director, Jim, will soon be discontinued. Although Mary and a few others in
her department have this knowledge, Jim does not. For a few weeks, Jim
was directed to work on an array of special projects at his home office. In
the meantime, an employee from a different department is told to move in to
Jim's office.
The branch director instructs Mary and other support staff to change Jim's
voice mail, move his files out of the office, and erase his name from his
assigned parking spot. Mary is told the human resources department will call
Jim to let him know what has taken place.
That week Jim calls Mary because he cannot get into his voice mail. He wants
to know if there are any technical problems about which he should know.
Mary feels torn: should she tell him the truth now or should she rely on human
resources staff to tell him?
Ethical Dilemma:
You are a psychiatrist and your patient has just confided to you
that he intends to kill a woman. You're inclined to dismiss the
threat as idle, but you aren't sure.
Should you report the threat to the police and the woman or
should you remain silent as the principle of confidentiality
between psychiatrist and patient demands?
Should there be a law that compels you to report such threats?
Ethical Dilemma:
On March 13, 1841, an American ship, the William Brown, left Liverpool,
England for Philadelphia, Pennsylvania. In addition to her cargo, she carried 17
crewmen and 65 passengers, who were mostly Scots and Irish emigrants. On the
night of April 19, 250 miles from Newfoundland, the William Brown struck an
iceberg and began to sink rapidly. There were two lifeboats, one small and one
large. The captain and most of the crew took the small lifeboat, and the
passengers crowded aboard the large lifeboat. There was not enough space on
the large lifeboat for all the passengers, and 31 died on board the William
Brown when it sank.
First Mate Francis Rhodes, Alexander William Holmes, and another seaman
commanded the large lifeboat. The passengers were still dressed in their night
clothes and suffered terribly in the cold Atlantic weather, which was made worse
by a pelting rain. The two lifeboats stayed together through the night but
separated the morning of the 20th because the captain, George L. Harris,
thought there was a better chance of rescue if the two boats took different
directions.
Ethical Dilemma:
Rhodes said that his boat was overcrowded and that some people would have
to be thrown overboard to keep it from capsizing. Captain Harris said, "I
know what you'll have to do. Don't speak of that now. Let it be the last resort."
Throughout the day of the 20th and into the night, the rain and the waves
worsened. The boat began to leak and fill with water, despite constant
bailing. Around ten o'clock that night, Rhodes cried out in despair, "This work
won't do. Help me, God. Men, go to work."
Holmes and the other seaman began throwing people overboard. They threw
14 men and two women into the freezing water. They chose single men only,
spared the married men on board, and threw the two women overboard only
because they were sisters of a man already thus ejected and had demanded to
be sacrificed with their kin. None of the crew was thrown out.
Ethical Dilemma:
Defendant: Alexander William Holmes
Crime Charged: Manslaughter
Chief Defense Lawyer: David Paul Brown
Chief Prosecutor: William M. Meredith
Judge: Baldwin (historical records do not indicate his first
name)
Place: Philadelphia, Pennsylvania
Dates of Trial: April 13-23, 1842
Verdict: Guilty
Sentence: 6 months in prison and a $20 fine
http://law.jrank.org/pages/2482/Alexander-Holmes-Trial-1842.html
Ethical Dilemma:
Jane has been operating a consulting business for about a year and has
been doing very well. About a month ago, she decided she needed to
hire someone to help her. After interviewing several candidates, she
decided to hire the best one of the group, Sara. She called Sara on
Monday to tell her she had gotten the job. They both agreed that she
would start the following Monday and that Sara could come in and fill
out all of the hiring paperwork at that time.
On Tuesday, of the same week, a friend of Jane's called her to say that
she had found the perfect person for Jane. Jane explained that she had
already hired someone, but the friend insisted. "Just meet Kim. Who
knows, maybe you might want to hire her in the future!"
Ethical Dilemma:
Rather reluctantly, Jane consented. "All right, if she can come in tomorrow,
I'll meet with her, but that's all." "Oh, I'm so glad. I just know you're going
to like her!" Jane's friend exclaimed.
And Jane did like her. She like her a lot. Jane had met with Kim on
Wednesday morning. She was everything that Jane had been looking for
and more. In terms of experience, Kim far surpassed any of the
candidates Jane had previously interviewed, including Sara. On top of
that, she was willing to bring in clients of her own which would only
increase business. All in all, Jane knew this was a win-win situation.
But what about Sara? She had already given her word to Sara that she
could start work on Monday and she only had the resources to hire one
person at this point.
Ethical Dilemma:
Clearly, the best business decision was to hire Kim. But what about the
ethical decision? If her business did poorly or Sara couldn't provide
enough support, the business would suffer. As a result, her family would
suffer. Money was already tight, what with two boys in college. And yet
she knew Sara also had a family she was supporting. Plus, she had
been so enthusiastic about starting to work.
Obviously, Jane had a problem - an ethical problem. Should she hire
Sara (whom she'd already given her word) or Kim (who was obviously
the best person for the job)?
Ethical Dilemma:
According to Kenneth
Blanchard and Norman
Vincent Peale, authors of The
Power of Ethical
Management, there are three
questions you should ask
yourself whenever you are
faced with an ethical
dilemma.
Is it
legal?
• In other words, will you be violating any criminal
laws, civil laws or company policies by engaging in
this activity?
Is it
balanced
?
• Is it fair to all parties concerned both in the shortterm as well as the long-term?
• Is this a win-win situation for those directly as well
as indirectly involved?
Is it right?
• Most of us know the difference between right and
wrong, but when push comes to shove, how does
this decision make you feel about yourself?
• Are you proud of yourself for making this decision?
• Would you like others to know you made the
decision you did?
Ethics: Multiple Touchpoints
Individuals must make their own
ethical choices
BUT
The organization can have a
significant influence on decisions
19
Creating and Maintaining an Ethical
Organization



Organizational Culture
Role of Top Management
Code of Ethics
Executive Buy-in
 Clear expectations
 Integrated approach
 Global and local
 Whistleblower support
 Reporting and Enforcement

SPECTRUM OF SOCIAL RESPONSIBILITY
LESS
Responsible
MORE
Responsible
No
Contribution
Responsive
Contribution
Proactive
Contribution
Businesses that do not
recognize obligations
to society and do only
what’s legally required
Businesses that respond
on a case-by-case basis
to requests for
contributions
Businesses that integrate
social responsibility into
their strategic plans
SOCIAL RESPONSIBILITY
Responsibility to
Whom?
Stakeholders are any
groups that have a stake –
or a personal interest - in the
performance and actions
of an organization.
RESPONSIBILITY TO……
EMPLOYEES
• Creating Jobs that Work
CUSTOMERS
• Value, Honesty and
Communication
INVESTORS
• Fair Stewardship and Full
Disclosure
COMMUNITY
• Business and the Greater Good
ENVIRONMENT • Sustainable Development
RESPONSIBILITY TO EMPLOYEES:
CREATING JOBS THAT WORK





Meet Legal Standards
Workplace Safety
Minimum Wage/Overtime
Requirements
Value Employees
Provide Work/Life Balance
DOES IT PAY TO PAY MORE?
Average hourly wage
Annual health costs per worker
Covered by health plan
Employee turnover
Labor and overhead costs
Profits per employee
Costco
Wal-Mart’s
Sam’s Club
$15.97
$11.52
$5,735
82%
6%/yr
9.8% of sales
$3,500
47%
21%/yr
17% of sales
$13,647
$11,039
RESPONSIBILITY TO CUSTOMERS
 The Right to Be Safe
Consumerism: a social
movement suggests that  The Right to Be Informed
consumer rights should be
 The Right to Choose
the starting point…
 The Right to be Heard
Planned Obsolescence –
Deliberately designing products to fail in order to shorten
the time between consumer repurchases
APPLE COMPUTERS
APPLE COMPUTERS:
Planned Obsolescence –
• iPods had irreplaceable battery.
• Batteries died after 18 months.
• Customers were encouraged to
purchase new iPods
• Two customers posted high profile
protest movies online.
• APPLE announced replacement
program.
APPLE iPHONES
• Apple introduced the iPhone on June 9,
2007 to rave reviews despite $599 price tag
• Apple dropped the price to $200 to increase
customers
• Customers were livid!
• CEO, Steve Jobs apologized and gave
customers $100 store credit
RESPONSIBILITY TO INVESTORS
FAIR STEWARDSHIP AND FULL DISCLOSURE

Legal Requirements
Legal Requirements
 Sarbanes-Oxley
• Sarbanes-Oxley
 Responsible
Responsibleuse
useofofCorporate
Corporate
Dollars
Dollars
• Honesty
 Honesty
Is Optimism or Pessimism
 Socially
Is Optimism
Responsible?
or Pessimism Socially
Responsible?
RESPONSIBILITY TO COMMUNITY
Cause-related Marketing –
partnerships between businesses
and nonprofit organizations,
designed to spike sales for the
Corporate Responsibility company and raise money
The actions of the business
for the nonprofit.
rather than donations of
Corporate Philanthropy money and time.
business donations to
nonprofit groups, including
both money and time.
RESPONSIBILITY TO ENVIRONMENT
Green Marketing –
marketing environmental
products and practices
to gain a competitive edge.
RESPONSIBILITY TO ENVIRONMENT

Responsibility to environment is a part of
responsibility
to community
• Responsibility
to environment is a part of
responsibility to community


Reducing
the amount
of trash
is more
important
• Reducing
the amount
of trash
is more
thanimportant
recyclingthan recycling
• Although consumers support green
Although
consumers
support
green
marketing,
they
marketing,
they may
not be
willing
to sacrifice
mayquality
not be willing to sacrifice quality
CAUSE RELATED MARKETING

The term was coined in 1983 by
American Express


Raise Funds for Statue of Liberty
Restoration
Campaign to donate $.01 for every
dollar charged on credit card.
New Cardholders Grew 45%
 Card Usage Grew 28%
 Statue of Liberty Restored Early

ETHICS & SOCIAL RESPONSIBILITY IN THE
GLOBAL ARENA

Corruption is part of the culture
in many countries


Bribes or Gifts
Labor issues in host countries can
be complicated
Living Wage
 Child Labor
 Code of Conduct

MONITORING ETHICS AND SOCIAL
RESPONSIBILITY
SOCIAL AUDIT
A systematic evaluation of
how well a firm is meeting its
ethics and social
responsibility objectives.