1. Corporate Responsibilities, Consumer Stakeholders, and the Environment
Chapter Five
Corporate Responsibilities,
Consumer Stakeholders,
and the Environment

2. Consumer Rights The right to safety The right to be informed
The right to choose
The right to be heard
The right to satisfaction of basic needs
The right to redress
The right to consumer education
The right to a healthy environment

3. Responsibility toward Consumers
Duty to inform fully and truthfully
Duty to not misrepresent or withhold information
Duty to not force or take undue advantage of through fear or stress
Duty to take ‘due care’ to prevent foreseeable injuries
“Buyer beware vs. Seller take care”

4. Five Goals of Government Policy Makers toward Consumers
Providing consumers with reliable information about purchases
Providing legislation to protect consumers against hazardous products
Providing laws to encourage competitive pricing
Providing laws to promote consumer choice
Protecting consumers’ privacy

5. U.S. Consumer Protection Agencies
The Federal Trade Commission (FTC) deals with online privacy, deceptive trade practices, and competitive pricing
The Food and Drug Administration (FDA) regulates and enforces the safety of drugs, foods, and food additives, and sets standards for toxic chemical research
The National Highway Traffic Safety Administration (NHTSA) deals with motor vehicle safety standards
The National Transportation Safety Board (NTSB) handles airline safety
The Consumer Product Safety Commission sets and enforces safety standards for consumer products
The Department of Justice (DOJ) enforces consumer civil rights and fair competition

6. External Corporate Responsibility Areas
Advertising
Product Safety and Liability
Environmental concerns

7. Ethics and Advertising
Is the consumer being treated as a means to an end or as an end? What and whose end?
Whose rights are being protected or violated intentionally and inadvertently? At what and whose cost?
Are consumers being justly and fairly treated?
Are the public welfare and good taken into consideration for the effects as well as the intention of advertisements?
Has anyone been harmed, and can this harm be proven?

8. Advertising Inform vs. persuade (two purposes)
FTC guidelines: (claims must be substantiated)
Deception:
Mislead customers
Affect consumers’ behavior or decisions
Unfair:
Substantial injury
Injury not outweighed by other benefits
Injury is reasonably avoidable

9. FTC Conditions for Clear and Conspicuous Disclosures
The placement of the disclosure in an advertisement and its proximity to the claim it is qualifying
The prominence of the disclosure
Whether items in other parts of the advertisement distract attention from the disclosure
Whether the advertisement is so lengthy that the disclosure needs to be repeated
Whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration
Whether the language of the disclosure is understandable to the intended audience

10. Pros and Cons of Advertising
Fine line between puffery and deception
Targeting unsophisticated buyers (children and youth)
Intentional deception and half- truths
Pros
Informs consumers about products
Enables companies to be competitive
Increases consumption and spending, which in turn creates economic growth
Helps a nation’s balance of trade and debt payments
Customers pay for the images as well as the products
Consumers are not ignorant; they have freedom of choice

11. Justice Powell’s 4 step test (Free speech argument)
Is the ad accurate and does it promote a lawful product?
Is the government’s interest in banning or restricting the commercial speech important, nontrivial, and substantial?
Does the proposed restriction of commercial speech assist the government in obtaining a public policy goal?
Is the proposed restriction of commercial speech limited only to achieving the government’s purpose?

12. Advertising Issues Ethical Debate: Paternalism vs. Free Choice/Speech
Other issues:
Internet – pop up ads; product sampling; spyware
Children – exposure to questionable material; target marketing at young children
Tobacco and Alcohol – products that are unhealthy and endanger others; targeting vulnerable groups

13. Product Safety and Liability
Marginal value of product = Marginal cost of life or function (about $129k)
National Commission on Product Safety’s steps to assess product safety:
How much safety is technically attainable, and how can it be specifically obtained for this product/service?
What is the acceptable risk level for society, the consumer, and the government regarding this product?
Does the product meet societal and consumer standards?

14. External Review and Control
1972 CPS Act, CPS Commission
EPA, NHTSA, FDA, OSHA
Why are external review processes (i.e.: governmental regulatory oversight) needed?
Children’s products (car seats, toys, cribs, highchairs, etc.)
Automobiles (Firestone, Ford Explorers)
Drugs (Fen-Phen, etc.)

15. Liability and Negligence
Negligence – all parties may be held liable if reasonable care was not observed in producing or selling product
Strict Liability – (manufacturers) known or knowable defect gets to market
Injury happened
Injury resulted from a product defect
Defective product delivered by manufacturer
Absolute liability – (manufacturers) not warning of product danger even though the danger was scientifically unknown at the time of production and sale of the product

16. Environmental Issues Toxic air pollution Water pollution and scarcity
Hazardous waste and land pollution
Laws:
Clean Air Act, 1970, 1977, 1989, 1990
Federal Water Pollution Control Act, 1972
Safe Drinking Water Act, 1974, 1996
Toxic Substances Control Act, 1976
Resource Conservation and Recovery Act, 1976
Chemical Safety Information, Site Security, and Fuels Regulatory Relief Act, 1999

17. Causes of Environmental Pollution
Consumer affluence.
Materialistic cultural values.
Urbanization.
Population explosion.
New and uncontrolled technologies.
Industrial activities.

18. Ethics of Ecology: Assumptions
Responsibilities go beyond production of goods and services at a profit
Include helping to solve important social problems, especially those they created
Broader constituency than stockholders
Impact more than just marketplace
Serve a wider range of human values than just economic value

19. Environmental Ethical Issues
Green Marketing
Environmental Justice
Industrial Ecology
Rights of future generations
Right to a livable environment

20. Questions for Managers Regarding Environmental Policy
How much is your company really worth? (This question refers to the contingent liability a firm may have to assume depending on its practices.)
Have you made environmental risk analysis an integral part of your strategic planning process?
Does your information system “look out for” environmental problems?
Have you made it clear to your officers and employees that strict adherence to environmental safeguarding and sustainability requirements are a fundamental tenet of company policy?

21. Figure 5.5: Five Stages of Environmental Corporate Commitment

22. Three Ethical Principles as Guidelines
from: Toward a Life Centered Ethic for Business
The Principle of Connectedness
The Principle of Ecologizing Values
The Principle of Limited Competition