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BUSI 211: Business Ethics

CLASS 34 (8TH APR 2014):



A. Course Evaluation
B. Whats Up in the World Today
C. Why ad industry prone to unethical behavior
D. Ethical theories of marketing
E. Cause-related marketing
F. Green marketing
G. Thought of the Day
H. Homework


Your turn to evaluate me!

B. Whats up in the World Today


The onus is on you to sign up for a time slot and to

actually show up on the time slot.

Once you miss it, you may the lose the chance to do
so given how close we are to the end of the semester.
I will no longer be reminding people about this.



Most of us have developed scepticism about ads in that

we often think they are misleading or not truthful.
Why do you think the advertising industry has
developed a reputation for unethical behavior?

2009 Ad industry study


Ad industry and academic leaders interviewed about ethics in ad industry.

1) Barriers to ethical decision making: Uncertainty about management,
pressures of having to come up with new ideas under deadline pressure.
Few ad agencies had ethics codes or proper processes.
Perceived tension between management and creativity: Creative people dont
follow processes because can hamper creativity ad agencies are too cool for
Intense deadlines and constant pressure to produce new and better ideas: so
consumed with coming up with ideas faster and better than ever before.
Client-based nature of advertising: Ethical decisions made by clients and not
agencies: Clients say that is what I want you to do. => agency-shopping.
Client is always right philosophy overrides agencys emphasis on managing
employees in respectful and ethical way or on creating ethical culture.

Ad industry contd

2) Role of organizational culture: Culture has to support

ethical decision making and leaders crucial in creating culture.
Culture is probably most important factor when it comes to ethics.
Whether an organization really accepts and buys into high standards is a
culture issue and a leadership issue.
Leaders viewed as crucial to creating and maintaining culture through
example they set and through programs they initiate. You set culture
by example. The first time a senior person says one thing and acts in
another way, it starts to erode culture and goes down from there.
Need to call out unethical behavior and respond to it in appropriate
manner to provide clarity in a grey world as to what is right behavior.

(Source: Drumwright and Murphy, Journal of Advertising, vol. 38, no. 1 (Spring 2009), pp. 83



From our textbook: What do some of our favourite

ethical theories have to say about marketing and

Ethical theories of marketing


Utilitarianism: Advertising should make some

contribution to overall happiness to be of some

ethical worth.
Virtue ethics: Advertising should be grounded in
moral values.
Cultural relativism: e.g. marketing alcohol in
Muslim country unethical while cigarette
advertising is not as unethical vs. in many Western
countries, it is opposite.

Ethical theories contd


Rights based approach (John Rawls):

Companies have contractual relationship with

customers so moral duties to customer are created
by relationship.

A contract is valid only if all 3 of these are met:

Both parties have full knowledge about nature of contract.

Neither party must misrepresent facts of contractual relationship
to the other.
No one is forced to enter contract.

(Source: Manuel Velasquez, Pearson Business Ethics, 6 th Edition)

Ethical theories contd



Company has following duties:

1. Duty to comply: Company must provide consumers
with a product that lives up to the claims that the company
has made about product regarding:
Reliability: product will function as consumer is led to expect it
will function;
Service life: product will continue to function for as long as
consumer is led to expect it will function;
Maintainability: ease at which product can be maintained and
repaired; and
Safety: degree of risk associated with using product.


2. Duty of disclosure: Company must disclose exactly what

consumer is buying and any other relevant information that could
affect customers decision to buy product, e.g. any health risks,
ingredients, costs, product ratings, etc.
3. Duty not to misrepresent: Must not mislead, deceive or hide
any relevant information to customers, e.g. cant sell software with
bugs that could cause problems to customer, say something is on
sale when it is on regular price.
4. Duty not to coerce: Cant use pressure or take advantage of a
buyers fear or stress to make a purchase.
(Source: Manuel Velasquez, Pearson Business Ethics, 6 th Edition)


What does our textbook say about cause-related


Cause-related marketing

Incorporates a charitable dimension within an act

of exchange, i.e. company will give a percentage or

set amount to charity for each product sold.
Strategic: Giving is targeted and closely related to
performance of product so only give money if sell
products unlike traditional writing a cheque.
Success factors: Must gain sympathy of target
audience and cause must be unthreatening

Cause-related marketing contd



Not sustainable
May weaken other types of fundraising.
83% of customers have favorable images of companies who engage
in cause-related marketing, therefore just a cynical marketing tool.
Post-Modernists: Rampant consumerism given moral value =>
pursue image at expense of true moral worth


What does our textbook say about green marketing?

Even if superficially green products become
increasingly fashionable, ethics could become
confused with aesthetics (philosophy of beauty).
Genuine ethical marketing views consumers as part
of marketing of wider ecosystem and that social
change happens gradually with consumers making
ethical choices as part of process of social change.

Approaches to green marketing


1. Fair play approach: Customers have right to know what they are getting.
Critical of greenwashing: doubtful unverifiable or false environmental claims.
Require clear labelling of cosmetic products that say they are not tested on
animals with certification from an independent monitoring organization. If there
is no such label, assume testing on animals was done.
Consumers must be able to make an informed choice.
2. Managerialist approach: Consumer holds certain moral values that company
has to meet to get consumer to buy its products.
About meeting consumer demand, not really changing corporate values.
3. Reformist approach: Companys activities should be re-aligned with
stakeholder expectations and needs.
Any change in companys activities motivated at least in part by self-interest
because need favorable image to increase market share.

Green marketing approaches contd

4. Dialogic approach: Need dialogue between company and stakeholders to resolve
competing concerns and interests.
Actual outcome is less important than manner and form of dialogue.
5. Reconstructionist approach: Deep Ecology approach.
Marketers should respond proactively to environmental degradation especially since
marketing part of problem and not solution.
Business can play a central role in sustainable development.
Adopt a minimalist approach in marketing (less packaging and paper in general) products
that are produced in a sustainable and human fashion, e.g. Body Shop cosmetics.
Promote consumer awareness of major issues, e.g. Volkswagen ad: cars should be fully
recyclable and consumers consider recyclability when choosing a car.
6. Interpretavist perspective: Focus on internal issues and extent morality integrated
into marketing. => like CSR integrated into culture and strategy of company.


Trust is key to long-term relationships and retaining

(not just acquiring) customers.

Important considerations:

Nature and extent of consumer knowledge.

How consumers can make informed decisions.
Incorporating ethical marketing even if not financially



Transforming a brand into a socially responsible

leader doesn't happen overnight by simply writing new
marketing and advertising strategies. It takes effort to
identify a vision that your customers will find credible
and aligned with their values. ~ Simon Mainwaring


Reading: from Chap 8 (HRM and OB)

NOTE: Read these sections and pages only:

Section 8.4 (pp 174 to 176);

Section 8.6 (p.178), and
Section 8.8 + case study (pp.181-186). We will be discussing
case study next class.

Other parts of chapter NOT on exam.