Ethical and Legal Considerations in Personal Selling: Powerpoint Presentation Prepared by Dr. Rajiv Mehta

Chapter 3
Ethical and Legal

Considerations
In Personal
Selling
PowerPoint presentation prepared by

Dr. Rajiv Mehta
Chapter Outline
• What are ethics?
• Ethical concerns of salespeople
• The company's ethical eyes and ears in the field
• Behaving ethically, every day
• Going beyond ethics: laws affecting business-to-business
personal selling
• Ethics and regulation in international sales
Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 2

Learning Objectives
After reading this chapter, you should understand:
• What are ethics?

• Ethical concerns of salespeople
• The company’s ethical eyes and ears in the
field
• Behaving ethically, everyday
• Going beyond ethics: laws affecting business-
to-business personal selling
• Ethics and regulation in international sales
• Making ethical decisions
© Royalty-Free/CORBIS

Learning Objectives cont’d
After reading this chapter, you should understand:
• What ethics are and why there is no universally

accepted standard for ethics.
• Ethical concerns of salespeople in dealing with
customers, competitors, employers, and co-
workers.
• Behavior that salespeople have a right to expect
from their employers.
• Legal and ethical issues in foreign markets.
• How to approach ethical decisions.

What Are Ethics?
• Ethics:
• May be defined as the study of what is good and bad or right or

wrong
• Provide a moral code of conduct governing individuals and societies

Business Ethics Build
Trust in Relationships
• "Right" and "wrong" is usually
determined by economic criteria • Ethical behavior helps build trust
in business between the buyer and seller.
Trust has been defined as “one
party’s belief that its needs will be
met in the future by actions
undertaken by the other party.”
• People are not "ethical" simply

because they stay within the law
• Most of us would probably
agree that its unethical to do
Royalty-Free, Photodisc/Getty Images
what we personally believe is
wrong

Salesperson Ethics Must Go Beyond Legal
Requirements
• Some salespeople have the idea that if it’s legal, it’s ethical.
• Ethical behavior and legal behavior are not the same.
• A salesperson can be dishonest, unprincipled, untrustworthy, unfair, and

uncaring without breaking the law.
• Many U.S. companies recognize this problem; indeed, more than 38

percent offer ethics training, and about 20 percent of large corporations
have appointed ethics officers.
Chapter Review Question:

What Are Ethics?

Ethical Image of Salespeople
• To counter the generally negative image of

salespeople, professional salespeople must
hold themselves and their companies to a high
standard of ethics
• Many companies now include ethical and legal

issues as major parts of their sales training
programs

Ethical Concerns of Salespeople cont’d
1. Customer relationships
– Even dishonest and unethical customers don't trust unethical salespeople
and will eventually not want to deal with these types of salespeople
– The following are unethical activities or areas of ethical concern in the
treatment of customers
• Special gifts
• Entertainment
• Over-promising
• Misrepresenting or covering up the facts
• Manipulating order forms
• Disclosing confidential information
• Showing favoritism Royalty-Free, Digital Vision/Getty Images

2. Treatment of coworkers
a. Sexual harassment
b. Stealing customers from
colleagues
c. Undermining coworkers
3. Treatment of competitors
a. Disparaging competitors and
their products or services
b. Tampering with competitors’
products
c. Competitive snooping
Royalty-Free, Digital Vision/Getty Images

4. Salespeople’s ethics and their

company
a. Expense account padding

b. Unauthorized use of company
funds
c. Personal use of company time
d. Fabrication of sales records
e. Manipulation of customer
orders
Royalty-Free, Digital Vision/Getty Images

5. Employer ethics with their salespeople

Ethical salespeople have a right to expect ethical treatment from their
companies in various areas
a. Compensation
• Prompt, accurate payment of salary, Chapter Review
commissions, and bonuses as well as Question:
timely reimbursement of selling Discuss some of
expenses the more
b. Sales territories common ethical
• Fair assignment of sales territories concerns of
salespeople.
c. Sales quotas
• Setting realistic achievable sales quotas
d. Hiring, promoting, and firing
• Sexism, racism, and ageism must not
influence managerial decisions
The Company’s Ethical Eyes
and Ears in the Field
• Salespeople are the firm’s eyes and ears in the field, which helps in
decision-making in the following areas of the marketing mix:
1. Product quality and service

• Poor product quality, unsafe products,
unreasonable return policies, and poor
after-sales service
2. Pricing
• Inflated list prices, not honoring pricing
incentives, and adding hidden costs

The Company’s Ethical Eyes
and Ears in the Field cont’d
3. Distribution
• Using resellers that are aggressive,
dishonorable, “fly-by-night” operators.
Using “bait and switch” strategies and
selling lower quality products
4. Promotion
• Deceptive advertising, misleading
product warranties, phony promotional
contests, and dishonest fund-raising
activities
© Royalty-Free/CORBIS Chapter Review Question:
Describe some of the ways in which professional
salespeople can be the ethical “eyes and ears” of their
companies.

Behaving Ethically, Every Day
Insights for behaving ethically include:

1. Ethical conflicts and choices are inherent in personal selling
2. The law is the lowest common denominator of ethical behavior
3. There is no single satisfactory standard of ethical action that is
agreeable to everyone to assist you in making on-the-job decisions
4. There are diverse and sometimes conflicting influences (e.g., the
customer, management, your peers, industry standards, competition)
on ethical behavior
5. Your value system will have a dramatic influence on your ethical
conduct
6. The lower you are in the corporate hierarchy, the greater the likelihood
you will feel pressure to engage in ethical misconduct
7. Top management will set the tone for your organization’s ethical
conduct

Table 3.1 Ethical Ideas for Salespeople

Going Beyond Ethics: Laws Affecting Business-
to-Business Personal Selling cont’d
• Personal selling is affected by numerous federal, state, and local

laws
• Federal laws tend to affect personal selling indirectly while state and
local laws usually deal directly with personal selling in the following
areas:
• Price discrimination • Orders and terms of
• Price fixing sales
• Collusion • Business descriptions
• Exclusive dealing • Product descriptions
• Restraint of trade • Secret rebates
• Reciprocity • Customer coercion
• Tie-In sales • Unfair competition
• Unordered goods • Business defamation

Going Beyond Ethics: Laws Affecting Business-
to-Business Personal Selling cont’d
Business defamation includes:

a. Business slander
• Unfair and untrue oral statements Chapter Review Question:
about a competitor What are the three most
common kinds of business
b. Business libel defamation?
• Unfair and untrue written Why should salespeople be

statements about a competitor especially careful about
business defamation during
c. Product disparagement or after the sales
• False or deceptive comparisons or presentation?
distorted claims made during or
after a sales presentation about a
competitor's products or services.

Ethics and Regulation in
International Sales cont’d
• International salespeople are restrained by three different laws:
1. U.S. laws
2. Laws of any country where they operate
3. International laws that are enforced across national
boundaries
• U.S. salespeople may have to spend months or even years studying

cultural differences to develop the expertise required for successful
selling in foreign markets
• Even major corporations still make embarrassing cultural mistakes;
some companies prefer to hire native salespeople for their foreign
accounts
Chapter Review Question:
What are three different sets of laws that
international salespeople must abide by?

Ethics and Regulation in
International Sales cont’d
• In international negotiations, salespeople must not

confuse varying ethical standards and the U.S. and
foreign laws governing their activities
• In planning to sell products or services to a foreign

country, sales reps should contact the commercial
attaché at the U.S. embassy for information on legal
requirements in conducting business there

Table 3.2 Doing Business in
Foreign Countries

Table 3.3 Ethical Decision-Making
Checklist

Key Terms
• Ethics
• Moral code of conduct and principles that govern individuals and societies in
determining what is right or wrong.
• Quid Pro Quo Harassment
• A person in authority’s demand for sexual favors from an employee in exchange
for a job advantage, such as being hired or promoted.
• Hostile Environment
• A pattern of sexual behavior that makes the job so unpleasant that the victim’s
work is adversely affected.
• Price Fixing
• Two or more competing sellers conspiring to set or maintain uniform prices and
profit margins.
• Collusion
• An illegal arrangement in which competing sellers agree to set prices, divide up
markets or territories, or act to the detriment of a third competitor or customers.
• Tie-In
• An often-illegal seller’s requirement that a customer purchase an unwanted
product along with the desired product.
Key Terms cont’d
• Exclusive Dealing
• Agreements in which a manufacturer or wholesaler grants one dealer exclusive
rights to sell a product in a certain trading area and insists that the dealer not
carry competing lines. Illegal under the Clayton Act.
• Business Defamation
• Any action or utterance that slanders, libels, or disparages a competitor, causing
the competitor financial damage, lost customers, unemployment, or lost sales.
• Business Slander
• Unfair and untrue oral statements made about competitors that damage the
reputation of the competitor or the personal reputation of an individual in that
business.
• Business Libel
• Unfair and untrue statements made about a competitor in writing (usually a letter,
sales literature, advertisement, or company brochure), damaging the
competitor’s reputation or the personal reputation of an individual in that
business.
• Product Disparagement
• False or deceptive comparisons or distorted claims made during or after a sales
presentation about a competitor’s products, services, or properties. These
statements are considered defamatory per se.
Chapter Review Questions
1. Can you explain the difference between quid pro quo

harassment and hostile environment harassment?
2. Name and briefly describe several of the most important

federal laws affecting business-to-business selling.

Topics for Thought
and Class Discussion
1. How do you think your ethical values were formed? Who had the
most influence on you? Why?
2. Why must salespeople concern themselves with ethical issues?
Isn’t it enough to understand and operate within the law?
3. Do you believe that ethical standards in the United States are
relatively stable or changing? Do you think U.S. ethical standards
are becoming higher or lower? Why?
4. Why do countries differ so sharply about what is ethical or
unethical behavior? Do you think that all countries would ever
adopt an international code of ethical behavior in business?

Topics for Thought
and Class Discussion
5. How do you think you would handle a situation in which
you were trying to make a multimillion-dollar sale to a
foreign country and that country’s trade representative
made it clear that he expected a substantial bride?
6. Have you ever been a victim of sexual harassment? If so,
how did you deal with it?
7. What do you think are today’s major ethical issues?
8. Do you have any personal guidelines for what is ethical or
unethical behavior? Would you like to see everyone use
your guidelines?

Internet Exercises
1. Go online to find the ethical codes or codes of business

conduct for three different companies (e.g., Coca-Cola,
Halliburton, and DuPont). You can find various firm’s’
business codes at websites such as
http://infomgmt.homestead.com/files/ethcod_f.htm.
Compare the three codes. How do they vary in length,
specificity, and content? What does each code have to
say about salesperson or selling behavior?

Internet Exercises cont’d
2. Using your college’s electronic database, find three

articles on “business ethics” in business journals or
magazines. In what journals or magazines did you find the
articles? Do the articles mention ethics in personal
selling? What guidelines, if any, do the articles provide for
ethical conduct? If you were to start up a small business,
what would your one-page ethical code or code of
business conduct say to your employees?

Projects for Personal Growth
1. Locate and interview two salespeople. Ask them how they
decide whether a particular behavior is ethical or
unethical. Did they receive any instruction in ethics during
their sales training program? Do their companies have
codes of ethics? What punishments or penalties
accompany ethical violations?
2. Write down two ethical dilemmas that you have personally
faced. How did you decide what to do in each case? In
retrospect, do you think your decisions were the right
ones? Who was affected by your decision? How? Would
you be willing to tell your friends the total truth about the
dilemma and how you resolved it? How do you think they
would react?

Projects for Personal Growth cont’d
• Go to your college or public library and look through

issues from the 1940s or 1950s of popular magazines
such as Life or Time and compare them with recent
issues. Do the advertisements seem more or less ethical
than those of today? Why do you think so, and what might
account for the differences?

Case 3.1: It’s the Short-Run That
Matters Most!
1. What do you think about George Fagus’s approach to

personal selling? Why do you think he’s viewed as a top
performer at Spearhead Technologies?
2. Do you think that Stewart should follow George’s advice,
at least for the next year or so, so that he can make his
sales quotas? Why? If you don’t agree with George’s
advice, what advice would you give Stewart? What should
Stewart do next year at this time if he hasn’t made his
sales quota? What should he say to his sales manager,
Sylvia Ambers?

Case 3.1: It’s the Short-Run That
Matters Most! cont’d
3. Do you think Spearhead Technologies has any problems

in its performance evaluation system? For example, do
you think the company is giving equal weight to qualitative
performance and quantitative performance? What can the
company do to ensure a better balance in its performance
evaluation for salespeople? How might an improved
performance evaluation system help Spearhead
Technologies?

Case 3.2: Affable ... Or Overly
Affectionate?
1. Do you think Tom’s line of questioning while driving to the

motel was merely a show of genuine interest and concern
for Toni (who’s nearly young enough to be his daughter) . .
. or not? Did Toni handle the conversation with Tom
appropriately? If not, what do you think Toni should have
said to Tom when he began asking her rather personal
questions? Would your suggested response enable Toni
to avoid upsetting Tom?
Case 3.2 is found online at

http://college.hmco.com/pic/andersonps2e.
Affectionate? cont’d
2. While staying overnight at motels, should Toni go out to
dinner each night with Tom or make some excuse each
time and eat alone? Why? Should she order or allow Tom
to order any alcoholic drinks for her if they do go out to
dinner together? What should Toni do if Tom invites her to
dance, if they happen to go to a restaurant with live
entertainment? Will Tom be insulted if Toni says no to a
dance invitation? If so, how might this affect their long-run
superior-subordinate relationship and Toni’s future at
NMS?

3. While traveling in her territory with her boss this coming

week, what should Toni do if Tom seems to be making
advances toward her? Should she just ignore any such
attempts, make a joke about them that subtly puts Tom
back in his place, or should she take a tough stance up
front and tell Tom to back off? Should Toni’s first-name
relationship with Samuel Thomas, CEO of NMS, be used
to keep Tom in his place?

4. What should Toni say and do if Tom has a few drinks and later tries to
become affectionate with her at the restaurant or later at the motel?
What can Toni do to avoid being alone with Tom?
5. If Toni believes that she has to put Tom in his place verbally, or, worse,
fend off his overly friendly touches during the first few days on the trip,
what should she do about the remainder of the trip around her
territory? Should she tell him to fly back to the office, as she cannot
work in this awkward situation? If he refuses to leave, should she
cancel the remainder of the trip and go back home, possibly risking
her job? Should she call her boyfriend for advice? Should she call
Samuel Thomas, CEO of NMS, to tell him about her awkward
experience with Tom? What other options might be better?

Affectionate?
6. Do you think that Toni’s sales manager is creating a

hostile working environment for her? Should Toni consider
leaving the company? Why or why not?

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Chapter 3

Ethical and Legal

PowerPoint presentation prepared by

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 2

After reading this chapter, you should understand:

• What are ethics?

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 3

• What ethics are and why there is no universally

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 4

• May be defined as the study of what is good and bad or right or

• Provide a moral code of conduct governing individuals and societies

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 5

• People are not "ethical" simply

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 6

• Ethical behavior and legal behavior are not the same.

• A salesperson can be dishonest, unprincipled, untrustworthy, unfair, and

• Many U.S. companies recognize this problem; indeed, more than 38

Chapter Review Question:

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 7

• To counter the generally negative image of

• Many companies now include ethical and legal

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 8

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 9

Royalty-Free, Digital Vision/Getty Images

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 10

4. Salespeople’s ethics and their

a. Expense account padding

Royalty-Free, Digital Vision/Getty Images

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 11

5. Employer ethics with their salespeople

1. Product quality and service

Royalty-Free, Photodisc/Getty Images

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 13

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 14

Insights for behaving ethically include:

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 15

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 16

• Personal selling is affected by numerous federal, state, and local

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 17

Business defamation includes:

• Unfair and untrue written Why should salespeople be

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 18

• U.S. salespeople may have to spend months or even years studying

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 19

• In international negotiations, salespeople must not

• In planning to sell products or services to a foreign

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 20

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 21

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 22

1. Can you explain the difference between quid pro quo

2. Name and briefly describe several of the most important

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 25

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 26

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 27

1. Go online to find the ethical codes or codes of business

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 28

2. Using your college’s electronic database, find three

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 29

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 30

• Go to your college or public library and look through

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 31

1. What do you think about George Fagus’s approach to

Copyright © Houghton Mifflin Company. All rights reserved. Chapter 3 | Slide 32