1. Social Responsibility and Ethics in Marketing4
Social Responsibility and Ethics
in Marketing

2. The Nature of Social Responsibility The Nature of Ethics
Agenda
The Nature of Social Responsibility
The Nature of Ethics
Incorporating Social Responsibility and Ethics into Strategic Planning
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3. The Nature of Social Responsibility
An organization’s obligation to maximize its positive impact and minimize its negative impact on society
Stakeholders
Constituents who have a “stake” or claim in some aspect of the company’s products, operations, markets, industry, and outcomes
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4. The Nature of Social Responsibility (cont’d)
The Dimensions of Social Responsibility
Marketing ethics
Principles and standards that define acceptable marketing conduct as determined by various stakeholders
Cause-related marketing
The practice of linking products to a particular cause on an ongoing or short-term basis
Strategic philanthropy
The synergistic use of organizational core competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits
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5. The Pyramid of Corporate Social Responsibility
Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” adaptation of Figure 3, p. 42. Reprinted from Business Horizons, July/Aug Copyright © 1991 by the Foundation for the School of Business at Indiana University. Reprinted with permission.
FIGURE 4.1
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6. BMW has donated over $6 million to the Susan G
BMW has donated over $6 million to the Susan G. Komen Breast Cancer Foundation from vehicle test drives during their “Ultimate Drive” promotion.
Copyright BMW of North America, LLC. Used with permission. The BMW name and logo are registered trademarks.
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8. The European Eco-label
Courtesy of the European Commission.
FIGURE 4.2
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9. Will Consumers Pay an Extra 25¢/Gallon to Reduce Pollution and Global Warming?
Source: “Americans Split on Paying Higher Prices to Reduce Pollution,” USA Today, September 4, 2001, p. A1. Used with permission
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10. The Nature of Ethics Ethical Standards Influence Factors Company
Industry
Government
Customers
Interest Groups
Society
Influence Factors
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11. The Nature of Ethics (cont’d)
Ethical Issues
Legal Issues
Ethical Issues
Legal Issues
Gray
Areas
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12. The Nature of Ethics (cont’d)
Ethical Issues in Marketing
An identifiable problem, situation, or opportunity requiring a choice among several actions that must be evaluated as right or wrong, ethical or unethical
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14. Misconduct Observed in the Workplace
Workplace Misconduct Observed
2003
2000
Abusive or intimidating behavior toward employees
21%
24%
Lying to employees, customers, vendors, or the public
19%
26%
Withholding needed information from employees, customers, vendors or the public
18%
25%
Discrimination on the basis of race, color, gender, age or similar categories
13%
17%
Sexual harassment
11%
Stealing, theft or related fraud
12%
Falsifying financial records and reports 5%
No data
Giving or accepting bribes, kickbacks or inappropriate gifts 4%
Source: “Major Survey of America’s Workers Finds Substantial Improvements in Ethics, “Ethics Resource Center,
press release, May 21, 2003,
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15. Exercise
You are the distribution manager for a large consumer products firm. Your company is about to release a very large shipment of products. You must choose among several transportation companies. Sales representatives from these companies often make calls to your office. Your decision will mean the loss or gain of millions of dollars of revenue for these companies.
The objective of this exercise is to help students identify ethical issues and understand the importance of codes of ethics.
Question 1. You might ask students which of the listed gifts “crosses the line” with regard to their own perception of what is ethical. Students might change their minds about acceptable gifts if asked, “What if everyone did it?” A distribution manager who accepts a gift of any magnitude may make a decision that is not necessarily in the best interest of the company (e.g., selecting a higher-cost trucking company because it provides box seats to ball games).
Question 2. You might ask students if they know of instances in their own jobs where organizational relationships have had a negative or positive effect on ethical decision making. For instance, how does seeing a boss file inaccurate expense reports (to cover unauthorized expenditures) affect others in the firm? How might people react when peers take supplies or merchandise home?
Question 3. The role of opportunity may determine whether a person will behave ethically. You might also want to ask, “What if I gave an exam and left the classroom for the hour—would you be more likely to cheat?” Opportunity may be a better predictor of unethical activities than personal values.
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16. Exercise (cont’d)
Which of the following gifts would you be willing to accept from sales reps of the transportation companies?
Pen and pencil set (with the company’s logo)
5-year supply of scratch pads (with logo)
Dinner for four at an exclusive restaurant
Season tickets to a professional football team
Fruits and nuts delivered to you each Christmas
Three-day, all-expense-paid golfing vacation
$500 in cash
Bag of groceries delivered to your home each week
Lavish trip to the Cayman Islands
Question 4. An effective code of ethics should let employees know both what is expected of them and the punishment for violating the rules. For instance, a firm may have a policy against accepting any gifts valued over $25. The penalty for accepting anything over that amount may be dismissal. However, simply having a policy or code will be ineffective if top management and superiors do not support and enforce it.
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17. Exercise (cont’d)
What role would top management, superiors, and peers play in your decision on accepting these gifts?
If you had the chance to take some of the gifts on the list without anyone knowing, would you?
Would a code of ethics or an ethical corporate culture help you in making your decision?
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18. Exercise
How ethical are the following behaviors?
The manufacturer of a leading insect spray changes the formulation of its product to eliminate problems with some people being allergic to one of its ingredients. The manufacturer does not inform consumers. The change in the formula will make the product less effective.
A bribe is paid to a company official in the island country of Kocomo to facilitate the movement of a product in that country. Bribes are a normal and expected business practice in Kocomo.
The main objective of this exercise is to discuss the complex issues in defining ethical behaviors. Have the class discuss the ethical issues in each situation and determine whether the action described is ethical or unethical. You could also have the students discuss what it means to be ethical or unethical. Can a manager be truly ethical across all situations? What is the role of understanding the circumstances in ethical decision making? Try not to moralize by telling the students the right answer (if there is one). Encourage the students to reach a group consensus.
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19. Exercise (cont’d)
A beer company engages in an advertising campaign that targets undergraduate college students, many of whom are under the legal drinking age.
A rental car company strongly advises customers to purchase insurance when renting a car. Although most personal car insurance policies cover insured motorists when driving a rental car, most rental car customers are not aware of it.
The main objective of this exercise is to discuss the complex issues in defining ethical behaviors. Have the class discuss the ethical issues in each situation and determine whether the action described is ethical or unethical. You could also have the students discuss what it means to be ethical or unethical. Can a manager be truly ethical across all situations? What is the role of understanding the circumstances in ethical decision making? Try not to moralize by telling the students the right answer (if there is one). Encourage the students to reach a group consensus.
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20. Exercise (cont’d)
Consumer Reports publishes the results of a study on shampoos that provides strong evidence that all shampoos are basically the same. In fact, the results suggest that a mild dishwashing liquid will do the same job for a lot less money. After the study is published, a leading shampoo marketer claims that its latest product will remove oil, add body, condition, and replenish hair better than any competing shampoo and do it all in one step.
The main objective of this exercise is to discuss the complex issues in defining ethical behaviors. Have the class discuss the ethical issues in each situation and determine whether the action described is ethical or unethical. You could also have the students discuss what it means to be ethical or unethical. Can a manager be truly ethical across all situations? What is the role of understanding the circumstances in ethical decision making? Try not to moralize by telling the students the right answer (if there is one). Encourage the students to reach a group consensus.
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21. Factors That Influence the Ethical Decision-Making Process in Marketing
FIGURE 4.3
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22. The Nature of Ethics (cont’d)
The Ethical Decision-Making Process
Influence factors
Individual—personal values and principles of right and wrong, socialization through family, social groups, religion, and education
Organizational—work groups, committees, coworkers
Opportunity—business and organizational conditions which limit, punish, encourage, or reward ethical/unethical decisions
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23. The Relationship of Organizational Values to Employee Satisfaction
Source: Ethics Resource Center, The Ethics Resource Center’s 2000 National Business Ethics Survey: How Employees Perceive Ethics at Work (Washington, D.C.: Ethics Resource Center, 2000), p. 85. Reprinted with permission.
FIGURE 4.4
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24. Sources of Pressure to Compromise Ethics Standards at Work
Source: Ethics Resource Center, The Ethics Resource Center’s 2000 National Business Ethics Survey: How Employees Perceive Ethics at Work (Washington, D.C.: Ethics Resource Center, 2000), p. 38. Reprinted with permission.
FIGURE 4.5
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25. The Nature of Ethics (cont’d)
Improving Ethical Conduct in Marketing
Codes of conduct (ethics)
Formalized rules and standards that describe what the company expects of its employees
Ethics officers
High-ranking persons (known to respect legal and ethical standards) in the organization who have responsibilities for
creating and distributing codes of conduct.
providing advice about ethical issues.
overseeing and enforcing of the code of conduct.
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26. Copyright © Houghton Mifflin Company. All rights reserved.

27. Copyright © Houghton Mifflin Company. All rights reserved.

28. Copyright © Houghton Mifflin Company. All rights reserved.

29. Copyright © Houghton Mifflin Company. All rights reserved.

30. Copyright © Houghton Mifflin Company. All rights reserved.

31. The Nature of Ethics (cont’d)
Implementing Ethics and Legal Compliance Programs
Provide open communication and coaching on ethical issues (create a value-based corporate culture).
Enforce standards and impose penalties or punishment for codes of conduct violations.
Revise compliance programs as necessary.
Make compliance programs an essential part of the overall marketing strategy implementation.
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32. Incorporating Social Responsibility and Ethics into Strategic Planning
Ethics Individual and
group decisions
Social Responsibility
The total effect of marketing decisions on society
Overall Strategic Marketing Planning
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33. Evaluating whether an activity is ethical and socially responsible
Incorporating Social Responsibility and Ethics Into Strategic Planning (cont’d)
Evaluating whether an activity is ethical and socially responsible
Ask other persons in the organization for their approval.
Contact concerned consumer, industry, and governmental groups.
Check company policies.
Wall Street Journal test.
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34. Texas Instruments’ Ethics Quick Test
Is the action legal?
Does it comply with our values?
If you do it, will you feel bad?
How will it look in the newspaper?
If you know it’s wrong, don’t do it!
If you’re not sure, ask.
Keep asking until you get an answer.
Source: Texas Instruments. Used with permission.
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35. Lockheed Martin’s “Warning Signs”
“Well, maybe just this once…”
“No one will ever know…”
“It doesn’t matter how it gets done as long as it gets done.”
“It sounds too good to be true.”
“Everyone does it!”
“Shred that document!”
“We can hide it!”
“No one will get hurt!”
“What’s in it for me?”
“This will destroy the competition!”
“We didn’t have this conversation.”
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36. Variations in Employee Conduct
10%
40%
Follow their own values and beliefs; believe that their values are superior to those of others in the company
Always try to follow company policies
Go along with the work group
Take advantage of situations if -the penalty is less than the benefit -the risk of being caught is low
Copyright © 2005 O.C. Ferrell.
These percentages are based on a number of studies in the popular press and data gathered by the authors. These percentages are not exact and represent a general typology that may vary by organization.
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37. Incorporating Social Responsibility and Ethics into Strategic Planning (cont’d)
Being socially responsible and ethical is not easy.
Requires organizational commitment to
constantly monitoring trends and changes in society’s values.
developing control procedures to prevent organizational decisions and actions from damaging customer relations.
attempting to predict the long-term effects of products and actions taken to meet current societal wants.
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38. Social responsibility and ethics improve marketing performance.
Incorporating Social Responsibility and Ethics Into Strategic Planning (cont’d)
Social responsibility and ethics improve marketing performance.
Socially responsible companies (and their employees) can better respond to stakeholder demands.
A company’s reputation for social responsibility is important to consumers’ buying decisions.
Social responsibility and ethical behavior reduce the costs of legal violations, civil litigation, and damaging publicity.
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39. Importance of Company Reputation to Consumers Today Versus Five Years Ago
Source: Wirthlin Worldwide
Source: “Watch What You Say,” American Demographics, July 2000, p. 24. Adapted with permission.
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