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CHAPTER 2
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL

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LEARNING OBJECTIVES
This chapter is one of the most important in this textbook. Understanding social, ethical and legal issues helps build a solid foundation on which to base future decisions and to manage sales personnel. After studying this chapter, you should be able to explain the following:  Management’s social responsibilities.  What influences ethical behavior.  Management’s ethical responsibilities.  Ethical dealings among salespeople, employers and customers.  The international side of ethics.  Managing sales ethics.
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MANAGEMENT’S SOCIAL RESPONSIBILITIES
Social responsibility is management’s obligation to make choices and take actions that will contribute to the welfare and interests of society as well as to those of the organization.

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Stakeholder
Any group within or outside the organization that has a stake in the organization’s performance.

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FIGURE 2.1 MAJOR STAKEHOLDERS IN THE ORGANIZATION’S PERFORMANCE

C u sto m e r s

S u p p lie rs E m p lo ye e s
M an agers

C o m m u n ity

O rg a n iza t io n

C re d it o r s

G o v ern m en t

O w n ers

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CCC GOMES
This acronym is an effective way to remember an organizations stakeholders: Customers, Community, Creditors, Government, Owners, Managers, Employees, and Suppliers.
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AN ORGANIZATION’S MAIN RESPONSIBILITIES • ECONOMIC RESPONSIBILITIES • LEGAL RESPONSIBILITIES • ETHICAL RESPONSIBILITIES • DISCRETIONARY RESPONSIBILITIES

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HOW TO DEMONSTRATE SOCIAL RESPONSIBILITY
1. Taking corrective action before it is required. 2. Working with affected constituents to resolve mutual problems. 3. Working to establish industry-wide standards and selfregulation. 4. Publicly admitting mistakes. 5. Getting involved in appropriate social programs. 6. Helping correct environmental problems. 7. Monitoring the changing social environment. 8. Establishing and enforcing a corporate code of conduct. 9. Taking needed public stands on social issues.
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WHAT INFLUENCES ETHICAL BEHAVIOR?
THE INDIVIDUAL’S ROLE
• Level one: preconventional • Level two: conventional • Level three: principled

THE ORGANIZATION’S ROLE
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MANAGEMENT’S ETHICAL RESPONSIBILITIES
WHAT IS ETHICAL BEHAVIOR?
Ethical behavior refers to treating others fairly.

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WHAT IS ETHICAL BEHAVIOR?
• Being honest.

• Maintaining confidence and trust. • Following the rules. • Conducting yourself in the proper manner. • Treating others fairly. • Demonstrating loyalty to company and associates. • Carrying your share of the work and Copyright © 2001 by Harcourt, Inc. All rights effort. responsibility with 100% reserved.

WHAT IS AN ETHICAL DILEMMA?
An ethical dilemma arises in a situation when each alternative choice or behavior has some undesirable elements due to potentially negative ethical or personal consequences.

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Three main ethical areas most frequently faced by sales personnel:
• Salespeople • Employers • Customers

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ETHICS IN DEALING WITH SALESPEOPLE
• LEVEL OF SALES PRESSURE • DECISIONS AFFECTING TERRITORY • TO TELL THE TRUTH? • THE ILL SALESPERSON

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EMPLOYEE RIGHTS
Rights desired by employees regarding the security of their jobs and the treatment administered by their employer while on the job, irrespective of whether such rights are currently protected by law or collective bargaining agreements of labor unions.

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EMPLOYEE RIGHTS
• Termination at will • Privacy • Free from Sexual Harassment

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Cooperative Acceptance
The right of employees to be treated fairly and with respect regardless of race, sex, national origin, physical disability, age, or religion while on the job as well as when applying and regarding a job.

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Reasons for respecting employee rights
• Providing a high quality of work life. • Attracting and retaining good sales personnel; making recruitment and selection more effective less frequently needed. • Avoiding costly back-pay awards and fines. • Establishing a balance between employee rights and obligations and employer rights and obligations.
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SALESPEOPLE’S ETHICS IN DEALING WITH THEIR EMPLOYERS
• Misusing Company Assets • Moonlighting • Cheating • Affecting Fellow Salespeople • Technology Theft
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ETHICS IN DEALING WITH CUSTOMERS
BRIBES OR GIFTS
• Money • Gifts • Entertainment • Travel Opportunities
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MISREPRESENTATION AND BREACH OF WARRANTY
• Exaggerated capabilities of products or services and sometimes making false statements to close a sale.

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Misrepresentation and breach of warranty are two legal causes of action.

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PRICE DISCRIMINATION
• Price reductions • Promotional allowances and support • Robinson-Patman Act of 1936

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Robinson-Patman Act of 1936
Allows sellers to grant what are called quantity discounts to large buyers based on savings in the cost of manufacturing, but individual salespeople or managers may not practice price discrimination to improve sales.

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TIE-IN SALES
• To purchase a particular line of merchandise, a buyer may be required to buy other unwanted products. • Prohibited under the Clayton Act.

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EXCLUSIVE DEALERSHIP
• Requires a wholesaler or retailer to purchase from one manufacturer. • Prohibited under the Clayton Act.

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RECIPROCITY
• Buying a product from someone if the person or organization agrees to buy from you. • Federal Trade Commission and the U.S. Department of Justice will consider such a trade agreement illegal.

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SALES RESTRICTIONS
• Cooling-off Laws provide for a cooling-off period in which the buyer may cancel the contract, return any merchandise, and obtain a full refund. • Covers sales of $25 or more made door to door. • Green River Ordinances require persons selling directly to consumers to be licensed by the city in which they are doing business if they are not residents. A bond may also be required.
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MANAGING SALES ETHICS
MANAGERS’ VIEWS
• All managers feel they face ethical problems. • Most managers feel they and their employers should be more ethical. • Managers are more ethical with their friends than with people they do not know.

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MANAGERS’ VIEWS

continued

• Even though they want to be more ethical, some managers lower their ethical standards in order to meet job goals. • Managers are aware of unethical practices in their industry and company ranging from price discrimination to hiring discrimination. • Business ethics can be influenced by an employee’s supervisor and by the company environment.
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Management methods to help organizations be more responsive: • Follow the Leader
• Leader Selection • Establish a Code of Ethics

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Establish a Code of Ethics
Code of ethics is a formal statement of the company’s values concerning ethics and social issues.

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Two types of codes of ethics:
• Principle-Based Statements Designed to affect corporate culture, define fundamental values, and contain general language about company responsibilities, quality of products, and treatment of employees. • Policy-Based Statements Outline the procedures to be used in specific ethical situations.
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Management methods to help organizations be more responsive: • Follow the Leader
• Leader Selection • Establish a Code of Ethics • Create Ethical Structures

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Ethical Structures
Ethical Committee
A group of executives appointed to oversee company ethics.

Ethical Ombudsperson
An official given the responsibility of corporate conscience who hears and investigates ethical complaints and informs top management of potential ethical issues.
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Management methods to help organizations be more responsive:
• Follow the Leader • Leader Selection • Establish a Code of Ethics • Create Ethical Structures • Encourage Whistle Blowing • Create an Ethical Sales Climate • Establish Control Systems
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THE BOTTOM LINE
Ethics and social responsibility are hot topics for managers. Corporate social responsibility concerns a company’s values towards society. Salespeople and managers realize that their business practices, including international dealings, should be carried out in an ethical manner.

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