PowerPoint presentation prepared by Dr. Rajiv Mehta Chapter 3 Ethical and Legal Considerations In Personal Selling

PowerPoint presentation prepared byDr. Rajiv Mehta

Chapter 3Chapter 3

Ethical and Legal Ethical and Legal Considerations Considerations

In Personal In Personal SellingSelling

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 2

Chapter OutlineChapter Outline

• What are ethics?

• Ethical concerns of salespeople

• The company's ethical eyes and ears in the field

• Behaving ethically, every day

• Going beyond ethics: laws affecting business-to-business personal selling

• Ethics and regulation in international sales


Learning ObjectivesLearning Objectives

After reading this chapter, you should understand:After reading this chapter, you should understand:

• What are ethics?

• Ethical concerns of salespeople

• The company’s ethical eyes and ears in the field

• Behaving ethically, everyday

• Going beyond ethics: laws affecting business-to-business personal selling

• Ethics and regulation in international sales

• Making ethical decisions © Royalty-Free/CORBIS


Learning Objectives Learning Objectives cont’dcont’d

After reading this chapter, you should understand:After reading this chapter, you should understand:

• What ethics are and why there is no universally accepted standard for ethics.

• Ethical concerns of salespeople in dealing with customers, competitors, employers, and co-workers.

• Behavior that salespeople have a right to expect from their employers.

• Legal and ethical issues in foreign markets.

• How to approach ethical decisions.

© Royalty-Free/CORBIS


What Are Ethics?What Are Ethics?

• Ethics:

• May be defined as the study of what is good and bad or right or wrong

• Provide a moral code of conduct governing individuals and societies


Business Ethics Build Business Ethics Build Trust in Relationships Trust in Relationships

• "Right" and "wrong" is usually determined by economic criteria in business

• Ethical behavior helps build trust between the buyer and seller. Trust has been defined as “one party’s belief that its needs will be met in the future by actions undertaken by the other party.”

• People are not "ethical" simply because they stay within the law

• Most of us would probably agree that its unethical to do what we personally believe is wrongRoyalty-Free, Photodisc/Getty Images


Salesperson Ethics Must Go Beyond Legal Salesperson Ethics Must Go Beyond Legal RequirementsRequirements

• Some salespeople have the idea that if it’s legal, it’s ethical.

• Ethical behavior and legal behavior are not the same.

• A salesperson can be dishonest, unprincipled, untrustworthy, unfair, and uncaring without breaking the law.

• Many U.S. companies recognize this problem; indeed, more than 38 percent offer ethics training, and about 20 percent of large corporations have appointed ethics officers.

Chapter Review Question:What Are Ethics?


Ethical Image of SalespeopleEthical Image of Salespeople

• To counter the generally negative image of salespeople, professional salespeople must hold themselves and their companies to a high standard of ethics

• Many companies now include ethical and legal issues as major parts of their sales training programs



Ethical Concerns of SalespeopleEthical Concerns of Salespeople cont’dcont’d

1. Customer relationships

– Even dishonest and unethical customers don't trust unethical salespeople and will eventually not want to deal with these types of salespeople

– The following are unethical activities or areas of ethical concern in the treatment of customers

• Special gifts

• Entertainment

• Over-promising

• Misrepresenting or covering up the facts

• Manipulating order forms

• Disclosing confidential information

• Showing favoritism Royalty-Free, Digital Vision/Getty Images


Ethical Concerns of Salespeople Ethical Concerns of Salespeople cont’dcont’d

2. Treatment of coworkers

a. Sexual harassment

b. Stealing customers from colleagues

c. Undermining coworkers

3. Treatment of competitors

a. Disparaging competitors and their products or services

b. Tampering with competitors’ products

c. Competitive snooping

Royalty-Free, Digital Vision/Getty Images


Ethical Concerns of SalespeopleEthical Concerns of Salespeople cont’d cont’d

4. Salespeople’s ethics and their company

a. Expense account padding

b. Unauthorized use of company funds

c. Personal use of company time

d. Fabrication of sales records

e. Manipulation of customer orders

Royalty-Free, Digital Vision/Getty Images


Ethical Concerns of Salespeople Ethical Concerns of Salespeople cont’dcont’d

5. Employer ethics with their salespeople

Ethical salespeople have a right to expect ethical treatment from their companies in various areas

Chapter Review Question:

Discuss some of the more common ethical concerns of salespeople.

a. Compensation• Prompt, accurate payment of salary,

commissions, and bonuses as well as timely reimbursement of selling expenses

b. Sales territories• Fair assignment of sales territories

c. Sales quotas• Setting realistic achievable sales quotas

d. Hiring, promoting, and firing• Sexism, racism, and ageism must not

influence managerial decisions


The Company’s Ethical Eyes The Company’s Ethical Eyes and Ears in the Fieldand Ears in the Field

• Salespeople are the firm’s eyes and ears in the field, which helps in decision-making in the following areas of the marketing mix:

1. Product quality and service

• Poor product quality, unsafe products, unreasonable return policies, and poor after-sales service

2. Pricing

• Inflated list prices, not honoring pricing incentives, and adding hidden costs

Royalty-Free, Photodisc/Getty Images



The Company’s Ethical Eyes The Company’s Ethical Eyes and Ears in the Field and Ears in the Field cont’dcont’d

3. Distribution

• Using resellers that are aggressive, dishonorable, “fly-by-night” operators. Using “bait and switch” strategies and selling lower quality products

4. Promotion

• Deceptive advertising, misleading product warranties, phony promotional contests, and dishonest fund-raising activities

Chapter Review Question:Describe some of the ways in which professional salespeople can be the ethical “eyes and ears” of their companies.




Behaving Ethically, Every DayBehaving Ethically, Every Day

Insights for behaving ethically include:

1. Ethical conflicts and choices are inherent in personal selling

2. The law is the lowest common denominator of ethical behavior

3. There is no single satisfactory standard of ethical action that is agreeable to everyone to assist you in making on-the-job decisions

4. There are diverse and sometimes conflicting influences (e.g., the customer, management, your peers, industry standards, competition) on ethical behavior

5. Your value system will have a dramatic influence on your ethical conduct

6. The lower you are in the corporate hierarchy, the greater the likelihood you will feel pressure to engage in ethical misconduct

7. Top management will set the tone for your organization’s ethical conduct


Table 3.1 Ethical Ideas for SalespeopleTable 3.1 Ethical Ideas for Salespeople


Going Beyond Ethics: Laws Affecting Business-Going Beyond Ethics: Laws Affecting Business-to-Business Personal Sellingto-Business Personal Selling cont’d cont’d

• Personal selling is affected by numerous federal, state, and local laws

• Federal laws tend to affect personal selling indirectly while state and local laws usually deal directly with personal selling in the following areas:

• Price discrimination

• Price fixing

• Collusion

• Exclusive dealing

• Restraint of trade

• Reciprocity

• Tie-In sales

• Unordered goods

• Orders and terms of sales

• Business descriptions

• Product descriptions

• Secret rebates

• Customer coercion

• Unfair competition

• Business defamation


Going Beyond Ethics: Laws Affecting Business-Going Beyond Ethics: Laws Affecting Business-to-Business Personal Selling to-Business Personal Selling cont’dcont’d

Business defamation includes:

Chapter Review Question:What are the three most common kinds of business defamation?

Why should salespeople be especially careful about business defamation during or after the sales presentation?

a. Business slander

• Unfair and untrue oral statements about a competitor

b. Business libel

• Unfair and untrue written statements about a competitor

c. Product disparagement

• False or deceptive comparisons or distorted claims made during or after a sales presentation about a competitor's products or services.


Ethics and Regulation in Ethics and Regulation in International Sales International Sales cont’dcont’d

• International salespeople are restrained by three different laws:

• U.S. salespeople may have to spend months or even years studying cultural differences to develop the expertise required for successful selling in foreign markets

• Even major corporations still make embarrassing cultural mistakes; some companies prefer to hire native salespeople for their foreign accounts

Chapter Review Question:

What are three different sets of laws that international salespeople must abide by?

1. U.S. laws

2. Laws of any country where they operate

3. International laws that are enforced across national boundaries


Ethics and Regulation in Ethics and Regulation in International Sales International Sales cont’dcont’d

• In international negotiations, salespeople must not confuse varying ethical standards and the U.S. and foreign laws governing their activities

• In planning to sell products or services to a foreign country, sales reps should contact the commercial attaché at the U.S. embassy for information on legal requirements in conducting business there


Table 3.2 Doing Business in Table 3.2 Doing Business in Foreign CountriesForeign Countries


Table 3.3 Ethical Decision-Making Table 3.3 Ethical Decision-Making ChecklistChecklist


Key TermsKey Terms

• Ethics• Moral code of conduct and principles that govern individuals and societies in

determining what is right or wrong. • Quid Pro Quo Harassment

• A person in authority’s demand for sexual favors from an employee in exchange for a job advantage, such as being hired or promoted.

• Hostile Environment• A pattern of sexual behavior that makes the job so unpleasant that the victim’s work

is adversely affected.

• Price Fixing• Two or more competing sellers conspiring to set or maintain uniform prices and

profit margins.

• Collusion• An illegal arrangement in which competing sellers agree to set prices, divide up

markets or territories, or act to the detriment of a third competitor or customers.

• Tie-In• An often-illegal seller’s requirement that a customer purchase an unwanted product

along with the desired product.


Key Terms Key Terms cont’dcont’d

• Exclusive Dealing• Agreements in which a manufacturer or wholesaler grants one dealer exclusive

rights to sell a product in a certain trading area and insists that the dealer not carry competing lines. Illegal under the Clayton Act.

• Business Defamation• Any action or utterance that slanders, libels, or disparages a competitor, causing

the competitor financial damage, lost customers, unemployment, or lost sales.

• Business Slander• Unfair and untrue oral statements made about competitors that damage the

reputation of the competitor or the personal reputation of an individual in that business.

• Business Libel• Unfair and untrue statements made about a competitor in writing (usually a letter,

sales literature, advertisement, or company brochure), damaging the competitor’s reputation or the personal reputation of an individual in that business.

• Product Disparagement• False or deceptive comparisons or distorted claims made during or after a sales

presentation about a competitor’s products, services, or properties. These statements are considered defamatory per se.


Chapter Review QuestionsChapter Review Questions

1. Can you explain the difference between quid pro quo harassment and hostile environment harassment?

2. Name and briefly describe several of the most important federal laws affecting business-to-business selling.


Topics for Thought Topics for Thought and Class Discussionand Class Discussion

1. How do you think your ethical values were formed? Who had the most influence on you? Why?

2. Why must salespeople concern themselves with ethical issues? Isn’t it enough to understand and operate within the law?

3. Do you believe that ethical standards in the United States are relatively stable or changing? Do you think U.S. ethical standards are becoming higher or lower? Why?

4. Why do countries differ so sharply about what is ethical or unethical behavior? Do you think that all countries would ever adopt an international code of ethical behavior in business?


Topics for Thought Topics for Thought and Class Discussionand Class Discussion

5. How do you think you would handle a situation in which you were trying to make a multimillion-dollar sale to a foreign country and that country’s trade representative made it clear that he expected a substantial bride?

6. Have you ever been a victim of sexual harassment? If so, how did you deal with it?

7. What do you think are today’s major ethical issues?

8. Do you have any personal guidelines for what is ethical or unethical behavior? Would you like to see everyone use your guidelines?


Internet ExercisesInternet Exercises

1. Go online to find the ethical codes or codes of business conduct for three different companies (e.g., Coca-Cola, Halliburton, and DuPont). You can find various firm’s’ business codes at websites such as http://infomgmt.homestead.com/files/ethcod_f.htm. Compare the three codes. How do they vary in length, specificity, and content? What does each code have to say about salesperson or selling behavior?

http://infomgmt.homestead.com/files/ethcod_f.htm







Internet Exercises Internet Exercises cont’dcont’d

2. Using your college’s electronic database, find three articles on “business ethics” in business journals or magazines. In what journals or magazines did you find the articles? Do the articles mention ethics in personal selling? What guidelines, if any, do the articles provide for ethical conduct? If you were to start up a small business, what would your one-page ethical code or code of business conduct say to your employees?


Projects for Personal GrowthProjects for Personal Growth

1. Locate and interview two salespeople. Ask them how they decide whether a particular behavior is ethical or unethical. Did they receive any instruction in ethics during their sales training program? Do their companies have codes of ethics? What punishments or penalties accompany ethical violations?

2. Write down two ethical dilemmas that you have personally faced. How did you decide what to do in each case? In retrospect, do you think your decisions were the right ones? Who was affected by your decision? How? Would you be willing to tell your friends the total truth about the dilemma and how you resolved it? How do you think they would react?


Projects for Personal Growth Projects for Personal Growth cont’dcont’d

• Go to your college or public library and look through issues from the 1940s or 1950s of popular magazines such as Life or Time and compare them with recent issues. Do the advertisements seem more or less ethical than those of today? Why do you think so, and what might account for the differences?


Case 3.1: It’s the Short-Run That Case 3.1: It’s the Short-Run That Matters Most!Matters Most!

1. What do you think about George Fagus’s approach to personal selling? Why do you think he’s viewed as a top performer at Spearhead Technologies?

2. Do you think that Stewart should follow George’s advice, at least for the next year or so, so that he can make his sales quotas? Why? If you don’t agree with George’s advice, what advice would you give Stewart? What should Stewart do next year at this time if he hasn’t made his sales quota? What should he say to his sales manager, Sylvia Ambers?


Case 3.1: It’s the Short-Run That Case 3.1: It’s the Short-Run That Matters Most! Matters Most! cont’dcont’d

3. Do you think Spearhead Technologies has any problems in its performance evaluation system? For example, do you think the company is giving equal weight to qualitative performance and quantitative performance? What can the company do to ensure a better balance in its performance evaluation for salespeople? How might an improved performance evaluation system help Spearhead Technologies?


Case 3.2: Affable ... Or Overly Case 3.2: Affable ... Or Overly Affectionate?Affectionate?

1. Do you think Tom’s line of questioning while driving to the motel was merely a show of genuine interest and concern for Toni (who’s nearly young enough to be his daughter) . . . or not? Did Toni handle the conversation with Tom appropriately? If not, what do you think Toni should have said to Tom when he began asking her rather personal questions? Would your suggested response enable Toni to avoid upsetting Tom?

Case 3.2 is found online at http://college.hmco.com/pic/andersonps2e.

http://college.hmco.com/pic/andersonps2e






Case 3.2: Affable ... Or Overly Case 3.2: Affable ... Or Overly Affectionate? Affectionate? cont’dcont’d

2. While staying overnight at motels, should Toni go out to dinner each night with Tom or make some excuse each time and eat alone? Why? Should she order or allow Tom to order any alcoholic drinks for her if they do go out to dinner together? What should Toni do if Tom invites her to dance, if they happen to go to a restaurant with live entertainment? Will Tom be insulted if Toni says no to a dance invitation? If so, how might this affect their long-run superior-subordinate relationship and Toni’s future at NMS?



3. While traveling in her territory with her boss this coming week, what should Toni do if Tom seems to be making advances toward her? Should she just ignore any such attempts, make a joke about them that subtly puts Tom back in his place, or should she take a tough stance up front and tell Tom to back off? Should Toni’s first-name relationship with Samuel Thomas, CEO of NMS, be used to keep Tom in his place?



4. What should Toni say and do if Tom has a few drinks and later tries to become affectionate with her at the restaurant or later at the motel? What can Toni do to avoid being alone with Tom?

5. If Toni believes that she has to put Tom in his place verbally, or, worse, fend off his overly friendly touches during the first few days on the trip, what should she do about the remainder of the trip around her territory? Should she tell him to fly back to the office, as she cannot work in this awkward situation? If he refuses to leave, should she cancel the remainder of the trip and go back home, possibly risking her job? Should she call her boyfriend for advice? Should she call Samuel Thomas, CEO of NMS, to tell him about her awkward experience with Tom? What other options might be better?


Case 3.2: Affable ... Or Overly Case 3.2: Affable ... Or Overly Affectionate?Affectionate?

6. Do you think that Toni’s sales manager is creating a hostile working environment for her? Should Toni consider leaving the company? Why or why not?

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PowerPoint presentation prepared by Dr. Rajiv Mehta Chapter 3 Ethical and Legal Considerations In Personal Selling