Business Ethics 4

8/8/2019 Business Ethics 4

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Typical Problems in Business Ethics


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Areas to be coveredy Environmental Pollution & Societyy Marketing Ethics (products , pricing , promotion &

place) & consumer protectiony Ethics in Human Resource Management (Recruitment

& promotion policies, working conditions , downsizing workforce )

y Ethical issues at Top Management / StrategicManagement

y Ethics in financial markets & investor protectiony Ethical Responsibility towards competitors & business

partners


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1

Environmental

Pollution & Society


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2

MARKETING ETHICS


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Common perceptions about

marketing & ethicsy it seems almost unethical to include the terms

Marketing & ethics in the same sentence.

y Marketing generally equated with advertising & sellingis a set of tactics used by firms to induceunsuspecting customers to buy products & servicesthat they dont need , at prices that are much too high

yMarketing is a necessary evil

y It fails to provide complete information


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Marketers response to ethicsy Its legal. Isnt it?

y Do customers really care about ethics?

yWhere are the ethics police?y Profits are more important and ethics takes a back

seat..

y People should be intelligent enough to ask ; why

should it be companys job to tell them


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Ethical Issues in Marketing Mix (

Mc McCarthy's 4 Ps)

Product

Price

Promotion

Place


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Product : Unethical issues could be

Harmful products

Updating of consumerproducts


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Price: Unethical Issues could be1 Pricing high because of high demand of products

2 Pricing high because ofconsumers ignorance

3 Using price as a weapon to edge out smaller playersfrom market

( e.g. USTAD ZAKIR HUSSAIN in an advertisementclaims that BROOKE BOND TAJ MAHAL is the best

& if any other brand proves to be better , he will quitplaying tabla )


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Placey Place: the sum of locations by which the product

moves from the supplier to the consumer

yPlace : the point at which customer is able to access theinformation about the product or service & get thefinal product

y Unethical issue could be:

When Marketer stops distribution at a particularplace because of not yielding profits

And consumers of that place suffer because ofthis practice


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Promotion

Misleading

Advertisements


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Service aspects ofMarketing Mix (

3 Ps)

People

PhysicalEvidence

Process


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In General Most difficult ethical

issues in marketingy Bribery

y Fairness

y Manipulationy Price issues

y Product safety

y Misrepresentation


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What should be the solution?1.Self regulation

2.Advertisements should also benefit society(e.g.

ideas walk when you talk)3.Marketing code of ethics

It should include:

Responsibility of the marketer

Honesty & fairness


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Factors determining Marketers

code ofEthics1. Individual Factors : values learned from family,

education & culture

2

. Significant Factors : influence ofreference groups3. Opportunity Factors : ethical codes & standards that

are promoted in an organization


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Rights & duties of parties in

Marketing exchange processy In the area ofproduct development & management

y In the area ofpromotions

y In the area ofdistributiony In the area ofpricing

y In the area ofmarketing research


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Marketing Research


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Marketing Researchy Marketing research is a process that links the

consumer & general public to the marketer


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Entities who get affected by

Marketing Researchy Society

y Respondents in the specific study

y Clienty Researcher

y Research Profession


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Issues & Rights in Ethical Marketing

Research

Society

Right toinformation

Right to expectobjective results

Respondents inspecific study

Right toinformation

Right to choose

Right toconfidentiality

Right to privacy

Right to safety

client

Right toconfidentiality

Right to qualityresearch

Avoidingunnecessaryresearch

Protection againstmisleading

presentationofdata

Protection againstabuse of position

Researcher

Ethical subjectbehavior

Protection againstimproperproposals

Misinterpretationoffindings

Excessive requests

Availability of

funds

ResearchProfession

Use of acceptedresearchprocedures

Certification

Inappropriate useof marketingtechniques

Issues involvingresearchers &

team members Ethical behavior

of assistants


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Markets &

ConsumerProtection


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Market Approach to Consumer

Protectiony Consumer safety is best provided in Free Market

Mechanism i.e. in Perfect Competition


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Assumptions ofFree Markety Large number of buyers & sellers

y Free entry & exit

y Full & perfect informationy Homogenous products

y Rational buyers

y Unregulated market


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Limitations :

1. Full information not possible

Counter Argument :

Consumer Unions can be formed : Unions that make abusiness of acquiring & selling product information.

Limitations :

Free riders : individuals who acquire and use theinformation gathered by others without paying

Unwillingness to pay for information

2. Consumer may not be always so rational

3. Existence of Free market mechanism itself is doubtful


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Who should be held responsible for protecting

the interests of consumers?

Market approach cant be successful in protecting theinterests of consumers always

So QUESTION arises who should be held responsible for

protecting the interests of consumersANSWER could be different views:

1. Contract view : greater responsibility on consumer

2. Due Care View : greater responsibility on

manufacturer3. Social Costs view : greater responsibility on

manufacturer


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1.Contract view of business firms

duties to consumersy There is a contractual relation between customer &

firm so firms moral duties are the ones that are being

created by the contractual relationship.


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Duties of business firms acc. To

Contract Theory1. Duty to comply: product that lives up to those claims

that were being made at the time of contracta) Reliability

b) Service lifec) Maintainabilityd) Product safety2. Duty to disclosure : duty to disclose exactly what the

customer is buying & what the terms of sales are

3.Duty not to misrepresent :4.Duty not to coerce : seller should not take undue

advantage of consumers circumstances like immaturity,ignorance etc.


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2.Due Care Theoryy This theory puts greater responsibility on

manufacturer

y theory believes that manufacturers are in a moreadvantaged position so they have a duty to take specialcare to ensure that consumers interests are notharmed by the products that they offer them

y Duties of Firm :

a) Designb) Production

c) Information


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3.

S

ocialC

osts Viewy This theory puts greater responsibility on

manufacturer

y

the view that a manufacturer should paythe costsof any injuries sustained through any defects in theproduct , even when the manufacturer exercised alldue care in the design & manufacture of the product &has taken all reasonable precautions to warn users ofevery foreseen danger


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Advertising Ethics


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Advertising Ethicsy Is advertising a waste or a benefit? Does it harm

consumers or help them?


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Characteristics of Advertisingy Public communication

y Inducement to people to buy sellers products

y Succeeds by creating a desire for the sellers product ora belief that a product will satisfy a preexisting desire


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Social Effects of Advertisingy Psychological effects

yAdvertising & waste (because selling costs dont add

anything to consumer utility)yAdvertising & market power / monopoly power

yAdvertising & creation of consumer desires ( becauseadvertising can be manipulative)

yAdvertising & its effects on consumer beliefs


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Citizen & Public Actions toRegulate Marketing


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Consumerism

y Traditional sellers rights

y Traditional buyers rights

y

Additional rights proposed by consumer advocates


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Environmentalismy An organized movement of concerned citizens,

businesses and government agencies to protect andimprove peoples living environment

y Environmental Sustainabilityy Pollution prevention

y New environmental technology

y Sustainability vision


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u c c s gu

M rk ti g

y Major legal issues affect every area of marketingmanagement, including:

y Selling and advertising decisions

y Product decisions

y Packaging decisions

y Price decisions


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Business Actions Toward Socially Responsible Marketing

(EnlightenedMarketing)

Customer-Oriented Marketing:Companies view and organize their marketing activities from theconsumers point of view.

Innovative Marketing:

Companies seek real product and marketing improvements.Value Marketing:

Companies put most of their resources into value-buildingmarketing investments.

Sense-of-Mission Marketing:Companies define their mission in broad social terms, rather than in

narrow product terms.Societal Marketing:

Companies make marketing decisions by considering consumers wants,companys requirements, consumers long-run interests, and societyslong-run interests.


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Business Ethics in HR

Management


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HR & Business Ethicsy Business ethics can be defined as the conduct that one

should portray while at workplace.

y

The institutions that follow these ethical traits portraya good image in front of the society.

y When many individuals come together to contributetowards the advancement of an organization, every

individual should be treated as equal anddiscrimination should be prohibited.


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Questions / issues in HRy Does an employer have the right to search an employees computer files or

review the employees email or voice mail?

y Can employers use private investigation agencies to collect informationabout their employees?

y Can an employer give employment information about an individual to apotential creditor or to a landlord?

y Employers can electronically monitor employees at work, but can theyhire a private investigator to monitor employees outside of work?

y Suppose you work for a large organization and there is talk that the

employees are going to file suit against the company for improper hiringand promotion practices. The head of HR asks you to conduct researchinto the companys previous decisions but asks you to keep your

findings secret. You find that the company has been discriminatingagainst minorities.What would you do?


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Employee rightsy Right to freedom from discrimination

y Right to privacy

y Right to promotion , participation & associationy Right to healthy & safe working conditions

y Right to fair wages

y Right to freedom of conscious & speech

y Right to work


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Employees dutiesy Duty to comply with labor contract

y Duty to comply with Law

y Duty to respect employers property


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Ethical issues in HRy Recruitment / Hiring

y Remuneration

yWorking conditionsy Retrenchment / down sizing workforce


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Employment ContractyA legal document that governs the relationship

between a business & an employee

y

It specifies the tasks & responsibilities of theemployee, remuneration, hours of work, location etc.


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Hiring :Ethical selection of

employees Dos & DontsDonts of Hiring

1 Discrimination ( on the basis of age, gender, religion, socialbackground , nationality , rejecting overqualified people etc.)

2 Ageism should not be the criteria3 Credentials ( e.g. hiring only on the basis of degrees, certificatesof academic qualifications)

Dos of Hiring

1 Testing should be the criteria

2 Equality of OpportunityEvery applicant must be given equal opportunity

( even Reverse Discrimination may go against the businessobjective)


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Remuneration Act of rewarding employees in proportion to their

contributions to maximizing long term owner value.

Remuneration includes monetary rewards for work,other benefits, perks, recognition , promotions etc.


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Ethical Remuneration: Dos &

DontsDos of Remunerationon the basis ofcontribution towards maximizing long term

business value

Donts of RemunerationEthical Remuneration should not be on the basis ofNeed,

effort & Abilityif they dont contribute anything tobusiness

( however business may sometimes follow the approach help

itself by helping its employees in need)y Ethical Remuneration should not be on the basis of

Seniority & loyaltyif they dont translate into higher degreeof contribution to business


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Ethics in Retrenchmenty Circumstances may sometimes compel the

organizations to retrench or lay off people: in suchcircumstances :

y Firing could be ethical when the dismissal is aimed atmaximizing long term owner value

y Firing should be honest, fair, legal & without any

physical violencey Firing at will for unjust reasons could be unethical


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HRM Policies as being shown &

realityNew working patterns Part time instead of full time job

Flexibility Management can do whatever it wants

Empowerment Making someone else take the risk &

responsibilityTraining & Development Manipulation

Recognizing the contribution ofindividual

Undermining the trade union &collective bargaining

Team working Reducing individuals discretion


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Human Costs of unethical practices

in HRy Unethical business environments can:

y Demotivate individuals

y

Make good employees leave the companyy Attract unethical employees

y Lead to the lack of trust by the employees for thecompany


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HRResponses / solutionsy Take steps to eliminate and discourage reasons for

misbehavior and introduce and encourage reasons tobehave ethically

y Develop an appraisal system that rewards individualsfor ethical behaviors and punishes those who actunethically

y

HR can use its expertise to communicate with theworkforce to get out the ethical message


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Guidelines for Fostering an Ethical Culturey Have a well developed policy and procedures manual

y Enforce policies

yRecruit ethical employees

y Create a division to oversee ethics


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Situations leading to

Ethical Dilemmas at work placey Customer wants a refund?

y Quality work may need some more time but you will

miss the deadline?y Using your own method of work may go against

companys rules but may lead to higher productivity ofyours?

y

Whistle blowing?yAccepting your fault when no body knows about it?


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Ethical Dilemmas at Work


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Ethical Dilemmasy Power , authority & trust

y Secrecy, confidentiality & loyalty


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Resolving Dilemmasy Managers

y Employees


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Steps in resolving ethical

dilemmas/ Believe Approachy Background

y Estimate

y

Listy Impact

y Eliminate

yValues

y Evaluate

Documents

Business Ethics 4