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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
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