Ethical Issues for a Sales Person

7/28/2019 Ethical Issues for a Sales Person

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CHAPTER 3

ETHICAL AND LEGAL

CONSIDERATIONSIN SELLING

Glengarry Glen Ross

What were the principal ethical predicaments which Sheldon

Levine (Jack Lemmon) and his cohorts faced?

How could Shelley's extenuating circumstances justify his

actions?

What types of external pressures influenced the salespeople's unethical selling practices?

How did the sales manager (Kevin Spacey) and top management (Mitch & Murray) foster the

unethical practices?

How the nameless motivational speaker (Alec Baldwin) address the issues of ethics?

How does Dave Moss (Ed Harris), rationalize breaking the law?


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How does George Aaronow(Alan Arkin) violate rules of ethics?

What was unethical about Ricky Roma's (Al Pacino) methods

in prospecting and closing James Link (Jonathan Pryce)?

Why was Ricky Roma's handling of Mr.Link 's cancellation

unethical?

How would you change the sales environment to promote

ethical selling practices without compromising overall sales

performance?

The Power of Ethical Management

by Dr. Ken Blanchard & Dr. Norman Vincent Peale

The basic message of their book is simple:

1. You dont have to cheat to win!

2. Nice guys may appear to finish last, but usually they are running in a different race.

3. Cheating, lying, and short-changing the customer on service

1. may bring a satisfactory profit today,

2. but it is a sure way to court failure for the future.

THE ETHICAL DILEMMA:

Do honest salespeople finish last?

Ethical Questions


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What method do we use to determine moral standards?

Why be moral at all?

Are there moral standards which are common to all humanity?

Is free will a necessary condition for moral praise or blame?

The Origin of Ethics

1. Legal Standards are enforced

2. Ethical standards come from society

Bases for Ethical Systems

Deontological

Standards-based ethics

uses specific rules

Teleological

Results-Based Ethics

defines right and wrong in terms of end results

Utilitarianism

Started by Jeremy Bentham (1748-1832)

Tried to reform some of the unfair laws in England

Developed a theory that the morally correct rule was the one that provided

o "the greatest good to the greatest number of people. The greatest good fo

Ethical

Ambivalence

results from learning that everything is relative.

Are there any moral absolutes?

Is the language of ethics different from other uses of language?


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INFLUENCES ON THE SALESPERSONS ETHICS

Company Code of EthicsGovernment action and fear of retribution have induced more companies to adopt a code

Typical

issues

covered

Expense accounts

Gift giving

Unethical demands by a buyer

Promises about performance or delivery

Selling unnecessary products

Role Modeling by Executives and Sales Managers

Examples Set by Colleagues and Competitor

The Bottom Line

Profit?

Survival?

Groupthink

peer pressure

group develops a set of shared perspectives that may be

unrealistic but are strongly supported by the members ofthe group.


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Gamesmanship

winning

for the sake of winning

DEVELOPING A PERSONAL CODE OF ETHICS

Responsibility

to

Self

your conscience

Responsibility

to

your

Company

Inaccuracies in Expense Accounts

Honesty in Using Time and Resources

Accuracy in Filling Out Order Forms

Representing the Company

Responsibility

to

Competitors

Responsibility

to

Customers

Overselling and Misrepresenting Products or Services

Keeping Confidences

Gifts

Entertainment
http://en.wikipedia.org/wiki/Stephen_Potter


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OPERATING IN A GLOBAL ENVIRONMENT

Some cultures have different expectations

U.S. citizens are expected to follow U.S. laws

ETHICS AND JOB TENURE

Whistle-Blowing

1. You may be held legally accountable for inaction

2. Recent rulings encourage whistle blowing

3. Sometimes the best policy may be to keep quiet until solid evidence can be accumulated against a

wrongdoer.

4. A word of caution inaction can even be grounds for legal action.

How Does the Company Treats the Salesperson

1. Some incentives encourage fudging

2. Management may not be accessible to help with dilemmas

3. Do control mechanisms exist for

a. Customer complaints

b. Salesperson dissatisfaction

c. Expense accounts

4. Are sales goals impossible

5. Be sure managers fairly manage the distribution of sales territoriesSEXUAL HARASSMENT


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A. Nearly 16000 complaints per year

B. Look for a harassment policy including

A. Company Leadership

B. Immediate complaint investigation

C. Privacy rights protected

D. Thorough follow up

E. Sensitivity training

F. Review training for comprehension

G. Periodic refresher courses

ETHICS AS GOOD BUSINESS

A. Unethical activity costs business

B. Check Points in Ethical Decision-Making

1. Is it legal?

2. Is it fair to all concerned?

3. Would I want someone else to act this way to me?

4. How would I explain my actions to someone else?

5. How will it make me feel about myself?

RememberThere is no

pillow as soft as a clear

conscience.

LEGAL ISSUES FACING THE SALESPERSONIt is easy to violate many of the laws

Some

Legal

Traps

Quality below standard specified

Violation of delivery date

Pricing concessions

Incomplete or incorrect instructions

Price fixing

Delivering a different brand than that sold


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Misrepresentation of product usage

Slandering competitor

Kickbacks to buyer

Charges after the sale

Misuse of proprietary data

Signing agreements without the proper authorization

C

at

eg

or

ie

s

of

L

a

w

s

Antimo

nopoly

Decept

ive

actions

Preserv

e

compet

ition

SPECIFIC ANTITRUST LAWS AND THEIR SALES IMPLICATIONS

The Sherman Antitrust Act of 1890

Federal Trade

Commission

Act of 1914

Unfair methods of competition and commerce

Unfair or deceptive acts or practices

The Robinson Patman

Act of 1936

Defines price discrimination

Gives FTC the right to limit quantity discounts

Prohibits unfair promotional allowances

Brokerage allowances only go to brokers


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THE UNIFORM COMMERCIAL CODE (UCC)

guidelines for selling

1. Written or verbal offers to sell may be binding

2. Financing must be explained clearly and completely

3. Salesperson must know legal responsibilities of both parties

Warranties and guarantees

a. Express warranties are made by salesperson or in writing

b. Implied warranties

1. State law

2. Unless a disclaimer is made

COOLING-OFF LAW

How to keep out of

Legal Trouble

1. "Puffery" vs.

statements of

fact.

2. Educate the

customer

thoroughly

before making

the sale

3. Know technical

specs, etc. for

the product you

sell.

4. Know your

company's

literature.

Challenge it if is

false

5. Know the terms

of sale policies.

You can bind

the company

6. Know federal

and state laws

regarding your

product and its

warranties

7. Don't guess at


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your product's capabilities

Common Ethical Issues for Salespeople

What are the most common ethical issues facing salespeople? Many of the most common

situations you could face as a salesperson involve issues such as the following:

A customer asking for information about one of their competitors, who happens to be

one of your customers

Deciding how much to spend on holiday season gifts for your customers

A buyer asking for something special, which you could easily provide, but arentsupposed to give away

Deciding to play golf on a nice day, since no one knows if you are actually at work or

not

Lets examine each of the issues. In the first issue, a customer owns the information about

their business. The salesperson may hold that information, such as how many cases of the

product they purchase or who their customers are, but that salesperson does not have the right

to share that information with the customers competitor. In many instances, a buyer may ask

the seller to sign a nondisclosure agreement because, in order to serve the buyer, the seller

will gain access to important private information about that buyer. But even if there is nonondisclosure agreement, courts are likely to agree with the buyer that the seller has an

obligation to protect the buyers information.

In the second issue, the concern is whether the gift is so extravagant that it is considered a

bribe. In some companies, such as IBM and Walmart, buyers are not allowed to accept so

much as a free cup of coffee from a seller. These companies do not allow their buyers to

receive promotional items such as a pen or coffee cup with the sellers logo on it because

they want every vendor to have free access to sales opportunities and earn the business on

their merits, not their freebies. Many buyers would question the motives of a salesperson

giving too large a gift. Most salespeople agree that lavish entertainment and gifts are

becoming less important in business because decision makers know these add to the costs of

doing business and theyd rather get a better price than be entertained.

Figure 13.12.


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Lavish gifts like this watch may be nice, but many buyers will consider it too lavish and

wonder about the salespersons motives.

The third issue is tough for salespeople because there are two factors involved: a possibleviolation of company policy and providing an unfair advantage to one customer. Customers

may not know that their special request could get the salesperson in trouble and the request

may be reasonable, just against company policy. In that instance, the salesperson should not

follow through on the request, though it might make sense to see if the policy can be

changed. The second factor, though, is a bit more difficult because the request can be unfair

to other customers, and may cause legal problems. As long as the special request can be

provided to anyone who asks for it, no law is broken. What if the special request is for a

discount? Pricing discrimination laws could come into play if such a discount is not made

available to all who ask. What if the request isnt illegal, but other customers find out and get

upset that they werent offered the same benefit? Then the salesperson may get a reputationfor being untrustworthy.
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In the final issue, the question is whether the salesperson is cheating the company out of time

and effort. Some argue that a salesperson who is paid straight commission (paid by the sale)

is not stealing anything from the company, but others argue that even in that instance, the

company is being deprived of possible sales that would be gained if the salesperson was

working.

Figure 13.13.

Even though it is a beautiful day for golf, a salesperson who takes time away from the job is

stealing time from the company, and losing sales opportunities as well. Taking a customer to

play may be a different story; such a game may be a time to strengthen a relationship, as long

as the customer does not feel manipulated or obligated.

These are not the only issues that salespeople face. In the United States, two basic principles

of business are that everyone should have an equal opportunity to earn business, and thecustomer remains free to make a choice. Manipulation, a form of unethical sales behavior,

unfairly reduces or eliminates a buyers ability or opportunity to make a choice. Persuasion,

on the other hand, may influence a buyers decision, but the decision remains the buyers.

Manipulation can include misrepresentation, or claiming a product does something it doesnt,

but it can also include withholding important information, using hard-sell tactics, and other

unfair sales tactics.

However, as mentioned earlier, salespeople tend to be ethical people. The use of manipulative

sales tactics is actually pretty rare.

Company Safeguards
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Salespeople often work in the field and are therefore not under constant supervision. Even

inside salespeople may be able to get away with less than ethical behavior as no supervisor

can watch or hear everything. So how do companies manage ethical practices?

The first step is to develop policies based on the companys mission and values (recall these

from Chapter 2, Strategic Planning) that describe what is acceptable and what is not. Goodethical policies not only list or describe appropriate and inappropriate behaviors, they also

describe the underlying principles. Not all ethical dilemmas can be listed in a policy, so by

detailing the principles and values that make up the reasoning behind the policies, salespeople

and sales managers will be more prepared to respond appropriately.

Codes of ethics, or ethics policies, can be pretty detailed. Shells ethics policy, for example, is

a book over 20 pages long! Not only do these cover how salespeople (and other company

representatives) should interact with customers, they also detail how employees should treat

each other and how the companys vendors should be treated. (To see an example of a brief

code of ethics for salespeople, visit Sales and Marketing Executives Internationals Web site,

http://www.smei.org/displaycommon.cfm?an=1&subarticlenbr=16.)

A good second step is to train all salespeople and sales managers on the policy. One reason

for such training is to secure greater support and application of the policy, but another reason

is that, should a salesperson engage in an unethical or illegal activity, the company is

protected. The Federal Sentencing Guidelines (FSG) were first developed in 1987 and then

updated in 2007, and specify what happens to companies when employees commit breaches

of ethics. Companies that have solid policies and train all employees on those policies can,

rightfully under the FSG, claim that any unethical employee was acting against company

policies and on his or her own, should anyone file charges against the company. Solid

policies and employee training can then be used as a defense against such charges, and the

company would not be held liable.

Yet training alone is insufficient. The company must also enforce the policy and have

procedures in place that make enforcement possible. For example, a company should have a

mechanism for reporting unethical activity in a way that protects the person making the

report. Many companies have anonymous message boxes that enable an employee to report

unethical activity. One similar and common practice is to have an ethics office, charged with

investigating any complaints. The FSG requires that companies also have internal auditing

procedures to ensure that misconduct can be detected.

Note that these codes of ethics, the FSG, and the policies and procedures affect allemployees. These were not created just because of salespeople. Marketers have faced ethics

challenges in how claims are made in advertising, while supply chain managers have

encountered dilemmas in dealing ethically with vendors. Managers, in any area of the firm,

encounter challenges regarding equal opportunity and creating an appropriately professional

work environment.

Challenges Facing Sales Managers

Sales managers face the same challenges in managing salespeople that all managers face.

These include ensuring that hiring, compensation, and other management practices are not

discriminatory, that sexual harassment finds no home in the workplace, and that employeesare treated with dignity and respect.
http://www.smei.org/displaycommon.cfm?an=1&subarticlenbr=16http://www.smei.org/displaycommon.cfm?an=1&subarticlenbr=16


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Other challenges may arise, though. For example, salespeople have to be in front of

customers when customers are available. Earlier, we discussed how the number of calls made

can impact a salespersons success. So should a sales manager schedule all training sessions

on weekends, when buyers are at home and not available for sales calls? Does the answer to

that question change if the salesperson is paid a salary or a commission?

Recently, one sales manager reported a customer who said he wanted no Muslims calling on

him. Another sales manager said when she and her salesperson (another woman) sat down

with a buyer (a male), the buyer had pornography on his computer monitor. Do those sales

managers assign new salespeople to the accounts? Or do they fire the customer? If the

customer was to be fired, the salesperson would lose commission. Yet in both instances, the

managers said they fired the customer, an action that both salespeople were happy with, and

they were reassured that the loss of the sale wouldnt be held against them. The loss of the

commission was worth it.

In sales, several laws apply that also apply in other areas of marketing but are more

prominent in sales. For example, the Uniform Commercial Code (UCC) determines when asale is a sale. Typically, a sale is a sale when the product is delivered and accepted by the

buyer. In most instances, the customer can cancel the order with no penalty unless accepted.

Sales managers have to be aware of such laws in order to avoid creating policies that can be

illegal.

Laws that affect sales operations include pricing discrimination, which we discuss in

Chapter 15,Price, the Only Revenue Generator, and privacy laws, discussed earlier. In

addition, laws regarding hiring practices, workplace safety, and others can affect sales

managers. If global sales situations arise, the Federal Corrupt Practices Actwhich prohibits

bribery and other practices that might be culturally acceptable elsewhere but that are illegal in

the United Statescomes into play.

For these reasons, sales managers should develop close working relationships with the human

resources department. These professionals, along with the legal department, are charged with

staying abreast of legal changes that influence management practice.

Key Takeaway

Salespeople are, for the most part, caring, ethical professionals. They do face unique ethical

challenges because of their job, including how to handle unethical requests from customers

and making sure that they know and follow all company policies for interacting withcustomers. American salespeople have the added constraint that whats illegal in the United

States is illegal for them in other countries because of the Foreign Corrupt Practices Act, even

if the behavior in question is acceptable to those countries laws and practices.

Sales managers have all the usual management concerns, such as fair hiring practices.

According to the Federal Sentencing Guidelines, managers also have to develop policies and

practices that codify ethical behaviors, train salespeople on the ethics policies, and ensure that

the policies are followed. In addition, sales managers have to be aware of laws such as the

Universal Commercial Code and others that govern sales transactions.

Review Questions


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1. Do salespeople deserve the image or negative stereotype? Why or why not?

2. Do ethics get in the way of success in sales? Why or why not?

3. What safeguards do companies enact to ensure ethical behavior among salespeople

and sales managers?

Ethical Selling and Sales Management

A code of sales ethics is fundamental to sales success. It is the foundation on which sales techniques and

strategies are built, and provides solid footing on which long-term, profitable businesses are built.

Written Feb 15, 2008, read 6991 times since then.

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Sales people perform amid the convergence of three demanding masters: employer, customer

and self. Each party has their own agenda and the sales person, who clearly has a personal

agenda, is the arbitrator.

The employer/seller is seeking sales, profit margin and correctly consummated

closings.

The customer/buyer is seeking solution, value and correctly consummated closings.

The salesperson has the above objectives in mind and also their own income potential.

The common desire is that the sale be closed correctly. All three parties want to leave the

closing feeling pleased with the final result and process that lead to it. Critical to this three-

way satisfaction is the sales person saying and doing the right things and not over-promising.

True and correct disclosure is the basic tenet: disclosing to the customer what the product

truly is, how it can solve problems and disclosing to their employer who the customer is and

what they want.

It is a challenging work of communication, that can easily be confused accidentally and

deliberately.

The deliberate error most often is caused by money. People, including sales people, sellers

and buyers all have and will act oddly for money. Money can lead us astray. Sales people

have the added pressure of variable income streams and the challenge of having great months

and poor months. The question is, Will our sales people hold their ethical posture when

times are bad?

Micro-management is one tool to deal with this disclosure problem and many companies now

use scripts and legal approval of any and all flyers or letters that a sales person might use.

Misrepresentation is embarrassing and expensive. It can result in loss of business, loss of

customers and worst-case scenario, class action suits. Ethical selling is an adjunct to micro-management and an enhancement to any sales effort. Sales people need to know about the
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conflicted position that they are in and use their own ethical posture to bolster their customer

relations and service.

Ethical selling is developing trust: teaching individual sales people to act rightly, to say and

print the right things; to not over-promise and make sure that buyers and sellers are fully

informed.

The customer is not always right. Not all customers should be sold to, and sometimes,

customers should be fired. In every walk of life there are liars and thieves. Just as sales

people can over-promise and not deliver, so too can customers. The promise of purchases is

not the same thing as actually making the purchase. And paying for the purchase and the

product performing as advertised complete the transaction.

Sales people certainly know that all customers are not created equal. Some are large buyers

and some are small. Some have prompt payment habits and some dont pay at all. Though we

would prefer the large buyers who pay promptly, what we must truly avoid are those

customers that never pay. These are the unethical customers that should be avoided. Do oursales people know to avoid them?

Quality begets quantity. If and when sale people are ethical (courteous, responsible and

honest) they can and will attract similar type customers. They will also be able to identify

customers that may not be so. Unethical customers are to be avoided. The customer is not

always right. Ethical selling involves both sales people and their customers. Can our sales

people be ethical and also find like-minded customers?

Be ethical thyself and do business with same. Liars and thieves can and will play money

games and lead a sales person astray. Are our sales people ethically secure?

Competitors are not the enemy. Sometimes they will win the day and sometimes we will. No

one wins every game they play, but how do we handle defeat? Do we disparage our

competitors or our operations / fulfillment teams? Do we sulk and complain to anyone and

everyone? Or do we examine the events and learn from them?

Mistakes will happen and perfection is a very hard performance level to achieve and

impossible to maintain for very long. Mis-communication does happen. Shipping delays

occur and people do get sick and take vacations; all of which can cause a sale to not close

correctly. Ethical sales people know this and can deal with these errors, and they can also

communicate clearly what did occur and what might be done, without recrimination orassassination.

Ethical selling provides a framework to accept both success and loss. Surely, success is the

preferred outcome, but experience and character are most often acquired when we lose.

Losing is not bad, if we learn and grow from it. Developing a personal code of ethics is

critical in the development of successful sales people.

I am coming from the mortgage industry, which is suffering now for many reasons and one is

a market wide lack of ethical behavior. Too many players, sales people, sellers (lenders) and

buyers (borrowers) are misbehaving. Too many loans have been closed that were not true and

correct. Misrepresentation is not the only problem in the current mortgage crisis, but it is acontributory factor and there is truly no need for such and no excuse for such.


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Ethical Issues for a Sales Person