Business Ethics Fundamentals

Social Responsibility and Ethics

• The study of morality, what society considers right or wrong
• Business ethics examines morality in business values and practices
• Stakeholders include consumers, employees, investors, vendors, local communities, larger societies, governments, and other countries
• Ethical treatment of animals and environmental impact are key considerations

Outline

• Dark Marketing Practices
• Dark Consumer Behaviours
• Bright Behaviours
• Practice!

Dark and Bright Behaviours

• Transactions between buyers and sellers should be fair and balanced (win-win).
• Normal behaviour in transactions requires adherence to norms.
• Dark behaviors involve exploiting others for personal gain.
• Bright behaviours involve going above and beyond in transactions to benefit community or environment.

Unsafe Marketplace

• Consumer protections have increased, but the marketplace has become more unsafe in some areas
• Online purchase scams (fake websites, counterfeit goods)
• Diet/health supplement scams (miracle weight-loss pills, hormone balancing)
• Loan and income tax scams
• Cryptocurrency scams
• Romance scams

Example: Hormone Balancing

• Claims were scientifically proven to be false and dangerous.
• Some products may be harmless, while others can negatively affect health.

Business Ethics

• Study of morality in business
• Moral rules affect many stakeholders
• Important considerations are treatment of animals and the environment

A Need for Business Ethics

• Improved production capacity
• Increased competition among businesses
• Expanding consumer choices
• Scientific advancements and space exploration
• Global population growth
• Political and environmental activism

Ethical Principles

• Fiduciary: Diligence and prudence in handling responsibilities
• Property: Safeguarding tangible and intangible assets
• Reliability: Keeping commitments and fulfilling promises
• Transparency: Honesty, truth, and disclosure of information
• Dignity: Respecting others and protecting them
• Fairness: Treating all equally and appropriately
• Citizenship: Respect for laws and the natural environment
• Responsiveness: Quick reactions to problems

The Dark Behaviours of Marketers

• Marketing tactics that are misleading, exploitative, and unethical.
• Unsafe or harmful products, misleading pricing, planned obsolescence, exploitative sales, false advertising, bait-and-switch advertising, greenwashing, targeting vulnerable populations, consumer privacy violations, mishandling of private data.

Unethical Marketing and the 4Ps

• Marketers deliver value using the four P's.
• Product: Safe, functional products desired by consumers.
• Price: Non-discriminatory pricing that is fair.
• Promotion: Honest communication that doesn't exploit vulnerable populations.
• Place: Fair treatment of consumers through retailers and distributors

Unethical Marketing and the 4Ps (Strategies)

• Product: Developing a good, service, or experience that satisfies customer needs, or harmful/unsafe products that aren't disclosed.
• Place: Distributing products or services through multiple channels, or deliberately restricting availability.

Example: VW “Clean Diesel”

• Volkswagen advertised environmentally friendly vehicles but were not as advertised.
• The company used illegal devices to manipulate emissions tests.
• Vehicles emitted much higher levels of harmful emissions than allowed.

Consequences of Unethical Practices

• Loss of profits and reputational damage
• Legal issues and fines
• Public relations disasters
• Tarnished brand image
• Decreased investments and stock prices
• Distrust from partners and employees
• Consumer cynicism (a loss of trust)

Example: VW “Clean Diesel” (Outcomes)

• Over $30 Billion in fines, penalties, and restitution
• Stock prices dropped 1/3 within a short time
• Reduction in profits
• Efforts to recover brand image via new leadership, technological advancements, and ethical practice changes

Discouraging Unethical Marketer Behaviours

• Activism: Any action to draw attention to an issue and create positive societal change
• Movements, marches, protest demonstrations, rallies, strikes, boycotts, whistle-blowing, government lobbying, fundraising, canvassing, consumer rights organizations, and internet activism
• Quiet activism: Making small, mindful consumption choices or refusing to support unethical companies
• Slacktivism: Passive participation in activism (online likes, shares, etc.)

Governmental Regulation

• Reflects societal concerns and counteracts business self-interest
• Enforces compliance with regulations
• Protects businesses through the promotion of economic growth, regulating competition, trade, and intellectual property rights
• Regulatory agencies (e.g., Health Canada, Industry Canada, Competition Bureau of Canada, CRTC, Privacy Commissioner of Canada, Canadian Food Inspection Agency)

Consumer Privacy

• The Department of Justice, Industry Canada, and various privacy regulators protect individual consumer rights.
• Canada's privacy regulations are governed by PIPEDA.

Canada's Anti-Spam Law (CASL)

• The law came into effect in 2014 and was supplemented by restrictions on malware (2015).
• It mandates unequivocally explicit consent from recipients for stated communication purposes.

Self-Regulation

• Voluntary regulation imposed by the industry or corporation.
• Exemplified by agencies like the Better Business Bureau (BBB), Canadian Association of Broadcasters, and the Canadian Marketing Association.
• Criticised for having limited power to remedy and penalize offenders when standards are violated.

Consumer Ethics

• Consumers generally follow acceptable norms for marketplace behaviour.
• Judgments about right and wrong in the marketplace depend on changing societal standards, personal morals, and perceptions of harm and justice.

Consumer Misbehaviour and Problem Behaviour

• Misbehaviour: Violates acceptable norms, self-indulgent, self-interested, and lacks concern for others. Examples include shoplifting, filing fraudulent claims, and drunk driving.
• Problem Behaviour: Excessive reliance or overuse of products or participation in compulsive behaviors. Example, compulsive shopping or eating, or addiction to items.

Dark Consumer Behaviours (Acquisition)

• Deviant Acquisition Behaviours: Consumer misbehavior or problems in acquiring goods, like Consumer Aggression, Theft, and Compulsive buying.

Consumer Aggression

• Aggressive and violent behaviour, especially during sales events like Black Friday.
• Driven by perceived lack of freedom and control.
• Rooted in evolutionary drives to protect from threats or inspired scarcity.

Consumer Theft

• Costly for businesses and consumers
• Reasons include the inability to afford items, poverty, compulsion or emotional triggers, and the desire to maintain a certain standard of living
• Items popular for theft share characteristics of CRAVED- Concealable, Removable, Available, Valued, Enjoyed, and Disposable.

Compulsive Buying

• An unusual obsession with shopping that significantly affects the individual.
• Involves chronic problem behavior, secrecy, and uncontrolled financial, psychological, and personal consequences.
• Driven by emotions, low self-esteem, lack of control, and a desire to offset other issues.

Corporate Social Responsibility (CSR)

• Companies that go beyond ethical considerations to correct past mistakes.
• Ethical Responsibility: conducting business to higher principle standards (employee safety, health, and well-being, equality/diversity/inclusion)
• Philanthropic Responsibility: Providing back to the community. (Advocacy, supporting community events or initiatives)
• Economic Responsibility: Prioritizing financial sustainability and contributing to economic well-being of the community (Fair Trade, sourcing local products, economic development).
• Environmental Responsibility: Minimizing the negative impacts on the planet. (Reduce carbon emissions, eco-friendly packaging, recycling)

Sustainability

• The ability to maintain a given level or practice indefinitely.
• In business, it's often called the Triple Bottom Line accounting: Profit, People, Planet (environmental) considerations.

Sustainability and Packaging

• Packaging is a significant part of marketing, but it's a large contributor to waste.
• Packaging material has negative environmental impacts; landfills leach chemicals into groundwater and release toxic air pollutants.
• Canada ranks high in per-capita trash production.
• Companies face challenges in finding alternative packaging methods that safeguard products while aligning with sustainability concerns.

Voluntary Simplicity

• A lifestyle choice to limit material consumption and resource use.
• Highly or Less committed simplifiers adjust consumption patterns based on ethical or personal preferences
• Changing behaviour may be disruptive in extreme cases (e.g., homesteading), or gradual and less disruptive (e.g., purchasing fair-trade coffee)

Review Questions

• Define and provide examples of dark marketing practices.

• Describe 2-3 of the eight ethical principles and provide examples of marketing practices that may violate them.

• Describe how marketers typically use the 4 P's to create value for consumers and how these strategies may be used in unethical ways.

• Discuss the role of activism, consumer advocacy, government regulation, and self-regulation in discouraging unethical marketing practices.

• Distinguish between consumer misbehaviour and consumer problem behaviour, and provide an example of each.

• Discuss the relationship between limited-quantity promotions, scarcity, and consumer aggression and violence.

• Describe what items are popular for theft using the acronym CRAVE.

• Define compulsive buying, distinguish it from impulsive behaviour, and describe why it occurs.

• Define Corporate Social Responsibility (CSR) and describe the four different types that companies might engage in.

Practice Questions

• The provided practice questions relate to previously described topics.

Test your knowledge on the key concepts of business ethics, including ethical principles, corporate social responsibility (CSR), and stakeholder impacts. This quiz covers various aspects of ethical behavior in organizations and the implications for businesses in the competitive market.