27 June 2016From: CSE text bookSMEI-USA

Ethics & Laws in Business

Agenda

• Introduction to Ethics• What “Ethics” stands for?• Ethical approaches• The Sales person as a boundary spanner• Ethical issues associated with the salesperson’s customers• Ethical issues associated with the salesperson’s company• Is sales among the most unethical professions? • Creating an ethical climate• Identifying & responding to an ethical breaches• Sales related laws

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Introduction

• Does greed & profit drive every salesperson to engage in unethical behavior whenever possible???

• Of course NO

• Sales profession has developed a reputation for being unsavory!

• Unethical sales practices & unethical sales people can’t last, even without legal safeguards & judicial resources, suffice is the negative word or mouth & reduced future sales.

• Most salespeople are still good people. They do the right thing because they want to, not because they have to.

• Simply, focusing on truly helping others will free ourselves to be more honest & ethical.

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ETHICS

• Ethics are the moral principles of right & wrong to guide people’s behavior.

• What is & isn’t ethical varies from culture to culture.

• In terms of business it can vary from industry to industry

• What is believed to be ethical can also change over time

• Problems arise when people’s values conflict with what they see going on around them

• When problems are large enough, the responses to them are then codified into LAW

• Laws were created to stop practices that thought were problematic to organize & control these practices between different parties.

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Approaches to ethics

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Approach Summery Pros & Cons

1 Golden Rule Treat others as you would like to be treated

• Personalizes ethical decisions making it easy to determine what to do

• Fails to account for situations in which others are in conflict

2 Conventionalist approach

Acts are OK as long as it is legal OR if everyone is doing it

• Fails to account for grey areas in which acts are not specified as either legal or illegal

3 Protestant Ethic

Do what you can defend to a committee of peers

• What’s ethical depends on the intended, not actual outcome

• Can lead to more concern about what can be defended than what is right

4 Market Imperative Ethic

The market will determine what is right

• Provides clear responsibilities for individuals• Can develop into “might is right” scenario

5 Libertine Ethic Do what you want as long as no one gets hurt

• Outcomes are important & responsibilities to others is assumed

• Can lead to problems when others are harmed indirectly or harm is not obvious

6 Utilitarian Ethic Do what has the best outcome for all involved

• Outcomes & honorable intent are important, also requires taking responsibilities for others

• Unclear who gets to decide what outcomes are best

GOLDEN RULE

• Is familiar even to schoolchildren

• Do unto others as you would have them do unto you

• Works well with situations with only 2 parties

• Because most salespeople are responsible for several different people (multiple others), and their needs & wants conflict with each other, the Golden rule is not always helpful

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CONVENTIONALIST APPROACH

• Entirely different, it suppose to take all actions allowed by law or by convention

• “Everybody is doing it, so it must be okay”

• People shouldn't have the need to behave or act on a higher principles than other people

• A similar philosophy has arisen in the business world, based on the expression: “It is easier to ask for forgiveness than permission”. Which is appropriate when it comes to dealing with Red Tape that can slow down doing what is right.

• Problems arise when the outcome damages someone (customer or company)

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PROTESTANT ETHIC

• Most students associate the term “Protestant ethic” with “Work ethic”

• “Could I satisfactorily explain this action to a committee of peers, spouse or to the public”

• Can end up mirroring the conventionalist approach. Pick the right committee (don’t put any customers in it, for example) and probably you can explain away anything.

• Your explanation could focus on your intent rather than your actions

• Providing evidence that your intent was honorable can be difficult

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MARKET IMPERATIVE

• Stems from Adam Smith’s classical economics approach to Capitalism

• States that; the market require a person to act in his or her own best interest

• Similar to Darwin’s approach “Survival of the fittest” & Nietzsche’s “might makes right”, the strongest deserve to rule

• Modern civilizations have decreed that such an approach is not appropriate, laws are created to protect the defenseless & one’s strength doesn’t determine one’s rights

• According to it, the salesperson works for the company & only the company’s needs that must come first. So, it forgets what is best for the society, customer & competitors as well.

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THE LIBERTINE ETHIC

• Raised in 1960s, Ethics are based on the principle of individual freedom. Customers should be free to make their own decisions as they best see fit

• “one should be free to do whatever one wants as no one else gets hurt”

• Libertine approach appears to work very well with sales

• According to it, bribery & kickbacks would be okay, because at the end, bribery doesn’t influence the buyer’s ABILITY to choose, just his willingness to do so

• After all, fairness is not just what is fair for the customer, but also what is fair for the competition, and bribes eliminates competitors unfairly

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UTILITARIAN ETHIC

• Like the lebertine & Golden rule, focuses on doing what has the best OUTCOME

• There are different forms of Utilitarian ethic, (Situational ethic, Bentham/Mills proportional ethic…) all of them come down to the basic question “whether or not an action’s positive consequences outweigh its negative consequences”

• But, who gets to decide what the value or weight of the positive or negative outcomes are? Of course, it has to be the person making the decision, who is the sales person, so the salesperson’s temptation would affect his decisions, minimizing the weigh of negatives & maximizing the positives

• So, sometimes, it needs to return to the Golden rule; the salesperson must consider his customer’s needs to be as important as his own

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The Salesperson as a boundary spanner

• Is sales among the most unethical professions?!• If we considered exaggeration is one form of manipulation, so many other

professions are doing

• Sales persons are unique for being Boundary Spanners; • They operate both outside of & within an organization’s boundaries• They represent their organizations as well as their customers• They represent different people within their company

• That’s why they encounter ethical dilemmas not only externally with customers but internally within their organizations & with other employees

• So, representing multiple parties simultaneously is what causes sales people difficulty, and problem raise when the salesperson emphasizes one party’s need over another.

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Ethical issues associated with the salesperson’s CUSTOMER

• Misrepresentation: when the salesperson exaggerates benefits or minimizes problems, leading a customer to wrong conclusions about a product or service.• Puffery: is allowed exaggeration as long as it is vague & general

• Bribery: when the salesperson attempts to influence a buyer unfairly by offering a gift or money

• Privacy: when the salesperson fails to protect the privacy of his customer by giving the customer’s confidential information to another customer; the salesperson invades the customer’s privacy with spam or unwanted calls.• Rogue purchasing: purchasing products from unapproved vendors

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Ethical issues associated with the salesperson’s COMPANY

• Stealing: the salesperson fails to work a full day, stealing time that he is paid. Or the salespersons pads for his expenses accounts

• Claiming Credit: the salesperson steals other people’s lead; the salesperson misrepresent the location of a customer to receive credit for an order belonging to someone else

• Sexual Harassment: the salesperson experiences unwanted sexual offers or inappropriate physical contact; unwelcome sexual advances, jokes & so forth. Generally it is rare

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Creating an ethical sales climate

• Firm’s ethical climate is the degree to which its corporate culture supports ethical business practices; OR in the obverse, unethical climate is the degree to which unethical business practices are tolerated or encouraged

• High-performing salespeople are far more likely to leave a company if the ethical climate of the company is poor

• A company outlines its standards for ethical behaviour in its Code of Ethics• Almost 90% of the US organizations have a written code of Ethics• A code of Ethics is established in order to:

A. Provide salespeople & other employees with guidelines & standards for conductB. Helps salespeople inform others that they intend to conduct business in an ethical

mannerC. Support salespeople intention to remain ethical, offering salespeople an “out”

when under pressureD. Attract high quality salespeople

• The most important about the code is the clarity & specificity with which they are written

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IDENTIFYING & RESPONDING TO ETHICAL BREACHES

• Whistle-blowing; The primary method by which companies identify breaches of policy; when an employee or a customer reports unethical or inappropriate behavior

• Also by using technology, like Statistical Modeling Technique, which is a sophisticated & complicated program that can detect persons engaged in questionable actions.

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PROCESS SYSTEMS FOR RESPONDING TO ETHICAL BREACHES

1. Investigation & punishment system

2. Grievance & arbitration system

3. Mediator/counselor system (by Ethic officer)

4. Employee-board system

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DEALING PERSONALLY WITH ETHICAL BREACHES

1. Quit & leave the organization

2. Stand-out, just say no-that is. Refuse to follow & can put the blame on the ethics code

3. Negotiate for an alternative course of action, when the objective is ethical

4. Appear to agree with the unethical tactic then choose to remain ethical. But has to document whatever actions you took to free your self from the charge in case

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Sales related laws

• US Federal Sentencing Guidelines; enacted in 1987 & updated in 2007 as a response to an increase in the White-Collar crime (Crimes committed by business)

• Uniform Commercial Code; defines key elements of sales, such as what is “sales” & “warranty”

• Business Defamation; state laws that govern what businesses (and sales people)can say about competitors

• Gramm-Leach-Bliley Act; fedral law regarding privacy policy• Can-SPAM Act; federal law prohibiting spam & governing how companies

can contact customer; related is the Do-Not-Call registry• Foreign Corrupt Practices Act; a US law that makes bribery & other

activities illegal in other countries for American companies• Civil Rights Act; govern hiring practices, among others, for sales managers• Robinson-Patman Act; federal law regarding fair pricing• Caux Round Table; in 1986, to reduce trade tensions between countries,

organize moral principles of Capitalizm

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