Ethical issues in Marketing

Marketing ethics deals with the moral principles behind the operation and regulation of
marketing. Possible fundamental frameworks of analysis for marketing audit are:

· Value-oriented framework, ethical problems on the basis of the values which they infringe
e.g. honesty, autonomy, privacy, transparency.
· Stakeholder-orientated framework , analyzing ethical problems on the basis of whom they
affect e.g. consumers, competitors, society as a whole
· Process-orientated framework, analyzing ethical problems in terms of the categories used by
marketing specialists e.g. research, price, promotion, placement
Specific issues in marketing ethics:
Ø Market research: ethical danger points in marketing research include:
- Invasion of privacy
- Stereotyping
Ø Market audience: ethical danger points include
- targeting the vulnerable e.g. children, the elderly
- Excluding potential customers from the market: selective marketing is used to discourage
demand from undesirable market sectors or disenfranchise them altogether.
Ø Pricing ethics: list of unethical pricing practice:
- Price fixing
- Price skimming
- Price discrimination
- Price wars
- Bid rigging
- Dumping
Ø Advertising and promotion: ethical pitfall:
- Issues over truth and honesty
- Issues with violence, sex and profanity
- Taste and controversy
- Negative advertising

Code of Ethics in marketing

Members of the American Marketing Association are committed to ethical professional conduct.
They have joined together in subscribing to this Code of Ethics embracing the following topics:
Responsibilities of the Marketer
Marketers must accept responsibility for the consequences of their activities and make every
effort to ensure that their decisions, recommendations and actions function to identify, serve and
satisfy all relevant publics: customers, organizations and society.
Marketers' Professional Conduct must be guided by:
 The basic rule of professional ethics: not knowingly to do harm;
 The adherence to all applicable laws and regulations;
 The accurate representation of their education, training and experience;
 The active support, practice and promotion of this Code of Ethics.
Honesty and Fairness
 Marketers shall uphold and advance the integrity, honor and dignity of the marketing profession
by:
 Being honest in serving consumers, clients, employees, suppliers, distributors, and the
public;
 Not knowingly participating in conflict of interest without prior notice to all parties
involved; and
 Establishing equitable fee schedules including the payment or receipt of usual, customary
and/or legal compensation for marketing exchanges.
Rights and Duties of Parties in the Marketing Exchange Process
Participants in the marketing exchange process should be able to expect that
 Products and services offered are safe and fit for their intended uses;
 Communications about offered products and services are not deceptive;
 All parties intend to discharge their obligations, financial and otherwise, in good faith;
and
 Appropriate internal methods exist for equitable adjustment and/or redress of grievances
concerning purchases.
It is understood that the above would include, but is not limited to, the following responsibilities
of the marketer:
IN THE AREA OF PRODUCT DEVELOPMENT AND MANAGEMENT:
 disclosure of all substantial risks associated with product or service usage;
 identification of any product component substitution that might materially change the
product or impact on the buyer's purchase decision;
 identification of extra cost-added features.
IN THE AREA OF PROMOTIONS:
 avoidance of false and misleading advertising;
 rejection of high-pressure manipulations, or misleading sales tactics;
 avoidance of sales promotions that use deception or manipulation.
IN THE AREA OF DISTRIBUTION:
 not manipulating the availability of a product for the purpose of exploitation;
 not using coercion in the marketing channel;
 not exerting undue influence over the reseller's choice to handle a product.
IN THE AREA OF PRICING:
 not engaging in price fixing;
 not practicing predatory pricing;
 disclosing the full price associated with any purchase.
IN THE AREA OF MARKETING RESEARCH:
 prohibiting selling or fundraising under the guise of conducting research;
 maintaining research integrity by avoiding misrepresentation and omission of pertinent
research data;
 treating outside clients and suppliers fairly.
Organizational Relationships
Marketers should be aware of how their behavior may influence or impact the behavior of others
in organizational relationships. They should not demand, encourage or apply coercion to obtain
unethical behavior in their relationships with others, such as employees, suppliers, or customers.
 Apply confidentiality and anonymity in professional relationships with regard to
privileged information;
 Meet their obligations and responsibilities in contracts and mutual agreements in a timely
manner;
 Avoid taking the work of others, in whole, or in part, and representing this work as their
own or directly benefiting from it without compensation or consent of the originator or owner;
and
 Avoid manipulation to take advantage of situations to maximize personal welfare in a
way that unfairly deprives or damages the organization of others.
Any AMA member found to be in violation of any provision of this Code of Ethics may have his
or her Association membership suspended or revoked.
American Marketing Association Code of Ethics for Marketing on the Internet
PREAMBLE
The Internet, including online computer communications, has become increasingly important to
marketers' activities, as they provide exchanges and access to markets worldwide. The ability to
interact with stakeholders has created new marketing opportunities and risks that are not
currently specifically addressed in the American Marketing Association Code of Ethics. The
American Marketing Association Code of Ethics for Internet marketing provides additional
guidance and direction for ethical responsibility in this dynamic area of marketing. The
American Marketing Association is committed to ethical professional conduct and has adopted
these principles for using the Internet, including on-line marketing activities utilizing network
computers.
GENERAL RESPONSIBILITIES
Internet marketers must assess the risks and take responsibility for the consequences of their
activities. Internet marketers' professional conduct must be guided by:
 Support of professional ethics to avoid harm by protecting the rights of privacy,
ownership and access.
 Adherence to all applicable laws and regulations with no use of Internet marketing that
would be illegal, if conducted by mail, telephone, fax or other media.
 Awareness of changes in regulations related to Internet marketing.
Effective communication to organizational members on risks and policies related to Internet
marketing, when appropriate.
 Organizational commitment to ethical Internet practices communicated to employees,
customers and relevant stakeholders.
PRIVACY
Information collected from customers should be confidential and used only for expressed
purposes. All data, especially confidential customer data, should be safeguarded against
unauthorized access. The expressed wishes of others should be respected with regard to the
receipt of unsolicited e-mail messages.
OWNERSHIP
Information obtained from the Internet sources should be properly authorized and documented.
Information ownership should be safeguarded and respected. Marketers should respect the
integrity and ownership of computer and network systems.
ACCESS
Marketers should treat access to accounts, passwords, and other information as confidential, and
only examine or disclose content when authorized by a responsible party. The integrity of others'
information systems should be respected with regard to placement of information, advertising or
messages.

Paying attention to business ethics is an important part of any business owner or

manager's job. The human resources function deals with a variety of ethical challenges;
being the department that deals directly with people employed by a company, HR
includes numerous ethical pitfalls that can damage a company's reputation or financial
sustainability if not handled properly. Understanding the importance of ethics in human
resources is crucial for any business owner, whether in a local startup or a multinational
powerhouse.
Legal Considerations
Breaches of ethics in human resources can lead companies into a world of
legal trouble, in both the civil and criminal arenas. Breaches of ethics in the
HR department are more likely to be reported by victims to the Better
Business Bureau, the Equal Employment Opportunity Commission or other
regulatory agencies than those committed in other areas, such as product
development or accounting. Companies with comprehensive ethics programs
in place can avoid costly trouble regarding discrimination and hostile-work-
environment issues, resulting in lower costs for litigation and out-of-court
settlements.

Company Reputation
In the business world, legal trouble can introduce additional challenges to
employers, as news outlets and ethics watchdog organizations spread the
word about companies' misdeeds. Discrimination issues, sexual harassment
and unfair employment policies can land companies on the front page of
consumer- or business-focused publications, damaging a company's
reputation among consumers, potential strategic partners and potential
future employees.

Gaining a reputation as an ethical employer can help to attract the top talent
in your industry from a wider area, as employees seek to find the most
beneficial employment relationships they can. The opposite holds true, as
well; if job applicants see your company as an unethical employer, the most
skilled, experienced, creative and productive applicants are likely to put their
resumes in elsewhere.

Employee Loyalty
Treating employees ethically can garner long-term employee trust and
loyalty, which conveys a range of distinct benefits to employers. Loyal
employees gain more experience working with their employers, allowing
them to master production processes and more fully understand the inner
workings of the firm. This can increase employees' productivity and
efficiency over time in addition to keeping recruiting and training costs under
control.

Sellers of consumer goods can gain marketing advantages from loyal

employees, as well. Loyal employees often act as champions for a company's
products, purchasing goods from their employer and spreading positive
word-of-mouth advertising to friends, family and acquaintances over the
years.

Promoting Ethics
A solid reputation as an ethical employer does not happen on its own. Savvy,
ethics-conscious business owners put comprehensive ethics programs in
place to display a firm commitment to ethics in every area of business,
including human resources. Put HR ethics policies in place regarding
discrimination, sexual harassment and the treatment of employees, and put
each of your managers and supervisors through ethics training programs to
make sure they are fully aware of your expectations. Most importantly, lead
by example in your organization to create a culture of mutual respect and
dignity, where ethical decision-making is valued and rewarded.

Ethics in Advertising

Note: The following speech was written by Chris Moore of Ogilvy & Mather to
help liven up what can be a bland topic. While it has been edited by the AEF
and contains basic information about topics we have found to be of interest
to students, you will want to use your own words and examples where
possible.

I'm here to talk about ethics in advertising.

No, this isn't going to be "The shortest lecture ever given." People in
advertising spend a lot of their time dealing with ethical choices, and those
choices are almost never black and white. They're subtle, shades-of-gray
choices, juicy enough for a Philosophy major.

Let's start with the truth. Telling the truth seems like a pretty basic ethical
standard. The world's best example of truth in advertising may be a tiny
"Help Wanted" ad that appeared in the London papers in 1900:
"Men wanted for hazardous journey. Small wages, bitter cold, long months
of complete darkness, constant danger, safe return doubtful. Honor and
recognition in case of success. Ernest Shackleton."

Englishmen being what they are, the ad drew an overwhelming response.

And Shackleton's Polar expedition turned out to be far, far worse than his
bleak copy promised - a rare case of an advertisement over-delivering on its
claims.

Now let's look at a more subtle shade of truth in this infamous Volvo
commercial. In a real-life monster truck show, the Volvo was the only car
left uncrushed - a great idea for a commercial! But to make the ad, the film
company needed to shoot several takes. So they reinforced the beams inside
the car to stand repeated squashing. When this came out in the press, Volvo
was pilloried and their ad agency got fired, ultimately going out of business.
Did it serve them right? Or was it a bum rap? No question the demo was
rigged. But what it showed was the truth: if a monster truck runs over you
once, you're safer in the Volvo.

An ethical brainteaser we deal with every day is: "What can you legitimately
simulate to illustrate the truth?" Before you answer "nothing!", ask yourself
if a Higher Purpose would be served if Pampers and Kotex commercials
showed the real thing instead of that fake blue water.

Ads for reputable companies almost never lie. They have to be able to prove
what they say to their own corporate counsel, the ad agency's lawyers, the
network's approval committees and to any number of regulating bodies like
the FDA and the FTC. With at least five different government agencies
looking over our shoulder, the cost of being caught cheating is simply too
high. In addition, the individuals inside a company want to be able to look at
themselves in the mirror. Some like to think of business people as belonging
to some other species, but remember that most of them are you a few years
from now.

So we tell the truth -- but not always the Whole Truth. Like lawyers, our job
is to put our clients in the best light. When you go on a job interview or a
first date, you don't assume a false identity - but you probably don't make a
full disclosure either. Chances are you keep your lactose intolerance and foot
odor issues in the background, and save your Federation Starfleet uniform
for later in the relationship - if there IS a later.
For a company trying to sell something, an ad is like getting a job interview
with millions of people all at once. The ad wants to make a good first
impression and really, really doesn't want to make people mad. But different
people react differently.

During the 2000 Super Bowl, millions of people saw the following commercial
for Christopher Reeve walking again.

Some of us saw an uplifting message of hope. Some saw a cynical company

manipulating people's hope to make a buck. Still others - many of them with
disabilities - saw an ad that gave false hope. What did you see?

It's an axiom in advertising that when you do something bold, it's likely to
polarize your audience. And big events like the Super Bowl or the Olympics
make advertisers bolder.

You can tell the ad agency really enjoyed creating the horror movie spoof
with an Olympic runner. This Nike commercial ran during the 2000 Olympics.
But this commercial received over 2,000 complaints. Nike heard them and
killed the spot and unlike Freddie Kruger, this ad stayed dead!

A lot of people question the ethics of selling consumers things they don't
need - which presupposes that we shouldn't have the things we don't need
but want anyway. We don't need 90% of the stuff in our apartments. We
don't need artwork, among other things. Neanderthals didn't need cave
paintings, but they sure brighten up a grotto. Why did so many of us bring
bottled water - that we paid for - into this meeting room today, when
carrying a canteen of tap water is so much more… rational?

Advertising, like human beings, lives where Reason meets Desire. Years ago,
The Coca-Cola Company invented a better product. No consumer product
had ever been so thoroughly tested with so many consumers. This new Coke
was provably much better. But consumers not only didn't buy it, they
demonstrated against it. Because a lot of what they loved about "real" Coke
wasn't inside the bottle. It was the idea of Coke and their experiences with it
and how those experiences were connected to so much of what we imagine
life in America should be like. Advertising isn't just about the things we buy.
It's about how we feel about things, including ourselves. That's what makes
it interesting.
Cause-related marketing

Speaking of feelings, 80% of Americans say they feel better about

companies that are aligned with social issues. Two thirds of us say we'd be
inclined to switch to a brand that we identify with a good cause. It's why
American Express put on the Tribeca Film Festival in lower Manhattan to
help bring people back to the area after September 11th. Wal-Mart focuses
on community efforts of their associates and stores. General Mills'
"Spoonfuls of Hope" campaign features Lance Armstrong promoting cancer
research. Johnson & Johnson - always at the top of polls as a socially
responsible company -- has been running a campaign to help promote
nursing as a career:

Does the extra business and good will these companies stand to gain
compromise the good that the causes do? What are the ethics of enlightened
self-interest? Not long ago a major advertiser donated a quarter-million
dollars in food aid to Bosnians in the wake of the war there. By all accounts,
the aid did a lot of good. Later, the company spent over a million dollars to
advertise their good deed to American audiences. What decision would you
have made?

Tobacco Advertising

Ronald Reagan once appeared in ads touting the health benefits of a

cigarette brand. Times have changed. Now the space in which tobacco can
be promoted in any form is growing more restricted every day. And tobacco
isn't the only legal - and potentially lethal - product that poses ethical, not to
mention public policy questions for us.

Ad agencies and individual advertising people make their own decisions

about categories like tobacco and guns. Many say, "No, thanks" to working
on certain businesses. But would you turn down the Kraft Macaroni and
Cheese assignment because another division of the same corporation makes
Marlboros? That's a tougher question.

Alcohol

There are hundreds of beer commercials on the air, but not one of them
shows somebody actually drinking the beer. Does that make them more
ethical? And although there's the same amount of the same chemical in a
can of Bud and a shot of Jack Daniels, you don't see hard liquor advertised
on television. In the case of alcohol, advertisers themselves have made
these "ethical" choices. But do they make rational sense? The Mothers
Against Drunk Driving (MADD) probably don't make the same distinction
between beer and bourbon that advertisers do.

Incidentally, advertising people working for free because they believe in the
cause create MADD's ads. Ad folk like to work pro bono for nonprofits and
good causes. Public service campaigns, including anti-smoking messages,
got over $1.5 billion dollars in free media last year. Altogether, they'd be the
fifth largest advertiser.

The ethical issue isn't the alcohol in the product, it's the brand name on the
bottle (Smirnoff Ice). When I say the word "Smirnoff", what do you think of?
- you're not alone. A rival company says this commercial is misleading you
because there's no vodka in Smirnoff Ice. It's a malt beverage. Does the
name "Smirnoff" mean "vodka" or is it just a name? Many of you are in the
target audience. Are you being fooled here? And if you thought Smirnoff Ice
contained vodka, did you also think it contained ice? You don't have to take
time from your studies to decide this case. As we speak, it's being examined
by the ATF (Federal Bureau of Alcohol, Tobacco and Firearms).

Children

Society imposes context on advertising ethics all the time - especially in

advertising that involves children. Here's a commercial for children's
shampoo. On behalf of Society, can you see what's wrong with this
message?

The problem isn't something in the spot - it's what's missing. There is no
adult supervision shown around the swimming pool. The Children's
Advertising Review Unit (CARU) of the Better Business Bureau (BBB), which
also monitors kid's programming, requires that adults be shown supervising
children when products or activities could be risky. So L'Oreal changed the
commercial to model good parental behavior. Score one for Society. Another
commercial for Aim toothpaste showed a child who went to the bathroom in
a museum to brush her teeth. Good hygiene or not, it had to be taken off
the air when teachers complained that they'd never, ever, let a child leave
the group unattended.

Advertisers spend most of their waking hours trying to anticipate what their
audiences will want and how they'll react. We try our best, but sometimes
we miss.

Pharmaceutical advertising

Information is ethically neutral. In an academic setting like this, we welcome

more information because the marketplace of ideas enables individuals to
form their own judgments - which brings us to advertising about prescription
drugs. Not long ago, only a doctor could tell you about a new medicine. You
probably never heard of it before you walked in; you didn't know if it was
the only one in the world or one of dozens that did pretty much the same
thing. Now advertisers spend millions of dollars telling you about their
medicines. Advertising puts more information in people's hands. Studies
show that drug ads raise awareness of some conditions so more people seek
treatment. And they know more about their options before seeing the
doctor. That's good, right?

But of course the drug companies don't advertise their cheapest products.
They promote the big moneymakers. There's more information out there,
but it comes with a heavy dose of Point-of-View. Sometimes there are two
points of view in the same commercial. The FDA requires that, if you
promote the benefits of your medicine, you must also reveal any significant
risks or side effects. So we have them to thank for the now legendary
disclaimer for a weight-loss drug. The medicine worked miracles, but the
company was also obliged to mention it's unpleasant side effects, with the
result that the drug turned into a national joke! Does more information
elevate the national dialogue?

Product placement

What are the ethics of advertising that doesn't look like advertising? In a
movie chase scene, the hero and the bad guy are going to need some kind
of car to drive. In the theatre we have no way of knowing whether the
director chose those cars because they fulfilled his artistic vision - or
because the car manufacturer made a deal with the producer. The car
people get exciting exposure for their brand and she saves a nice piece of
change on her production budget. Audiences like realism in movies. Made-up
brands break the spell because they're obvious fakes. But the difference
between something that's just a prop and something that's a product
promotion is getting murkier all the time, on TV shows as well as movies.

This kind of "product placement" happens in real life, too. If you go out to a
club tonight, you might see some particularly good-looking young people
using a new kind of cell phone. It lets them shoot pictures of people to their
friends across the room: "Here's a cute guy - want to come and meet him?"
Fun stuff like that. If you're curious, maybe they've taken your picture and
they'll be happy to show you the phone and let you try it. The phone is very
cool. And the people are what advertisers call "aspirational" because they're
way cooler than you are. They're people you want to be. They're also actors
and this is a gig for them. Their job is creating the impression that using this
phone is The Next Trend. If you ask them directly if they are actors, they
won't lie. But if you don't ask, they won't tell. This is the reverse of the
Volvo story. Volvo's demonstration was rigged, no question, but what
viewers saw on TV was the truth. With this cell phone, the demonstration is
the absolute truth, but the scene in the club is pure theater.

(Note: This new "guerrilla" marketing campaign for Sony Ericsson has
received a great deal of negative publicity already for being deceptive in its
approach.)

Subliminal advertising

There's one more thing I know you want me to talk about. If you believe
subliminal advertising exists, you don't any more because I embedded a
convincing subliminal denial in this talk. In case you missed it, subliminal
advertising is one of those "urban legends." Try this experiment. Take a
photograph of a glass of ice water or the beverage of your choice and make
a fake ad out of it. Then invite people in your Psych department to find the
subliminal messages in your ad. They won't disappoint you.

If a bunch of students can create subliminal messages, imagine what the

pros on Madison Avenue can do.
 Ethical Issues Facing HR

Discrimination and Harassment

Human resources professionals must ensure the organization remains
compliant with anti-discrimination and harassment laws. Employee
discrimination and harassment on the basis of race, gender or religion is an
ethical issue human resources personnel face daily. Laws that prohibit
discriminatory behavior such as the Civil Rights Act and Americans With
Disabilities Act help HR representatives develop training and awareness
programs to prevent discrimination and harassment in the workplace. These
laws also establish procedures human resources may use to report and
discipline workers who display inappropriate discriminatory behavior.

Privacy
Human resources are involved in most aspects of employee relations
including hiring, firing, compensation, benefits and leaves. Human resources
representatives have access to extremely sensitive information. Keeping this
information private is an ethical matter facing HR. Human resources
personnel have an obligation to maintain the confidentiality of an employee's
personal data.

Diversity
Workplace diversity encompasses the various qualities, characteristics and
experiences that distinguish one worker from another. These characteristics
can be differences in race, gender, age, social status or other traits that
make an individual unique. Treating a person differently because of these
differences poses an ethical issue that faces human resources. HR personnel
implement policies that promote diversity in the workplace and welcome the
differences of the entire workforce.

Safety
Employee safety is an issue facing human resources personnel. The
department must prevent and correct potentially dangerous situations.
Human resources must promptly act on hazardous conditions that present
safety concerns in the workplace. The department is also responsible for
identifying potentially dangerous employees and ensuring they do not harm
themselves or others within the organization.

Lack of Cultural Awareness

Multinational managers inevitably deal with miscommunication and lack of
cultural awareness. They must prepare their employees for appropriate
conduct before sending them to their overseas destination. Training and
cultural classes help to enlighten employees about different customs and
practices overseas. A lack of cultural awareness could be shown by a lack of
respect for the conservative or liberal nature of other cultures. HR managers
should assume responsibility for providing employees the right knowledge to
successfully navigate cultural issues in foreign countries.

Bribery
The Foreign Corrupt Practices Act prohibits bribery. However, this law cannot
possibly cover all of the range of payments that international businesses
encounter. Things like facilitation payments may be required to operate in a
foreign country, and the U.S. government has ruled differently on multiple
situations surrounding these types of payments, which provides the company
with a true ethical dilemma, particularly a human resources manager who
must aid an employee facing bribery attempts overseas. In addition,
international companies face an environment of pervasive corruption,
according to a 2011 survey by Ernst and Young. In that survey, 39 percent of
respondents said corruption occurred frequently in their country. Some
countries, such as Brazil and Indonesia, had very high rates of reported
corruption -- 84 percent and 64 percent, respectively. Human resources
management must prepare its employee traveling to these hot-bed countries
on how to properly interact with the people and authorities, as well as
ensuring the employees remain safe and secure.

Privacy
Privacy is a pervasive issue for many companies. In addition, privacy laws
vary in different locations. The European Union has much stricter privacy
laws than the U.S. When the two sets of laws conflict, human resources
managers must make a decision which to follow. For example, a European
Union company that operates in the United States will have the choice to
follow the EU's more restrictive policies or the more lax policies in the U.S.
Some corporations choose to enforce the home country standards due to
their belief that it is a better operating model that will produce better
corporate results, as well as protection for their employees abroad.

Compensation
Another important issue to consider is the relative compensation levels for
each country. Multinationals often have offices in both developed and
developing countries where the salaries are quite different. For example, an
American transferred to China might make 2 to 3 times their Chinese
counterpart doing the same job. It is a bit unseemly to have people working
side by side earning so differently for jobs requiring the exact same skill set.
In this case, human resources management may face the ethical issue of
whether to narrow the gap in compensation.

Ethical issues in financial management and accounting

Ethics are important accounting and financial decision-making for several reasons, but
the most important reason for valuing ethics in the finances and accounting is the
success of a company. If a company does not value ethics it will lose profitability because
other companies and customers will not want to deal with and support it. This article
will discuss the importance of ethics in accounting and financial decision-making; it also
reflects on the Sarbanes-Oxley Act and its impact on accounting and financial decision
making.

Several key concepts of ethics in accounting and financial decision-making are trust,
confidentiality, collaboration, and a code of ethics (Shanker). Trust and confidentiality
go hand-in-hand in business accounting because trust is essential if a company wants
loyal customers; confidentiality is also an integral aspect of financial dealings because
privacy is often a concern for many companies and customers. Collaboration is another
area of financial decision-making that is relevant because ethical practices promote
collaboration (Shanker). A code of ethics is necessary in accounting and financial
decision-making because it provides guidelines and standards for employees on all
levels.

The Sarbanes-Oxley Act of 2002 "was passed in response to the financial scandals such
as Enron and WorldCom," and it inevitably had a strong impact on accounting and
financial decision-making (The Act Itself, pp. 1). This law required publicly traded
companies to be much more accountable for their finances. The Sarbanes-Oxley Act set
new regulations and penalties for public companies to provide investors with security.
This act also caused the creation of "the Public Company Accounting Oversight Board,
or PCAOB, which is in charge of overseeing, regulating, inspecting, and disciplining
accounting firms in their roles as auditors of public companies" (The Act Itself, pp.3).
This new law impacted accounting and financial decision making because it required
companies to be responsible for their financial decisions; it also regulated the way board
members and auditors interact, as well as, recognizing and regulating the problem of
auditors working for companies that they have personal interest in.

Ethics plays an important role in accounting and financial decision-making because

money is an area where greed and deception easily come into play. Many companies can
easily lose their success because of unethical practices, and laws such as the Sarbanes-
Oxley Act help to regulate financial practices of companies and create an ethical code of
conduct to follow.

ccountability
Businesses are accountable to a range of shareholders, from partners, to
investors, to customers. Shareholders, partners and investors deserve to
know the truth about your company's finances because this information is
critical to sound investment decisions. Customers, as well, may be entitled to
know whether your company is financially healthy if they enter into
transactions that depend on its longevity. For example, a customer taking out
a mortgage has a stake in working with a bank that is financially stable and a
customer renting a storage unit has a stake in the storage company's
ongoing solvency.
Planning

Accountants and bookkeepers have a responsibility to provide the business

owners who employ them with accurate information that facilitates sound
planning. This obligation involves providing accurate information, and
providing it in a time frame that is prompt enough to be relevant. If your
bookkeeper takes his time compiling profit and loss statements that could
tell you that your business is spending too much on payroll, you may miss an
opportunity to improve the situation before it puts your business in jeopardy.
Taxes

Your company has a legal obligation to report financial information fairly and
accurately on tax forms. Providing inaccurate information to tax agencies
may lower your tax burden, but you will be subject to fines and perjury
charges if you are caught. Ethical accounting practices ensure that your tax
forms will be completed in a way that keeps your conscience clear and keeps
you out of trouble.
Perception

Honest and ethical accounting helps to create a positive image for your
business. When a company makes news for dishonest accounting, it loses
the trust of current and potential customers. This is especially important with
industries that depend on strong working relationships with their customers.
In 2002, the accounting firm Arthur Andersen surrendered its license to
practice after being involved in the Enron scandal, and its reputation and
credibility were severely compromised even after the surrender ruling was
overturned in 2005.

Ethical issues in Production and Operations

thics in production is a subset of business ethic that is meant to ensure that the production
function or activities are not damaging to the consumer or the society. Like other ethics there is a
certain code of conduct or standards to be followed, however ensuring that the ethics are complied
with is often difficult.
One of the most important characteristic of the business today is that there is a great degree o
interdependence between various business functions. Production cannot happen without marketing
and sales and vice versa. In order to survive in the competitive sphere organizations try to reduce the
costs involved in production processes. This cost efficiency is sometimes achieved at the cost o
quality. Poor processes and technology is used to keep the cost down, this is especially true for sma
players who cannot afford economies of scale. Having said this there are also examples of industry
giants that compromised on certain production processes, cola companies make up for a good
example.

All the production functions are governed by production ethics but there are certain that
are severely harmful or deleterious which need to be monitored continuously. The
following are worth mentioning:
1. There are ethical problems arising out of use of new technologies that are
deleterious to health, safety and environment. Technological advancements like
genetically modified food, radiations from mobile phones, medical equipment etc
are less problems are more of dilemmas.
2. Defective services and products or products those are innately deleterious like
alcohol, tobacco, fast motor vehicles, warfare, chemical manufacturing etc.
3. Animal testing and their rights or use of economically or socially deprived people
for testing or experimentation is another area of production ethics.
4. Ethics of transactions between the organization and the environment that lead to
pollution, global warming, increase in water toxicity and diminishing natural
resources.

Dilemma of Ethics in Production

There are certain processes involved in the production of goods and a slight error in the
same can degrade the quality severely. In certain products the danger is greater i.e. a
slight error can reduce the quality and increase the danger associated with consumption
or usage of the same exponentially. The dilemma therefore lies in defining the degree of
permissibility, which in turn depends on a number of factors. Bhopal gas tragedy is one
example where the poisonous gas got leaked out due to negligence on the part of the
management.
Usually many manufactures are involved in the production of same good. They may use
similar or dissimilar technologies for the same. Setting a standard in case of dissimilar
technologies is often very difficult. There are many other factors that contribute to the
dilemma, for example, the involvement of the manpower, the working conditions, the
raw material used etc.
Social perceptions also create an impasse sometimes. For example the use of some
fertilizer by cola companies in India recently created a national debate. The same cold
drinks which were consumed till yesterday became noxious today because of a change
in the social perception that the drinks are not fit for consumption.

Ethical issues in IT
n "10 ethical issues raised by IT capabilities," we examined ethical
issues raised by IT capabilities, issues that all of us as technology
professionals need to consider as we go about our duties. This time,
we take a look at ethical issues more specific to management--and not
necessarily just IT management. Once again, one of our themes is that
advances in technology, just like advances in any other area of
endeavor, can generate societal changes that should cause us to
reexamine our behavior. The dynamic nature of civilization means
some components of ethical codes that were perfectly appropriate in
previous generations may no longer apply. Although space limits us to
10 issues, the ones we examine here are based on five main categories
of particular interest to technologists: privacy, ownership, control,
accuracy, and security. As in the previous article there are more
questions than answers.

#1: PRIVACY: Does information's availability justify its use?

Governments collect massive amounts of data on individuals and

organizations and use it for a variety of purposes: national security,
accurate tax collection, demographics, international geopolitical
strategic analysis, etc. Corporations do the same for commercial
reasons; to increase business, control expense, enhance profitability,
gain market share, etc. Technological advances in both hardware and
software have significantly changed the scope of what can be
amassed and processed. Massive quantities of data, measured in
petabytes and beyond, can be centrally stored and retrieved
effortlessly and quickly. Seemingly disparate sources of data can be
cross-referenced to glean new meanings when one set of data is
viewed within the context of another.
In the 1930s and 1940s the volumes of data available were miniscule
by comparison and the "processing" of that data was entirely manual.
Had even a small portion of today's capabilities existed, the world as
we now know it would probably be quite different.

Should organizations' ability to collect and process data on

exponentially increasing scales be limited in any way? Does the fact
that information can be architected for a particular purpose mean it
should be, even if by so doing individual privacy rights are potentially
violated? If data meant for one use is diverted to another process
which is socially redeeming and would result in a greater good or
could result in a financial gain, does that mitigate the ethical dilemma,
no matter how innocent and pure the motivation?

#2: PRIVACY: How much effort and expense should managers incur in
considering questions of data access and privacy?

This is an issue with both internal and external implications. All

organizations collect personal data on employees, data that if not
properly safeguarded can result in significant negative implications for
individuals. Information such as compensation and background data
and personal identification information, such as social security
number and account identifiers, all have to be maintained and
accessed by authorized personnel. Systems that track this data can be
secured, but at some point data must leave those systems and be
used. Operational policies and procedures can address the proper
handling of that data but if they're not followed or enforced, there's
hardly any point in having them. Organizations routinely share data
with each other, merging databases containing all kinds of identifiers.

What's the extent of the responsibility we should expect from the

stewards of this data? Since there's no perfect solution, where's the
tipping point beyond which efforts to ensure data can be accessed
only by those who are authorized to do so can be considered
reasonable and appropriate?
#3: OWNERSHIP: What can employers expect from employees with regard
to nondisclosure when going to work for another firm?

Many people are required to sign NDAs (nondisclosure agreements)

and noncompete clauses in employment contracts, legal documents
that restrict their ability to share information with other future
employers even to the point of disallowing them to join certain
companies or continue to participate in a particular industry.

What about the rest of us, who have no such legal restrictions? In the
course of our work for employer A, we are privy to trade secrets,
internal documents, proprietary processes and technology, and other
information creating competitive advantage. We can't do a brain dump
when we leave to go to work for employer B; we carry that information
with us. Is it ethical to use our special knowledge gained at one
employer to the benefit of another? How do you realistically restrict
yourself from doing so?

#4: OWNERSHIP: What part of an information asset belongs to an

organization and what is simply part of an employee's general
knowledge?

Information, knowledge, and skills we develop in the course of working

on projects can be inextricably intertwined. You're the project manager
for an effort to reengineer your company's marketing operations
system. You have access to confidential internal memoranda on key
organization strategic and procedural information. To build the new
system, you and your team have to go for some advanced technical
training on the new technology products you'll be using. The new
system you build is completely revolutionary in design and execution.

Although there are areas of patent law that cover many such
situations, there's not much in the way of case law testing this just
yet, and of course laws vary between countries. Clearly, you've built an
asset owned by your company, but do you have a legitimate claim to
any part of it? Can you take any part of this knowledge or even the
design or code itself with you to another employer or for the purpose of
starting your own company? Suppose you do strike out on your own
and sell your system to other companies. Is the ethical dilemma
mitigated by the fact that your original company isn't in the software
business? Or that you've sold your product only to noncompeting
companies? What if we were talking about a database instead of a
system?

#5: CONTROL: Do employees know the degree to which behavior is

monitored?

Organizations have the right to monitor what employees do

(management is measurement) and how technology systems are used.
It's common practice to notify employees that when they use
organizational assets such as networks or Internet access, they should
have no expectation of privacy. Even without that disclaimer, they
really don't need the warning to know this monitoring is, or could be,
taking place.

Do organizations have an obligation to notify employees as to the

extent of that monitoring? Should an organization make it clear that in
addition to monitoring how long employees are using the Internet, it's
also watching which Web sites they visit? If the organization merely
says there's no expectation of privacy when using the e-mail system, is
it an ethical violation when employees later find out it was actually
reading their e-mails?

#6: CONTROL: Does data gathered violate employee privacy rights?

Many organizations have started adding a credit and background

check to the standard reference check during the hiring process. Are
those organizations obligated to tell us they're doing this and what
results they've received? The justification for doing the credit check
typically is that a person who can't manage his or her own finances
probably can't be trusted with any fiduciary responsibility on behalf of
the organization. Does this pass the smell test or is this actually an
infringement of privacy?

Performing these checks is a relatively recent phenomenon, brought

on in part by the desire of organizations to protect themselves in the
wake of the numerous corporate scandals of the past few years but
also because technology has enabled this data to be gathered,
processed, and accessed quickly and inexpensively. Is technology
responsible for enabling unethical behavior?

#7: ACCURACY: Is accuracy an explicit part of someone's responsibility?

Business has always had a love/hate relationship with accuracy.

Effective decision making is driven by accurate information, but
quality control comes with a cost both in terms of dollars and
productivity. (If you're checking, you can't also be doing.)

In a bygone era, there was less data to work with, and the only quality
assurance that needed to be performed was on data…operations and
procedures were manual, so it was the output of those functions that
was most critical. Technology has enabled vastly more complicated
and interconnected processes, such that a problem far upstream in a
process has a ripple effect on the rest of the process. Sarbanes Oxley
requires the certification of all internal controls in large part for this
reason. Unfortunately, accuracy is one of those areas that always
seems to be assigned to the dreaded "someone," which all too often
translates to no one. On what basis should the level of accuracy in any
given system be determined? How much accuracy is sufficient? How
should responsibility for accuracy be assigned?

#8: ACCURACY: Have the implications of potential error been anticipated?

Most assembly lines have a cord or chain that can be pulled when a
worker notices a particular unit has a flaw. The line is brought to a halt
and the unit can either be removed or repaired. The effect of the error
can be contained. As complex interactions between systems and ever
larger databases have been created, the downstream consequence of
error has become vastly more magnified. So too has the growing
dependence on highly distributed systems increased the potential for,
and the cost of, error.

Do managers have a correspondingly greater responsibility to assess

negative outcomes and the mitigations of costs and effects of errors?
Can management or system owners be held accountable if unforeseen
errors occur? Is this also the case for predictable but unmitigated
error?

#9: SECURITY: Have systems been reviewed for the most likely sources of
security breach?

As we mentioned in the previous article on ethics, security used to be

confined to locking the door on the way out of the office or making
sure the lock on the safe was spun to fully engage the tumblers.
Technology presents us with a whole new set of security challenges.
Networks can be breached, personal identification information can be
compromised, identities can be stolen and potentially result in
personal financial ruin, critical confidential corporate information or
classified government secrets can be stolen from online systems, Web
sites can be hacked, keystroke loggers can be surreptitiously installed,
and a host of others. (It's interesting to note at this point that
statistics still show that more than 80 percent of stolen data is the
result of low tech “dumpster diving,” and approximately the same
percentage of oranizational crime is the result of an inside job.)

How far can--and should--management go in determining the security

risks inherent in systems? What level of addressing those risks can be
considered reasonable?

#10: SECURITY: What's the liability exposure of managers and the

organization?
Can system owners be held personally liable when security is
compromised? When an organization holds stewardship of data on
external entities--customers, individuals, other organizations--and that
data is compromised, to what extent is the victimized corporation
liable to the secondary victims, those whose data was stolen?

Organizations generally have internal policies for dealing with security

breaches, but not many yet have specific policies to address this area.
Managers who do not secure the systems for which they're
responsible, employees who cavalierly use information to which they
should not have access, and system users who find shortcuts around
established security procedures are dealt with in the same fashion as
anyone who doesn't meet the fundamental job requirements, anything
from transfer or demotion to termination. Should compromised or
ineffective security be held to a higher standard?

whistleblowing
Some notes about defining whistleblowing
By Simon Longstaff
A version of this article was first published: (publication unknown) - December 1992

A whistleblower discloses information he or she reasonably believes evidences a violation of any law, rule, or
regulation, or mismanagement, a gross waste of public funds, an abuse of authority, or a substantial or specific
danger to public health or safety.

1. a disclosure of information evidencing objectionable misconduct, not otherwise known or visible;

2. such disclosure is made in the reasonable belief that this information demonstrates that there had been
such misconduct;
3. the person making the disclosure acts in good faith, without malice;
4. the disclosure is made in the public interest with a view to ensuring that the community has an effective
civil service; and
5. the disclosure is not specifically prohibited by law, or considerations of national security or defence would
not preclude it being made.
(Starke, 1991, p.210)

Common features to any definition

 the whistleblower: a current or past employee of an organisation who makes accusations against that
organisation;

 the recipient of the complaint: commonly some external body (such as the media, Parliament, or a public
enquiry) but sometimes also an internal recipient (such as a more senior officer, or a special internal office
created to receive such complaints);
  the complaint: normally that an organisation has practised, tolerated or bears responsibility for some
illegal, immoral or unethical conduct which is likely to result in unnecessary harm to third parties; and

 the circumstances of the disclosure: which usually occurs in a way whereby the whistleblower (either
intentionally or accidentally) is identified publicly with the complaint, and claims that the principle motive for the
disclosure was to advance the public interest.
(McMillan, 1988, p.119)
Some tentative conclusions concerning the general shape of an adequate and effective reporting structure:

 The aims of the structure should be made explicit. If the objectives are properly understood and endorsed
then there will be a much better chance of achieving the desired end,
 The structure should resemble other networks within the organisation. This will help to encourage a sense
that reporting serious wrongdoing is a normal part of the organisation's culture,

 Whilst it may be desirable to have internal lines of communication, it is very important that there be an
individual or unit whose chief (if not sole) responsibility is to handle the relevant reports. An adequate network must
be headed by a person who has sufficient seniority to ensure that reports will be dealt with in an appropriate
manner. Whistleblowers must have confidence in the internal system. Such confidence can easily be undermined if
there is a perception that the responsible entity is subject to any form of 'operational' conflict of interest. This can
happen when cost restraints mean that the responsible entity is required to fulfil a number of other duties which
involve a blurring of lines of responsibility and so on,
 Given the difficulty of establishing entirely dependable lines of communication, it may be wise to sanction the
use of external lines in circumstances where there are sufficient grounds for believing that the internal structure is
inadequate.

The range of interests to be considered

1. The interests of the person or persons impugned in the report or complaint.
2. The interests of the reporter. Except where the reporter is a senior/supervising officer performing a duty to
export the misconduct of subordinates,
it is desirable that the anonymity of the reporter be maintained until that point is reached in consequential investigation
where revelation of the reporter's identity is necessary (if at all) so as to accord due process to 'the accused'.
1. The interests of the agency. Here there is a need to minimise the disruption occasioned by the report.
2. The interests of the public
(Starke, 1991, p.256)

One example of private enterprise provisions

Each employee shall be alert to any action or omission in connection with his or her work which might constitute a violation
of this Code, shall attempt to prevent Code violations and shall take prompt corrective action necessary to remedy and
prevent any recurring violation of this Code. Where personal corrective action is not possible or practicable, the employee
should immediately bring the matter to the attention of his or her supervisor, the functional Executive Director or the
Managing Director.
It goes on:

Any failure by an employee to report a Code violation in accordance with this Code section shall itself constitute a Code
violation.
(Coca-Cola Amatil, 1991, pp 20 & 22)

Reacting to reports of wrongdoing

 the response will be objective,

 any investigation will be thorough while seeking to minimise delay in the resolution of the matter,

 where possible, procedures employed will be non-coercive and non-threatening.

There are bound to be other factors that could be drawn from the discussion so far. To the extent that any other
matter should be considered, it will owe its place in the discussion to the fact that it contributes to the achievement of
a just solution. That is, to a solution that is fair to all concerned.
'Muckrakers': rarely have ties to the organisation being criticised

'Stool pigeons': have self-interest as the primary motivation for disclosing information

'Whistleblowers': usually refers to people who disclose moral wrongdoing for moral reasons

Types of retaliation
 dismissal (usual in private sector)

 damaging letters of 'recommendation'

 blacklisting

 transfers, demotions, denial of salary increases and/or promotions

 questions re. competence, motivation, mental health etc.

Some advice for whistleblowers

 Make sure that the situation is one that warrants whistleblowing

 Examine your motives

 Verify and document information

 Determine the type of wrongdoing and to whom it should be reported

 State allegations in an appropriate way

 Stick to the facts

 Internal or external?

 Open or anonymous?

 Resign first?

 What protection is available?

 Anticipate and document retaliation

(adapted from James, 1984)

Internal reporting
 Establish clear channels

 Use of channels should be rewarded as an act of loyalty

 Ombudsman or independent committee to hear complaints

 The model advocate