Module 4: Business Ethics

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Principles and Ethics in Selling

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SALES: Ethics and Communication
Business Ethics

What are Ethics?
Ethics are moral principles-they are a system that defines right and wrong and provides a guiding philosophy for every decision you make.

There are two aspects to ethics: The first involves the ability to discern right from wrong, and propriety from impropriety. The second involves the commitment to do what is right, good, and proper. Ethics entails action; it is not just a topic to mull or debate.” [2] Is it right? Is it fair? Is it equitable? Is it honest? Is it good for people? These are all questions of ethics. [3] Ethics is doing the right thing, even if it is difficult or is not to your advantage. [4]

It seemed like a straightforward decision at the time-you could either pay ninety-nine cents per song on iTunes, or you could download for free from a peer-to-peer network or torrent service.

The MP3s you downloaded have value-that’s why you wanted them, right? And when you take something of value without paying the price, well, that’s theft. The fact that you’re unlikely to get caught may make you feel safer, but if you are caught, you could pay from $750 to $150,000 per song. [1]

Other variables can further complicate the situation. If you downloaded the MP3s at work, for example, you could lose your job.

Acting unethically is wrong and can have enormous practical consequences for your life and your career.

Personal Ethics
Ethics comes into play in the decisions you make every day.

Have you ever received too much money back when you paid for something in a store, didn’t get charged for something you ordered at a restaurant, or called in sick to work when you just wanted a day off? [5]

Each of these is an ethical dilemma. You make your decision about which path to take based on your personal ethics; your actions reflect your own moral beliefs and moral conduct. [6]

Your ethics are developed as a result of your family, church, school, community, and other influences that help shape your personal beliefs-that which you believe to be right versus wrong. [7]

A good starting point for your personal ethics is the golden rule: “Do unto others as you would have them do unto you.” That is, treat people the way that you would like to be treated.

You would like people to be honest with you, so be honest with others.

Your strong sense of personal ethics can help guide you in your decisions. But compromising your ethics even just once is a slippery slope. Ethics is all about the art of navigating the slippery slope: you have to draw a line for yourself, decide what you will and won’t do, and then stick to it. If you don’t have a strong set of ethics, you have nothing to use as a guidepost when you are in a situation that challenges you morally. A highly developed set of personal ethics should guide your actions. The only way to develop a strong sense of ethics is to do what you believe in, to take actions consistent with your principles time and time again.

Imagine that you’re taking a class that has an assignment of a twenty-page paper and you’ve been so busy that you really haven’t had the time to get started. You’re really worried as the paper is due in two days.

Now you have to decide what to do. You could knuckle down, go to the library, and study, but you really don’t have the time. You’ve heard about some people who have successfully bought papers from a Web site. You’ve never done it before, but you are really desperate. “If I only do it this one time,” you think, “I’ll never do it again.”

Even if you get away with using a paper that is not your own, it’s always possible that you’ll be found out and humiliated even decades after the fact. Southern Illinois University (SIU), in the US, had three high-ranking officials-a university president and two chancellors-revealed as plagiarists in a two-year period. [8]

Even more embarrassing, the committee formed to investigate the charges of plagiarism developed a new plagiarism policy whose parts were plagiarized- it copied its academic dishonesty policy from another US University without citing that source. [9] SIU was made a laughingstock, and its reputation has suffered considerably. Academic dishonesty is not a gamble worth taking; though many students are tempted at some point, those who give in usually regret it.

If you rationalize your decisions by saying, “Everyone does it,” you should reconsider. Ethical behavior is not only what you believe to be right and fair, it is a reflection of your personal brand and what people can expect from you personally and professionally.

Even celebrities such as Wesley Snipes, Willie Nelson, and Darryl Strawberry have fallen from grace in the eyes of the public and learned the hard way that unethical-and in their cases, illegal-behavior such as tax evasion can result in a prison term. [10]

The consequences of unethical behavior can range from embarrassment to suspension, loss of job, or even jail time, depending on the act.

Eliot Spitzer, the governor of New York, admitted that he violated his personal ethics and those of his office when he resigned in March 2008 because of alleged involvement in a sex ring.

Ironically, he built his reputation as the “sheriff of Wall Street” due to his efforts to crack down on corporate misdeeds. [11]

His disgrace was the topic of many conversations about ethics.

Being ethical means you will do the right thing regardless of whether there are possible consequences, you treat other people well and behave morally for its own sake, not because you are afraid of the possible consequences.

Simply put, people do the right thing because it is the right thing to do. Thomas Jefferson summed up ethics in a letter he wrote to Peter Carr in 1785: “Whenever you are to do a thing, though it can never be known but to yourself, ask yourself how you would act were all the world looking at you, and act accordingly.” [12]

Ethical decisions are not always easy to make, depending on the situation. There are some gray areas depending on how you approach a certain situation.

According to Sharon Keane, associate director of marketing at the University of Notre Dame, people have different approaches, so there may be multiple solutions to each ethical dilemma. [13]

For example, if one of your best friends told you in confidence that he stole the questions to the final exam would you say nothing, use them, or report him? This is the gray area where your personal ethics come into play.

Company Ethics

Ethics apply to businesses as well personal behavior. Business ethics is the application of ethical behavior by a business or in a business environment.

An ethical business not only abides by laws and appropriate regulations, it operates honestly, competes fairly, provides a reasonable environment for its employees, and creates partnerships with customers, vendors, and investors. In other words, it keeps the best interest of all stakeholders at the forefront of all decisions. [14]

An ethical organization operates honestly and with fairness. Some characteristics of an ethical company include the following:
Respect and fair treatment of employees, customers, investors, vendors, community, and all who have a stake in the organization
Honest communication to all stakeholders internally and externally
Integrity in all dealings with all stakeholders
High standards for personal accountability and ethical behavior
Clear communication of internal and external policies to appropriate stakeholders [15]

Unethical Business Behavior

While ethical behavior may seem as if it is the normal course of business, it’s unfortunate that some business people and some businesses do not operate ethically.

Enron, WorldCom, Tyco, HealthSouth, and Lehman Brothers among other companies, have been highlighted in the news during the past several years due to unethical behavior that resulted in corporate scandals and the conviction of senior executives and collapse of some companies. While business has never been immune from unethical behavior, it was the fall of Enron in 2001 that brought unethical business behavior on the part of senior executives to the forefront.

Enron began to expand to areas such as Internet services, and borrowed money to fund new businesses. The debt made the company look less profitable, so senior management created partnerships in order to keep the debt off the books and they showed a completely different set of financial statements to shareholders.

On October 16, 2001, the company announced a loss of $638 million. On October 22 of that year, the SEC announced that Enron was under investigation. The stock price continued to fall, and the company was unable to repay its shareholders. As a result of the unethical and illegal behavior, the company filed for bankruptcy protection. [16]

The unethical (and illegal) behavior of the Enron senior management team caused a ripple effect that resulted in many innocent people losing their money and their jobs.

As a result of the Enron scandal, a new law named the Sarbanes-Oxley Act (for US Senator Paul Sarbanes from Maryland and Representative Michael Oxley from Ohio) was enacted in 2002 that requires tighter financial reporting controls for publicly traded companies. [17]

The epitome of unethical (and illegal) behavior was Bernard Madoff, who was convicted of running a $65 billion fraud scheme on his investors.

For years, he reported extremely high returns on his clients’ investments, encouraging them to reinvest with even more money. All the time he was stealing from his clients and spending the money. He cheated many clients, including high-profile celebrities like actor Kevin Bacon and his wife Kyra Sedgewick and a charity of Steven Spielberg’s. [18] He was arrested, tried, and sentenced to 150 years in jail, and his key employees were also sentenced to similar terms. [19], [20]

Ethical Business Dilemmas
Not all behavior that is unethical is illegal.
Companies frequently are faced with ethical dilemmas that are not necessarily illegal. Sometimes ethical behavior can be a matter of disclosure, as in the case of Enron or Bernie Madoff.

Business ethics can also be challenged based on business practices. Bribing an executive, saying or promising things that are knowingly untrue, or treating employees unfairly are all examples of unethical behavior in business.

For example, if a travel company wants to attract a lot of new customers, it can honestly state the price of a trip to Disney World in its advertising and let customers decide if they want to purchase the trip. This would be ethical behavior.

However, if the company advertises a free vacation in order to get customers to call, but the free vacation package includes a $500 booking fee, it is unethical.

If an appliance store wants to get new customers by advertising a low-priced refrigerator, it is an ethical way to let customers know that the company has competitively priced appliances as well.

However, if the store only has a higher-priced refrigerator in stock and tries to sell that one instead, it is unethical behavior.

In the 1990s Nike was accused of exploiting workers in third-world countries to manufacture their products. The low wages they were paying the workers made Nike’s profits higher.[21]

While this is not illegal behavior—they were paying the workers—it was considered unethical because they were paying the workers less than what is reasonable.

Social Responsibility
You may choose to shop at companies because of their business practices. For example, you might like The Body Shop because of its commitment to selling products that do not use animals for testing.

This is a case of ethical behavior that is socially responsible. Corporate social responsibility (CSR), focuses on companies operating in a way that balances the interests of all stakeholders including employees, customers, investors, vendors, the community, society, and any other parties that have a stake in the company.

While corporate social responsibility may seem easy, it’s not always as easy as it looks.

Keep in mind that in order to be socially responsible a company has to balance the social, economic, and environmental dimensions, which means generating a profit for investors while serving the best interest of all parties that have a stake in the operations of the company.

When companies measure the impact of their performance along the three dimensions of social, economic, and environmental impact, it is called the triple bottom line.

Good Ethics = Good Business
The impact of ethical behavior by companies cannot be underestimated. It’s no surprise that companies that consistently demonstrate ethical behavior and social responsibility generate better results.

In successful companies ethics is so integrated into the organization that it defines how every employee from CEO to the lowest-level employee behaves. Ethics is not a separate topic but is incorporated into company strategy. It becomes part of every activity from strategic planning to operational execution. [22]

Target has been committed to the triple bottom line even before it was in vogue, founder, George Draper Dayton, established a foundation to give back to the community. Since 1946 it has donated 5 percent of its income every year. Target’s Corporate Responsibility Report is available to everyone on its Web site. [23]

Target’s commitment to ethics and social responsibility are especially impressive given the current economic challenges. With pressure on short-term results, many companies set unrealistic goals and employees feel extreme pressure to meet them or face the possibility of losing their jobs. Professor Neil Malhotra of the Stanford Graduate School of Business calls this an “overemphasis on instant gratification.” In fact, he feels that is the root cause of the current economic crisis. [24]

Business ethics, just like personal ethics, mean doing the right thing even when it is a difficult choice or doesn’t appear to be advantageous. Ethical behavior and integrity are clearly linked to profitability.

In a study of seventy-six Holiday Inn franchises around the country conducted by Tony Simons, associate professor in organization management at Cornell University and author of the book The Integrity Divided, Simons found that the behavior of the hotel manager was the “single most powerful driver of profit.” [25]

Ethics are moral principles, a system that defines right and wrong.

Business ethics is ethical behavior applied to a business situation.

An ethical dilemma is a situation that is presented with options that may be right or wrong.

Values define what is important to you: they are your guiding principles and beliefs, they define how you live your life, and they inform your ethics.

A mission statement is a roadmap of where a person or company wants to go.

Your reputation will affect how people see you throughout your life, which can have either a positive or a negative impact on your career.

Every action you take defines you; bear that in mind when making decisions.

If you find yourself in a situation that challenges your ethics, talk to your supervisor. If you don’t feel that you can talk to your supervisor, talk to someone in the human resources department.

Evaluate your values. Choose three values that are important to you and discuss how they may impact your decision making.
Think of someone you know only by reputation; what do you know about that person, and what assumptions do you make about him or her?


[1] Elianne Friend, “Woman Fined to Tune of $1.9 Million for Illegal Downloads,”CNN.com, June 18, 2009,http://www.cnn.com/2009/CRIME/06/18/minnesota.music.download.fine/index.html(accessed February 13, 2010).
[2] John C. Maxwell, There’s No Such Thing As “Business” Ethics (New York: Center Street, 2003), 23–24.
[3] Manual Velasquez, Claire Andre, Thomas Shanks, and Michael J. Meyer, “What Is Ethics?” Santa Clara University,http://www.scu.edu/ethics/practicing/decision/whatisethics.html (accessed August 31, 2009).
[5] College Confidential, http://talk.collegeconfidential.com/california-institute-technology/427749-ethical-dilemma-question.html (accessed August 31, 2009).
[6] Manual Velasquez, Claire Andre, Thomas Shanks, and Michael J. Meyer, “What Is Ethics?” Santa Clara University,http://www.scu.edu/ethics/practicing/decision/whatisethics.html (accessed August 31, 2009).

[7] Manual Velasquez, Claire Andre, Thomas Shanks, and Michael J. Meyer, “Ethics and Virtue,” Santa Clara University,http://www.scu.edu/ethics/practicing/decision/ethicsandvirtue.html (accessed August 29, 2009).
[8] Margaret Soltan, “Southern Illinois University an Official Laughingstock,” Inside Higher Ed, August 30, 2007,http://www.insidehighered.com/blogs/university_diaries/southern_illinois_university_an_official_laughingstock (accessed February 18, 2010).
[9] Wendy Weinhold, “SIU Accused of Copying Plagiarism Policy,” Daily Egyptian, January 29, 2009, http://web2.collegepublisher.com/se/daily-egyptian/siu-accused-of-copying-plagiarism-policy-1.1318397 (accessed February 18, 2010).
[10] Stefanie Fontenez, “Tax-Troubled Celebrities, Politicians, Outlaws,” CNN.com, April 15, 2008, http://www.cnn.com/2008/LIVING/wayoflife/04/15/famous.tax/index.html(accessed August 29, 2009).
[11] Danny Hakim, “Eliot Spitzer,” New York Times, Times Topics, August 31, 2009,http://topics.nytimes.com/topics/reference/timestopics/people/s/eliot_l_spitzer/index.html (accessed August 31, 2009).
[12] Gerhard Gschwandtner, “Lies and Deception in Selling: How to Tell When Customers or Prospects Are Lying to You,” Selling Power 15, no. 9,http://www.sellingpower.com/content/article.php?a=4256 (accessed March 16, 2010).
[13] “An Education in Ethics,” Selling Power Sales Management eNewsletter, April 17, 2002, http://www.sellingpower.com/content/newsletter/issue.php?pc=197 (accessed March 16, 2010).
[16] NewsHour Extra, “What Happened to Enron?” Paul Solman, PBS, January 22, 2002,http://www.pbs.org/newshour/extra/features/jan-june02/enron_past.html (accessed December 6, 2009).
[17] SearchCIO, “Sarbanes-Oxley Act,”http://searchcio.techtarget.com/sDefinition/0,,sid182_gci920030,00.html (accessed December 6, 2009).
[18] “Bernie Madoff Ponzi Scheme: Victim List Grows,” Huffington Post, December 15, 2008, http://www.huffingtonpost.com/2008/12/15/bernie-madoff-ponzi-schem_n_151018.html (accessed December 6, 2009).
[19] Julie Creswell and Landon Thomas Jr., “The Talented Mr. Madoff,” New York Times, January 24, 2009, http://www.nytimes.com/2009/01/25/business/25bernie.html(accessed August 31, 2009).

[20] Jack Healy and Diana B. Henriques, “It Was All Fake: Madoff Aide Details Scheme,”New York Times, August 12, 2009, http://dealbook.blogs.nytimes.com/2009/08/12/madoff-aide-reveals-details-of-ponzi-scheme/?scp=2&sq=madoff%20sentencing&st=cse(accessed August 31, 2009).

[21] Aaron Bernstein, “Nike’s New Game Plan for Sweatshops,” BusinessWeek, September 20, 2004, http://www.businessweek.com/magazine/content/04_38/b3900011_mz001.htm(accessed December 6, 2009).

[22] Jeremy Dann, “Business Ethics Integral to Corporate Strategy, Says Stanford’s Malhotra,” BNET, July 1, 2009, http://blogs.bnet.com/mba/?p=927&tag=content;col1(accessed August 29, 2009).
[23] Target, “Corporate Responsibility Report,” http://investors.target.com/phoenix.zhtml?c=65828&p=irol-govResponsibility (accessed September 1, 2009).

[24] Jeremy Dann, “Business Ethics integral to Corporate Strategy, Says Stanford’s Malhotra,” BNET, July 1, 2009, http://blogs.bnet.com/mba/?p=927&tag=content;col1(accessed August 29, 2009).

[25] Heather Baldwin, “There’s a Price on Your Integrity,” Selling Power Sales Management eNewsletter, September 16, 2008,http://www.sellingpower.com/content/newsletter/issue.php?pc=867 (accessed March 16, 2010).