ETHICAL ISSUES AND PROBLEMS IN BUSINESS AND THE CORPORATE WORLD “Life is really simple, but we insist on making it complicated.” ~ Confucius INTRODUCTION | Business is a productive human activity that brings beneficial contribution to both people and society. Business produces employ- ment, fair deals, creativity, advancement of technology, customers’ satisfaction, among others. Ironically, however, business is also an activity that provides an opportunity for some unscrupulous people to take advantage of others, e.g., the abuse of fiduciary relationship between employers and employees and between buyers and sell- ers. This chapter examines the broad array of ethical issues and problems that affect the flow of business as a dynamic yet complex human activity. ees OBJECTIVES: At the end this chapter, the students are expected to: 1. examine the different issues and problems in business and the business enterprise from the moral perspective 2. develop a framework for analysis and resolution of ethical dilemmas and problems affecting business 3. acquire basic information about questionable business } practices and their impact to its stakeholders 4, develop problem solving skills using the philosophical- qualitative approach to resolve ethical problems in the business and corporate world 123Key Terms: + Bribery + Fair Wage $ ‘Subliminal Advertising + Conflict of Interest Money Laundering tying Whistleblowing Insider Trading “Quid Pro Quo” Sexua) Harassment Workplace Romance Caveat Emptor Pyramid Selling Multilevel Marketing = * 1. Sexual Harassment WHAT IS SEXUAL HARASSMENT? Sexual harassment is an issue in the corporate world that must be looked into because it can create a hostile ang unhealthy workplace for the employees. For this reason, the Congress of the Philippines enacted the Anti-Sexual Act of 1995 or R.A. 7877 declaring sexual harassment unlawful in the employment, education or training environment, and other purposes. “The State shall value the dignity of every individual, enhance the development of its human resources, guarantee {ull respect for human rights, and uphold the dignity of workers, employees, applicants for employment, students or those undergoing training, instruction or education, Towards this end, all forms of sexual harassment in the employment, education or training environment are hereby declared unlawful.” The Civil Rights Act of 1964 (Title Vil) of the United States of America, from which our law was patterned, defines sexual harassment as “Unwelcome Sexual advances, requests for sexual favors, and other verbal or Physical conduct of a nduct explicitly or im ejector plicitly affects an individual's. employment, unreasonably interferes with an individual's work performance oF creates an intimidating, hostile or offensive work environment ' seme cPubllc Act No. 7877 defines sexual harassment as, ‘mployer, employee, Manager, supervisor, agent of the 124ee teacher, instructor, professor, coach, trainor or y other person who, having authority, influence or moral ascendancy over another in a work or training or education environment demands, requests or otherwise requires any Sexual favor from the other, regardless of whether the demand, request or requirement for submission is accepted by the object of said act.” Why Does Sexual Harassment Occur? Sexual harassment occurs due to the power struggle between men and women as a response to a real or imagined loss of power or as an expression of retaliation or a flexing of the new power. This also happens because some organizations and managers allow it to happen. Historically, sexual harassment has always occurred but there used to be no label for such behavior. The industrial revolution brought about changes in the traditional function of men and women which greatly increased gender specialization and formed a new kind of workplace in the western world. Men and women no longer work together on the farm or in the family business. The responsibility of each became more specialized. In the past decades, things continued to change. More and more women joined the workforce. Increasingly they moved into jobs that were traditionally held by men. As a result of these changes, the balance is shifting. Sexual harassment is one effect of this shift. When harassment is committed by a male against a female, it may be a response to real or imagined loss of power. When committed by a woman towards a man, it may be an expression of retaliation or flexing of the new power. Two Types of Sexual Harassment Sexual harassment falls into two general categories: 1) the “Quid Pro Quo” Harassment and 2) a harassment that creates a hostile environment. “Quid pro quo” means “this for that” (something for something) and is defined as requiring a sexual favor or interaction as a condition of employment or in exchange for an employment benefit (such as promotion, transfer, pay raise, and the like). A manager uses his authority to grant pay increases and promotions as a means to extort 125 ROE“Go to bed with me ang sexual favors from an employee: &:9:, uu want. you will get that promotion yo of harassment, abuso, In the hostile environment Lape acts that eréste in include verbal, physical and visu Ti, the workplace y jle envi intimidating, offensive, or ncaa This type of harassment that interferes with work perfor Fo gin, sekape n, nation x, a on race, religion, national erin, Se a arose veteran status, sexual oe ee y. ‘Some examples of a hostile environmen! + Unwanted touching, patting, pinching or brushing up against a person; wolf-whistling ¢ its about your body, leering, isting, caesar ‘nauite of a sexual nature, persistently pestering for a date; it hic pictures + Displaying or circulation of pornographic pic with the intention of harassing someone/posting of explicitly sexual materials; + Workplace blackmails, e.g., suggestions that sexual favors may further your career (or refusal may hinder it); + Green jokes; + Obscene letters; + Sexual proposition; and + Suggestive looks. The Profiles of the Victim and the Harasser 1. The victim as well.as the harasser may be a woman or a man. The victim does not have to be of the opposite sex, 2. The harasser can be the victim's ‘Supervisor, an agent of the employer, a Supervisor in another area, @ coworker, or a non-employee, 3. The victim does not! have: tobe the personh dbut Could be anyone affecte aan by the offensive conduct. The harasser's Conduct must be unwelcome. 1267 He le nell for the victim to directly inform the harasser shold, luct is unwelcome and must stop. The victim use any employer complaint mechanism or grievance system available. Although the victim of sexual harassment and the person accused of sexual harassment may be peers, more frequently, the victims are in a position of lesser position than the accused. The most common example is the boss- subordinate relationship. Harassment also occurs between customer/client and providers. How Does Sexual Harassment Affect the Workplace? In the study made by Redbook Magazine in 1981, 140,000 men and women were interviewed pertaining to sexual harassment. The result revealed that 80 percent of the persons interviewed believed they have been sexually harassed. The study also showed that use of words, jokes and gestures were the type of harassment which created a hostile environment or offensive work environment. It affected the individuals harassed and the persons accused, who may be innocent. Such cases can generate costly lawsuits, unfavorable publicity, or the invasion of privacy. It can also. affect the bottom line of the employer, managers and co-workers, and affect the entire life of an organization and its members. How to Prevent Sexual Harassment in the Workplace A significant step an organization can take in preventing sexual harassment in the workplace is through creating a safe, secure, and positive work environment by putting into practice a strong sexual harassment policy. Some examples for policy development are the following: + Abroad anti-harassment/positive environment policy that includes a statement that specifically addresses sexual harassment; + Aseparate sexual harassment policy that covers all organizational members; and Separate sexual harassment policy, one that addresses non-management employees and one that addresses management. 127S lOW Moral I costly and causes Fale Sexual harassment is very roductivity. Annoyeg ‘a decrease in PI i , among employees afin te incapable of pefoming Wel, mot dealt wih, sexvel harassment ™2Y rutin cot i, dreadful publicity and ruin of an organizal years to establish ment will come through the Riddance of sexual harass’ Nos it ization and employees. Most persons, commitment of the organization al Se rim teed ou male and female, want a secure 0! apprehension. Communicating the Sexual Harassment Policy The best policy is ineffective if it is not communicated well. Even if the company already has a well-written Policy, it is important to expose it regularly through permanent Posting ‘on bulletin boards, memos, articles in the organization's newsletters, meetings and trainings. Training programs may ‘come up with various topics to support the anti-harassment programs and to assure each employee of a safe and harassment-free workplace environment. Legal Penalties of R.A. 7877 + Imprisonment of not less than one (1) month but not more than six (8) months. Fine of not less than Ten Thousand Pesos (10,000) but not more than Twenty Thousand Pesos (P.20,000). ‘The Problem of Just Wage WORK AND COMPENSATION Work is said to be for the purpose of obtaining economic : ee that work is dit promotion of life. The duty to eatiencoleree Being compensated for a work g done or f s rendered ts part of the essence of ‘work’ One is wiling 0 128work in e chy iorlanatn for remuneration or rewards ne wil receve for working. Such remuneration may include both francia ang nen fnencial compensation, it gan be In the, form of wages, shares on prof, harvest or commercial goods, inckind and other remunerative fringe benefits. The mai : of rear realy objective of compensation is to create a system the enetal cin kabel to the employer and employee. Thus, n m is tt ic compensatin: at justice should be a substance of Figure 13. Types of Wages The Question of Just Wage ‘The question of “What is a just wage?" or “How do you define a fair wage?” has a long history. Anumber of people all over the world commented on its definition and have argued on the appropriate criteria to consider in setting the so-called just wage. Ajust wage is defined as that remuneration which 13 enough to suport the wage-eamer in reasonable and frugal + ertort The Catholic Church teaches us that “a just wage is the legitimate fruit of labor.” 129The Teachings of the Catholic Church on Wages The question of just wages has played a dominant role in the teachings of five popes, including the late Pope John Paul II, who returned to the theme repeatedly. Guidelines for just compensation, according to their beliefs, were poetically expressed in their apostolic writings. Rerum Novarum Atthe turn of the century, Pope Leo XIII forced the question onto the world stage in 1891 with his ground-breaking encyclical Rerum Novarum (also known as the Capital and Labor, May 15, 1891). In it, Pope Leo XIII addressed what he termed the ‘misery and wretchedness pressing so unjustly upon the majority of the working class.” The pope wrote, “Member the working classes are citizens by nature and has the sal rights as the rich." Pope Leo did not attempt to calculate a j wage. He simply decried the philosophy widespread then ani today that the marketplace alone should set wage structures. He said: “Let workers and employers... make any bargains they like and in particular agree freely about wages; nevertheless, there underlies a requirement of natural justice higher and older than any bargain voluntarily struck; the wage ought not to be in any way insufficient... If a worker is forced to accept harder conditions imposed by an employer or contractor, he is a victim of violence against which justice cries out.” Rerum Novarum is one of the most impassioned treatises ever written by a pope on the sacredness of work and the dignity of the working person. Pope John XxXiIll rightly called it the “Magna Carta for Social Reconstruction.” Quadragesimo Anno Forty years after Pope Leo XII wrote Rerum Novarum, Pope Pius XI came up with another document—Quadragesimo Anno (On the Reconstruction of the Social Order), an encyclical that advocated the minimum wage. Pope Pius XI introduced 130profit-sharing ang giving workers a say in a company’s management, Echoing Pope Leo XIll’s previous encyclical, he insisted that heads of families should receive a wage sufficient enough to meet the “ordinary” family needs. From this, he developed the concept of “family wage” as one sufficient wage for a single wage-earner to support his family. Indeed, Pius X's assertion became the American norm throughout the 1950s and 1960s, until the vast and large voluntary influx of women into the workforce in the latter part of the 1960s and early 1970s. Mater et Magistra Popes John XXIII and Paul VI advanced the church's teach- ings on economic justice. Writing Mater et Magistra ("Mother and Teacher’) in 1961, Pope John XXill called on governments to reign in business abuses and to press for full employment policies. This encylical adopted and affirmed the teachings of the previous social documents. It also focused the world’s atten- tion to the worldwide problem of the widening gap between the rich and the poor, the arms race and the plight of the farmers. Laborem Exercens * In 1981, Pope John Paul I! issued Laborem Exercens (On Human Work), an encyclical letter that discussed the modern perspectives and problems of human work and the duties of the members of the church towards it. He also extended and adapted the previous encyclical Rerum Novarum of Pope Leo XIII to the present situation of labor and asked for commitment to justice through the fostering of just wages, joint ownership and sharing in management and profits of labor. Pope John Paul I! offered a detailed assessment of what constitutes just compensation, declaring that workers have STundamental rights" to health-care insurance, suitable working conditions, and rest periods. The disabled, he says, “should receive job training, and migrant workers should have special protections.” In addition, the pope also argued that wages should be sufficient so that women with children aren't forced to work 131 i; qso that “it should be possible for a mother to devote herself entirely to her children.” Centesimus Annus On the 100th anniversary of Rerum Novarum on May 1, 1991, Pope John Paul Il stated that “Society and State must ensure wage levels adequate for the maintenance of the worker and his family, including a certain amount for savings. The right to a ‘just wage,” which cannot be left to the “free consent of the parties, so that the employer, having paid what was agreed upon, has done his part and seemingly is not called upon to do anything beyond.” It was said at the time that the state does not have the power to intervene in the terms of these contracts, except to ensure the fulfillment of what had been explicitly agreed upon Catholic Bishops’ Conference of the Philippines (CBCP): On Social Justice The Catholic Bishops of the Philippines, in a pastoral letter on “Social Justice,” issued in May 1949, referred to a just wage as “family wage” that is commensurate to the needs of a modest average Filipino Family. It stated that remuneration for work should guarantee man the opportunity to provide a dignified livelihood for himself and his family on the material, social, cultural, and spiritual level, taking info account the role and productivity of each, the state of the business, and the common good. The Bishops concluded their exhortation by reminding employers that workers deserve a “family wage not in charity merely, but as duty to social justice.” The encyclicals of the popes and the teachings of the Catholic Church reflect the importance of just wage and the welfare of the workers. The teachings of the popes on wages and labor are basically grounded on the principles of commutative justice and charity. At the same time it also encouraged the formation of labor unions and rejected individualism. “For no person can stand completely alone, we need each other.” The role of unions in negotiating minimum wages and working conditions is decisive in this area. 132The Issue of Jus| t Wage H Be Genes ige Has Also Been Discussed by Other Universal Declaration of ‘Human Rights The 1948 Universal Declaration of Human Rights protects the basic rights of the workers, more specifically: ___ “The right to work, to free choice of employment, to just and favorable conditions of work, and to protection against unemployment (Art. 23 [1]) and the right to equal Pay for equal work (Art. 23 [2)).” International Convention on Economic, Social and Cultural Rights The 1966 International Convention on Economic, Social and Cultural Rights states in Article 7: “The right to fair wages and equal remuneration for work of equal value.” The International Labor Office Conventions has adopted ILO Convention No. 100: “Equal pay for men and women workers.” Philippine Constitution and Republic Act 6727 Spread in various parts of the 1987 Philippine Constitu- tion are specific pronouncements and mandates on the pro- tection and promotion of the rights of workers in the public and private sectors, as indicated in letter “g” of Sec. 3 of Art. Xill. “That the workers are entitled to a living wage.” Republic Act No. 6727 ‘The Wage Rationalization Act declared the policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing scheme to ensure a decent standard of living for the workers and their families. The minimum wage rates shall 133le manner, considering be adjusted in a fair and equitabl : sap fy cost of living and other existing regional disparities in the socioeconomic factors. Government Agencies Involved In our country, determination of wages must also be equitable and just. The National Wage and Productivity Commission (NWPC) and the Regional Tripartite Wages and Productivity Boards (RTWPB) determine the minimum wage for Filipino workers. They handle the minimum wage rates of the workers of each and every region of the country. It is their duty that wage shall be as nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well being of the workers. Factors to Consider in the Formulation of Fair Wages Every employer faces the problem of setting wage rates and salaries. It is easy to say that companies should pay a fair and just wage. However, there are so many variables that no one can say how much a person should be paid for a job. Factors such as workers’ contribution to the firm, the market for labor, the competitive position of the organization, the bargaining power of both firms and unions, and individual needs all conspire to make simple answer impossible. Further, that simple answer may become more complicated by the fact that remuneration also includes health care, retirement plans, bonuses, commissions, and other incentives. The following more specific factors should be taken into consideration to provide a clearer picture of what a just and fair wage should be: 1. External Market Factors. Refers to the supply and demand for labor and the so-called economic conditions and underemployment. The principle behind this is that wages are relatively high if there is scarce supply of labor, and the same is low if there are more opportunities for labor. 134,Laws and Regulation. Workers should be paid in accordance with laws and regulations issued by the government. It requires that employers pay at least the minimum wage. The government usually determines the minimum wage for its country. In our country, the National Wage and Productivity Commission (NWPC) and the Regional Tripartite Wages and Productivity Boards (RTWPB) determine the minimum wage. But still, the minimum wage is not always acceptable as fair and just. Cost of Living. The cost .of living relates to basic maintenance needs and it must be seriously considered in the formulation of wages. A fair wage should be sufficient to meet the increase in cost of living. Thus, if the cost of living goes up by 10 percent, the wage should also go up by 10 percent. Unfortunately, it is a fact that majority of the employers cannot automatically adjust wages with the increase of cost of living. However, it is certainly clear that ignoring the cost of living means jeopardizing the welfare of workers. Prevailing Industry Rate..Some claim that paying workers the average of what other companies are paying for the same job results ina fair wage. However, such claim is not universally valid because not all companies have a minimum wage high enough to maintain a decent standard of living. Organizational Factors. Assessment on what type of industry the organization operates, the size of the com- pany and the organization's profitability to justify its ability to provide fair wages to its workers should be considered. Likewise, determining if the organization is unionized or not and if the company is capital or labor-intensive could contribute to the establishment of fair wage. Job Factors. The nature of the job itself entails the formulation of a just wage. Duties, responsibilities and the skill requirements of the job are probably the most considerable determinants of fair wage. An employee should be paid based on the complexity and difficulty of his job. This concept, however, is.not perfectly similar and 135,wrong, is not always easy. the line, betw is right and intenti ine, between what is right an ine, intentionally The clear point is that those who cross that ti or not, end up in big trouble. Examples Supposing you are a lawyer by profession and, + Linda, a former client, has steered a half dozen prospective clients your way this year, and several of them have become valued clients of your firm. Would it be an appropriate gesture, to thank her by inviting her and her husband out for a dinner? + Jose, your former classmate in law school (now an established lawyer practitioner), has referred a case that just resulted in a significant settlement. Would there be anything wrong with sending him a pair of concert tickets as a “thank you" gesture? Itis indeed difficult to determine the morality of giving gifts. Most agree that accepting and receiving bribe is a violation of professional ethics, but we may not always find it easy to determine what is and is not a bribe. Certainly not all examples of giving and accepting gifts and amenities qualify as bribery, just as not all cases of taking another's property should be considered theft. For professionals and people in the business world, the rules are not so clear and identified, but a number of considerations can help one determine the morality of giving and receiving gifts in a business situation. Factors in Determining the Morality of Gift-Giving [cf. William Shaw. 1999. Business Ethics. (San’ Jose, Ca., USA: Wadsworth Publishing), pp. 292-284 and A. Gorospe. 1995. Philippine Business Ethics. (Manila: GIC Enterprises Inc.), p. 36.] 1. Value of the Gift. Is the gift of nominal value, or is it substantial enough to influence a business decision? The term “nominal” or “substantial” in this point of view is relative. It varies on beliefs and culture of a particular group of people and society. However, : 138from the majority point of view, a valuable gift is definitely unethical. Itis for this main reason that the “goodwill” motives of the giver are open to doubt. Purpose of the Gift. As long as the gift is not intended or received as a bribe and remains nominal, there doesn't appear to be any serious problem. What is important to this question of purpose is the consideration of whether the gift is directly tied to an accepted business practice or not. For example, gifts like appointment books, calendars, or pens and pencils with the donor’s name clearly imprinted on them may be perceived as a form of advertisement. Circumstances under Which the Gift.Was Given or Received. A gift given during holiday season, for a store opening, or one attached to a special event is circumstantially different from one unattached to any special event or occasion. Another question is - whether the gift was given openly or secretly. Openly given gifts raise fewer questions than those gifts known only to the donors and recipients. Position between or Relationship of the Giver and Receiver. Could the recipient's opinion, influence, or decision result in preferential treatmentin favor of the donor? In a superior and subordinate relationship, for instance, the donors or the recipients have to make it clear that they don't intend to allow the gift to influence their actions and decisions. Acceptable Business Practice in the Industry. Could the act be considered acceptable in this kind of business? Monetary gifts and tips are usually practiced in numerous service industries. When gratuities are an integral part of customary business practice, they are far less prone to pose moral questions. Company Policy. Iffirms explicitly forbid the practice of giving and receiving gifts to its customers, vendors. or suppliers, associates, or corporate directors, then gift-giving would normally be wrong 1397. Laws and Regulations. Certain federal, state or local government institutions may impose laws that forbid accepting gifts from firms with which they do business, When these gift transactions violate the law, they are clearly unacceptable. Still, the ultimate moral judgment hinges on whether an objective partly could reasonably suspect that the gift might lead the recipient to sacrifice the interest of the firm for his/her own personal gain. BRIBERY Bribery is defined as a practice of giving renumeration for performance of an act thatis inconsistent with the work contract or the nature of the work one has been hired to perform. It is intended to induce people inside the business or other organization to make decisions that would not be justifiable according to normal business or other criteria. It was then identified to be a form of corruption and is generally immoral and for most is illegal. Renumerations, termed as bribes, can be in the form of money, gifts, entertainment, or preferential treatment. ° Examples of bribery: * a motorist offers a certain amount of money to a police officer in order not to be issued a ticket for overspeeding; + acitizen seeking paperwork or utility line connections gives an expensive gift to a functionary in exchange for a faster service; * a construction company sharing percentage of its income to a civil servant in order to win a contract; and * a narcotics smuggler bribes a judge to lessen criminal penalties. In some cases, the briber holds a powerful role and controls the transaction; in other cases, a bribe may be effectively extracted from the person paying it.Bribery i: Si : ReecGne: ry is obviously unethical because of the following + Itis generally used as an instrument to gain personal or corporate advantage; + Itcorrupts the concept of justice and equally, * Bribery produces cynicism and a general distrust of institutions; 7 It destroys people's trust in the integrity of profes- sional services, of government and the courts, of aw enforcement, religion, and anything it touches; and + Ittreats people as commodities whose honor can be bought and sold, It thus tends to degrade the respect we owe to other human beings. ‘The Morality of Advertising ‘Advertising plays a very significant role in marketing goods and services. Without advertising, the consumers somid not be aware of the presence of diverse products and services available in the market. Sometimes, even the mere presence of advertising can sell a product due to consumer perception that a heavily advertised product is a product of “good value.” The famous marketing guru, advertising as “any paid form of non-personal presentation ‘nd promotion of ideas, goods, oF services by an identified Sponsor.” Wells, Burnett and Moriarty, likewise defined Sgvertising as “paid non-personal ‘communication from an wentified sponsor using mass media to persuade or influence an audience.” Philip Kotler, defines ‘advertising has far reaching effects sociologically and economically, and it is important to note that it does not only dominate our environment but it also becomes part of Sur culture. Recognizing the ‘effectiveness of advertising in generating sales, companies allocate an enormous amount Companies like Philip Morris oP tneir budget for advertising. a folevision advertising alone for the year t $730 million on ‘BoA, Silo General Motors spent $728 million, and Pep: 141 < a$611.5 million. Topping the list for big television advertisers is Procter & Gamble which spent about $1.10 billion. The primary purpose of advertising is to inform potential buyers of the availability of a certain product by providing relevant information on its uses, benefits and how it might serve the needs and wants of individuals. However, the use of advertising today has not been serving its intended purpose since very little information is conveyed to consumers and more often the information is not even useful. Advertising is part of the selling process and its goal-is to persuade consumers to buy the products being advertised. The economic system is characterized by high degrees of business competition where every producer would want to have a piece of the consumer's demand; as a result, advertisements typically end making misrepresentations or false claims. From the point of morality, advertising in itself is not bad or immoral since it helps achieve the goals of both the seller and buyer. It only becomes immoral when, in the attempt to persuade consumers, the advertisements become deceptive, misleading, and manipulative. Since the primary function of advertising is to sell goods, its purpose should not be limited to supplying consumers with appropriate information but it should also educate the public or mold the public's opinion in choosing products that they need and not become manipulated in buying what they do not need. There is only one criterion in evaluating the morality of advertising, and that is, “to tell truth.” An advertisement that conveys truthful information is morally permissible. If an advertisement contains false statements and “lies,” then it is said to be immoral. However, there are also shortcomings to this approach since the truth in advertising can be contrasted with either falsehood or lying. Lying is immoral while falsehood is not necessarily immoral. Some advertisements contain sentences and express propositions which are appropriately evaluated in terms of truth and falsity. The ad is said to be immoral when it makes a false claim, which the advertiser knows to be false, for purposes of misleading, misinforming, or deceiving potential 142talie eal t is Considered immoral because the advertiser tence cs ving, and Wyng is considered immoral. Using the Be truth in advertising, let us examine some of the ues related to the moral dimension of advertising From the discussions above, it is clear that advertising is not totally immoral. It only becomes unethical when the advertisement becomes 1) misleading, 2) deceptive, and 3) manipulative or coercive. [cf. Richard de George. Business Ethics. 3rd ed. University of Kansas (New York: Macmillan Publishing Company, 1990) pp. 225-241] Misleading Advertisements — do not misrepresent, do not make false claims but it makes claims in such @ way that a normal person looking at it comes up with the wrong conclusion. Deceptive Advertisements— makes a false statement or misrepresents the product, e.g. the picture Presented in the advertisement is different from the actual product. + Manipulative or Coercive Advertisements ~ manipulative advertisement uses trickery or by devious or insidious means. Coercive advertisement involves the use of force or threat, either physical or psychological. Some Issues in Advertising [cf. William Shaw. Business Ethics (San Jose University, California: Wadsworth Publishing Co., 1999) p. 369ff.] Deceptive Advertising Deceptive ads are those which either make a false statement and therefore, lie, or which represent the product without making any statement. Deceptions may occur not only through sentences or propositions but also through pictures, individual words, or through certain combinations of objects which can deceive the eye and mind. A typical example of a deceptive advertising is one where pictures from the box ofthe ~ product do not look the same as the contents of the product. In this case, the picture is said to be deceptive. 143 erSemantics in advertising is also allowed in some conditions to allow certain leeway in some products. Inthe case ‘of cosmetics, since it is considered as luxury items, EA expect various cosmetics to be packaged in attractive bottles, boxes, or containers for aesthetic purposes. It cannot be sold just as well if the packaging is simple or unattractive. This is also true with shampoo, hair conditioners, and lotions. Using these products does not guarantee that an ordinary person will look like the models pictured in the ads. Most people understand the semantics in advertising and do not take the implied claims of the products literally. Use of “Weasel Words” ‘Another deceptive technique in advertising is ambiguity. When ads are ambiguous, they are considered deceptive. The use of weasel words is often complementary to ambigu- ity in advertising. Weasel words are used to avoid or recoil from a direct or straightforward statement. This is true with semantics which is often used in advertisements in order to prevent accusations that advertisers are acting immorally. ‘One example of a commonly used weasel word is “help.” Help means to “aid” or “assist.” According to one author, the word help has been generally used to say something that couldn't be said. We are usually accustomed to ads that con- tain phrases like: helps fight, helps prevent, helps stop, helps you feel, helps overcome, helps you look. Other commonly used weasel words are: like, virtual or virtually, can be, up to, as much as, and many other words that are used to imply what can't be said, It cannot be undermined that ads are open to various interpretations. However this does not exempt advertisers from the obligation to provide viewers with clear information. Given this fact, advertisers have the responsibility of avoiding the dangers of misleading through ambiguity as the ads are subject to interpretation. Not only are the people's money, health, loyalties, and expectations at stake but also, to a great extent their treatment of truth. It is for these reasons that ambiguity becomes a serious moral concern in advertising. 144Exaggeration acum might also be misled through exaggeration. false claim sid when advertisements tend to make ie ataclh i crthe benefits of the goods or services which Gains ey unsupported by valid evidence. For example, “50 percent pibaln Teliever provides “extra pain relief or is Nese cont stronger than aspirin,” that it‘upsets the stomach frequently” or is “superior to any other nonprescription Painkilleron the market” contradict evidence that all analgesics are effective to the same degree (Washington Post health supplement). Much of the exaggeration is usually done by manufacturers of vitamins and other dietary supplements, while some drug companies do the same. Exaggeration often goes hand in hand with concealed information. Advertisers conceal facts by suppressing information that is unflattering to their products. That is, they deliberately neglect to mention or distract consumers’ attention away from information, knowledge which would probably make their products less desirable. | Exay One example of exaggeration in advertising is Trident | chewing gum which has long advertised that it helps fight cavities, but its ads (which describe Trident as a “dental instrument") clearly exaggerate the benefits of chewing Trident. Indeed, chewing a gum can help remove debris on dental enamel, but eating an apple or rinsing one’s mouth with water can also do the same. The sugar substitute used by Trident which is sorbitol can indirectly promote tooth decay. Psychological Appeals ‘Advertisers play on several different tactics to get people interested in their products. There are some advertisements that are directed at arousing human emotional needs rather than reason. This is one area in advertising that presents a serious moral concern. Richard F. Taflinger defines psychological appeal as a visual or aural influence on the eebeonscious mind and emotions. It influences by implying that doing what is suggested (in the case of advertising, buying the product or service) wil satisfy a subconscious desir, itis 145‘not subliminal, which includes elements in a visual on aural presentation that are not consciously perceived but luence behavior. Taflinger further states that if a psychological sppesl couldn't be perceived, it would have no effect at all. In fact, itis blatantly obvious the moment one knows such appeals exist. It doesn't aim at intellect. In fact, intellect can often get in the way of the effect of an appeal. Further, psychological appeal doesn't have to make sense, and often shouldn't have to be effective. Some of the psychological appeals that advertisers use to motivate people to buy products are: Power, prestige, personal enjoyment, masculinity, femininity, curiosity, imitation, acceplance, approval, self-esteem, self-preservation, altruism, and the most pervasive of all are sexual pitches. The use of sex in advertising is a two-edged sword: Although it is extremely powerful and effective when aimed at ‘one gender, it often does so at the social expense of the other. Since humans live in a social world, consideration must be given to the feelings of the peopie in that world. Ads Directed at Children Most advertisers have recognized that advertising to children is effective and eventually became a big business recently. Children are a special group of consumers who do not regard reason. In the U.S.. the advertising industry spends $12 billion per year on ads targeted at children, bombarding young audiences with persuasive messages. Children between ages four and 12 receive as gifts about $20.3 billion and spend approximately $17.4 billion of it on items such as snacks, candies, and toys. The figure provided doesn't even account for billions of adult purchases for gifts, clothes, and groceries that are influenced by children. Advertising at children has grown exponentially in the recent years, More than $1.5 billion a year is spent by advertisers on ads for children, owing to the fact that more and more venues for advertising for children are now available such as in magazines, websites and television channels exclusively for children, child is exposed to more than 40,000 TV comm according to studies. And ads are reaching ch The average lercials a year, ildren through i146new media technologies and even in schools—with corporate- sponsored educational mat rials and product placements in students’ textbooks, ‘ : The aim of advertisers is for the children to pester their Parents to buy things for them. Children generally remember what they see. Young children are naive and gullible and are Particularly vulnerable to enticements made by advertisers. Consider for example an ad where children are shown that after drinking a certain chocolate drink, a child gains enough Power to lift large objects. Adults can clearly distinguish that this is purely persuasion and would not be misled by the idea; however, children lack experience and independent judgment to distinguish the real meaning of the advertisement. One advertising expert said that kids are the most pure consumers in that they tend to interpret ads literally. The problem with this thinking is that children are not able to draw a line between children’s shows and commercials; they see commercials as a form of entertainment. Moreover, movies and television shows are being linked to the selling of toys and other items featured in commercials with characters stamped ‘on various products. Since children are highly susceptible to misleading advertising there is a need to protect them from possible manipulation that leads to the kind of role advertising must play in a society dominated by the media. Philippine Laws on Advertising CONSUMER ACT OF THE PHILIPPINES (R.A. 7394) Article 108 of the Act declares that “The State shall protect the consumer from misleading advertisements and fraudulent sales promotion practices.” The Department of Trade and Industry is responsible for enforcing the provisions of the Act. With respect to food, drugs, cosmetics, devices and hazardous substances, the Department of Health is the agency that oversees these products. False, Deceptive and Misleading Advertisement Article 110 states that ‘It shall be unlawful for any person to disseminate or to cause the dissemination of any false, a 147woe ilippine mail or in deceptive or misleading advertisement on advertisement br commerce by print, radio, television, oul ee Teinal ather medium forthe purpose of inducing oF ee induce directly or indirectly the purchase Of or services.” {An advertisement shall be considered false, deceptive or misleading if itis not in conformity with the phontsions oftie fet Orifitis misleading in a material respect. To determine Whe i an advertisement is false, deceptive or i ccna el consider not only representations made or any | op . thereof, but also the extent to which the advertisement fails to reveal material facts in the light of such representations, or materials with respect to consequences which may result A the use of application of consumer products or services to which the advertisement relates under the conditions prescribed in said advertisement, or under normal or usual conditions. Special Requirements for Food, Drug, Cosmetic, Device or Hazardous Substances The following rules must be followed: a) No claim in the advertisement should be made that is not contained in the label or approved by the Department of Health (DOH). b) It is unlawful to advertise any food, drug, cosmetic, device or hazardous substance that is false, misleading or deceptive or is likely to create an erroneous impression regarding its character, value, quantity, composition, merit, or safety. ©) Where a standard has been prescribed for a food, drug, cosmetic, or device, no person shall advertise any article or substance in a manner that is likely to be mistaken for such product, unless the product actually complies with the prescribed standard, 4) Advertisements of any food, drug, cosmetic, device, or hazardous substance may not make use of any reference to any laboratory report of analysis required to be submitted to the Department of Health, 148