Marketing and Society, Marketing Ethics

Key Terms: corporate social responsibility, consumerism, the four rights of consumers, environmentalism, green marketing, cause-related marketing, social marketing, and marketing ethics.

"Man ought to regard himself, not as something separated and detached, but as a citizen of the world, a member of the vast commonwealth of nature and to the interest of this great community, he ought at all times to be willing that his own little interest should be sacrificed."
--Adam Smith (Theory of Moral Sentiments, 1790, p.140)

Note that Adam Smith felt that self-interest alone should not be the guiding force that rules business.

"though it is worth while to attain the end merely for one man, it is finer and more godlike to attain it for a nation or for city-states" Aristotle (Nicomachean Ethics 1:2)

The above quotes should make you a think about what life is really about. 
 

Corporate Social Responsibility (CSR)

Kotler and Levy, in their book, Corporate Social Responsibility (John Wiley & Sons) define corporate social responsibility as "a commitment to improve community well-being through discretionary business practices and contributions of corporate resources."    My definition of corporate social responsibility (CSR) will be the one cited in Hollender and Fenichell (2004, p. 29):    "… an ongoing commitment by business to behave ethically and to contribute to economic development when demonstrating respect for people, communities, society at large, and the environment.  In short, CSR marries the concepts of global citizenship with environmental stewardship and sustainable development."  Thus, corporate social responsibility includes the following: (1)   Concern for the environment, (2)   Commitment to ethical behavior, (3)   Respect for people, and (4)   Concern for society at large. Some of the benefits of being socially responsible include: (a) enhanced company and brand image (b) easier to attract and retain employees  (c) increased market share  (d) lower operating costs and (e) easier to attract investors.

A socially-responsible firm will care about customers, employees, suppliers, the local community, society, and the environment.  Of course, a company has an obligation to be concerned about its stockholders.  There is considerable evidence that doing good pays in the long run.  Even if it didn't, a firm has a responsibility to do the right thing. Every religion believes in the Golden Rule. Confucius, Hillel, and other great thinkers gave us the negative version of it:  "What is hateful to thee, do not do to others."  That should be the mantra of every person and company. Please note that CSR was extensively discussed in the introduction.  

Consumerism

Consumerism is concerned with broadening the rights of consumers; a firm that is committed to CSR will care about the rights of consumers.
President Kennedy said that consumers have the following four rights: to safety, to information, to choice, and to be heard.

Are you dissatisfied with a product or service? If you want to complain, try:
http://planetfeedback.com
You can also use the above site to send suggestions to firms.

Green Marketing

A key component of CSR is concern for the environment.  Environmentalists work to protect and improve the quality of life and are concerned with issues that include conservation of natural resources, reducing environmental pollution, protecting endangered species, and control of land use. The three Rs of environmentalism are Reduce, Reuse, and Recycle.  Many companies are finding that consumers are willing to pay more for a green product.  Toyota has become quite successful with their hybrid cars.

Green marketing refers to the development and distribution of ecologically-safe products.
Click below to learn about Green-e (green electricity from renewable sources)
http://www.green-e.org/

Click below to subscribe to emagazine.com
http://www.emagazine.com/

Cause-Related Marketing

Cause-related marketing (or cause marketing) discussed in a previous chapter is one way a company can be socially responsible.  The most common method is to donate a percentage of revenues to a specific charity or cause. For example, a company might donate a dime to America's Second Harvest (http://www.secondharvest.org/  They provide food for the poor) every time someone purchases its product. Yoplait® yogurt uses cause marketing with their lid program. Yoplait makes a 10 cent contribution to the Susan G. Komen Breast Cancer Foundation for every lid sent back to them.

Cause-related marketing should not be confused with social marketing.  A key difference is that a major purpose of cause-related marketing is to help a business.  It might be used to improve the image of the firm or to increase market share.  The technique involves associating a business with a cause.  Social marketing, on the other hand, is generally not associated with any company and is sued solely to help society by dealing with a social problem.

Cause-related marketing has to be done correctly or it can hurt a company.  A firm may look like it is exploiting a charity.  It is important for the firm to be transparent and honest about what it is doing.  There should also be a fit between the company and the cause.  A good fit would be, for example, might be a bottled water company and a cause the deals with providing clean water for poor people in Asia and Africa. [For more information on this subject, see "Cause-related Marketing:  More Buck than Bang" by M. Berglind and C. Nakata in Business Horizons 48(5)]

Social Marketing

Roberto, Lee, and Kotler (Social Marketing:  Improving the Quality of Life, Sage Publications ) define social marketing as:  "the use of marketing principles and techniques to influence a target audience to voluntarily accept, reject, modify, or abandon a behavior for the benefit of individuals, groups, or society as a whole."

Social marketing is usually done by a non-profit organization, government, or quasi-government agency.  The goal is either to steer the public away from products that are harmful to them and/or society (e.g., illegal drugs, tobacco, alcohol, etc.) or to direct them towards behaviors or products that are helpful to them and/or society (e.g., having family meals, praying together, etc.).

Business Ethics
(The Philosophy 14 course that many of you will be taking is a full course dedicated to business ethics. What I am providing here is a very brief overview)

The definition below is From Wikipedia, the free encyclopedia

"Business ethics is a form of applied ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce.” Generally speaking, business ethics is a normative discipline, whereby particular ethical standards are advocated and then applied. It makes specific judgements about what is right or wrong, which is to say, it makes claims about what ought to be done or what ought not to be done. While there are some exceptions, business ethicists are usually less concerned with the foundations of ethics (metaethics), or with justifying the most basic ethical principles, and are more concerned with practical problems and applications, and any specific duties that might apply to business relationships."  (Source: http://en.wikipedia.org/wiki/Business_ethics)


Principles that can be used Help one Make Ethical Decisions 

(1)  Basing Morality on Consequences (Consequentialism):
A consequence-based system works as follows:  If consequences are good, it is ethical; if the consequences are bad, it is unethical.  Thus selling defective products is unethical because it might hurt someone.  There are two major principles that are part of consequential ethics:
(A) The Egoism Principle that asserts that an individual  should only consider consequences to one's self.  Consequences to others do not matter. Thus, do not sell defective products because they may hurt people and I will be sued.
(B)  The Utility Principle avers that one must consider consequences of an act on everyone, not just one's self.  A consequentialist theory might very well argue that if an act provides the the "greatest good for the greatest number" it is moral. 

Problem with this approach to ethics:  How about this ethical question.  Is is moral to steal from the super rich in order to benefit millions of poor people? It is quite easy to argue that it is using consequential ethics.

(2) Basing Morality on the Rights of Individuals:
This approach states that if an action respects the rights of others (e.g., right to life, right to happiness, right to property, right to freedom), it is moral; if it does not respect the rights of others it is immoral.
As you all know the right to freedom is an important concept in the US constitution.

Problem: It is not so easy to define the rights of individuals. Does a very sick person have the right to commit suicide?  There is a great deal of controversy over the position of some philosophers  regarding the right of parents to kill children who are born with horrible diseases.

(3) Basing Behavior on Moral Duties: Deontological Ethics

This is a theory that posits that decisions should be made by considering one's moral duties (this is what one is ethically obligated to do for others) and the rights of other people.   In Greek, deon means duty or obligation.  If you look at the rights of an individual from the perspective of others, it is a moral duty.  Your right to life means that I have a moral duty to save you when you are drowning.  Kant was one philosopher who believed that the very essence of ethics is to fulfill moral duties. Indeed, according to him, every rational human being would accept the following two very basic principles of ethics:  (a)  universality = a person should act the way s/he would want others to act in the same situation (very much like the Golden Rule), and (b)  respect for persons = it is immoral to take unfair advantage of other people for one's own personal benefit. In Kantian philosophy, a categorical imperative is a course of action that does not allow any exceptions and should always be carried out.

The ends do not justify the means in deontological ethics. According to deontological ethics, one must live his/her life according to principles that do not change regardless of the situation.  Lying is wrong so it is wrong to lie even to save the life of your family. 

Question:  Is it moral to torture a terrorist who has information regarding a hidden bomb on a plane?  This is a big question today.

(4) Basing Behavior on Virtues:
A virtue is an ideal character trait, i.e., one that as seen as being good.  The opposite of a virtue is vice.  Virtues include such traits honesty, justice, compassion, kindness, generosity, fairness, etc. 
Aristotle talked about the Golden Mean as a tool of finding the virtue.  A moral virtue lies between two extremes. 

Problem: What should one do when following one virtue leads to the violation of another virtue? For example, should one lie to Nazis in order to the life of family members.

Read the following from Wikipedia:
 

From Wikipedia, the free encyclopedia (Source: http://en.wikipedia.org/wiki/Moral_absolute)

Moral absolutism
is the belief that there are absolute standards against which moral questions can be judged, and that certain actions are right or wrong, devoid of the context of the act. "Absolutism" is often philosophically contrasted with moral relativism, which is a belief that moral truths are relative to social, cultural, historical or personal references, and to situational ethics, which holds that the morality of an act depends on the context of the act.

According to moral absolutists, morals are inherent in the laws of the universe, the nature of humanity, the will of God, or some other fundamental source. Moral absolutists regard actions as inherently moral or immoral. Moral absolutists might, for example, judge slavery, war, dictatorship, the death penalty, or childhood abuse to be absolutely and inarguably immoral regardless of the beliefs and goals of a culture that engages in these practices.

In a minority of cases, moral absolutism is taken to the more constrained position that actions are moral or immoral regardless of the circumstances in which they occur. Lying, for instance, would always be immoral, even if done to promote some other good (e.g., saving a life). This rare view of moral absolutism might be contrasted with moral consequentialism—the view that the morality of an action depends on the context or consequences of that action.

 

Can Ethics be Taught? Kohlberg's Theory of Moral Development (This topic will not be on the exam)
 

There are several organizations that strongly believe that morality can be taught, including the Association for Moral Education (http://www.amenetwork.org/).  Lawrence Kohlberg was a major researcher who studied how people develop moral codes.  He believed that morality develops through stages.  Education, according to Kohlberg, is very important in helping individuals reach the highest level of morality (Power, Higgins, and Kohlberg, 1989).  Those interested in useful books dealing with this subject should go to the following website developed by The Office for Studies in Moral Development and Education:  http://tigger.uic.edu/~lnucci/MoralEd/books.html.  

Kohlberg's stage 1:  Punishment and Obedience
In this stage, children are totally self-centered. They do not yet understand that other people also have feelings and needs.  They are not capable of seeing something from another individual's point of view.  The key motivating force is to avoid punishment.  Don't do that because Mommy will punish me.

Kohlberg's stage 2:  Instrument and Relativity
In Stage 2, one recognizes that others have feelings and needs.  Reciprocity becomes a tool to satisfy personal needs, i.e., you take care of me and I'll take care of you. One follows the rules when it is to one's benefit.  The individual is very pragmatic and understands that that others also have needs and is willing to bargain. 

Kohlberg's stage 3:  Interpersonal Concordance
In Stage 3, one is concerned about the expectations of others.   These expectations are more important than an individual self-interest. An individual in Stage 3 define a morally correct act in terms of what is expected by people close to one's self.  Gaining social approval is of utmost importance; one avoids acts that bring shame or rejection.  Peer pressure is often more important than parental authority; one does not yet consider the needs of society.  A teenager who hates liquor but gets drunk because his friends encourage all engage in binge drinking is using Stage 3 reasoning.

Kohlberg's stage 4:  Law & Order
In Stage 4, there is a
shift from defining morality in terms of peer groups to defining morality in  terms of laws established by the larger social system. The individual sees herself as a  "member of society"; one has to be a good citizen and obey laws so that society can function.  Society cannot survive if the people are unwilling to obey laws.  The problem with Stage 4 is when the laws of the land are unjust (America allowed slavery in the past, Nazi Germany encouraged genocide, etc.).

Kohlberg's stage 5:  The Social Contract
In Stage 5, individuals see government as a legal authority. There is a higher moral authority and it is not necessarily government.  The social contract represents the values, moral codes, and principles of society.   It is the job of government to ensure that people follow the contract.   If government does not do its job, the people should challenge, and even have a right to change it.  

Kohlberg's stage 6:  Universal Ethical Principles
Individuals in Stage 6, follow universal ethical principles in any society.  These principles are universal and every rational human being believes in them.  They include such ideas as belief in human dignity, respect for human life, respect for justice for all, etc.  Yes, Superman almost said it:  "Truth, Justice, and .."  The prophet Jeremiah (9: 23-24) said it better:   he spoke of  “practicing kindness, justice, and righteousness to everyone on earth.”

The accounting profession stresses following the GAAP (Generally Accepted Accounting Principles) and the AICPA Code of Professional Conduct.  Is that the highest stage of moral development according to Kohlberg?  Is marketing better?

Marketing Ethics

The American Marketing Association (AMA) has its own code of ethics. This code covers ethical issues in promotions, distribution, pricing, and marketing research. You can find their Code of Ethics for Marketing on the Internet at:
http://www.ama.org/about/ama/ethcode.asp
 

It is my belief that good marketing is ethical marketing. Good marketing is about satisfying and developing a long-term relationship with your customers. Caring about your customers not only results in profits (or achieving your organization’s objectives if an organization is not-for-profit), it is the ethical thing to do. Deceiving customers may help a firm’s profits in the short-run, but is not the way to build a successful business.  The same goes for social responsibility. A firm has to care about all stakeholders:  customers, employees, suppliers and distributors, local communities in which they do business, society, and the environment.

What you were taught in finance (the stockholder model) that the goal of the firm is to maximize shareholder wealth is absurd.  Equally ridiculous is the view that rational man is motivated solely by self-interest ("homo economicus").  A rational person cares about others and wants to lead a virtuous life.

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Is there a difference between business ethics and corporate social responsibility? 

According to Juliet Altham ["Business ethics versus corporate social responsibility:  Competing or complimentary approaches" International Business Ethics Review 4(1)], business ethics is more reactive and CSR is more proactive. Business ethics is concerned with resolving problems after they happen, i.e., what is the right thing to do in this situation?  CSR is proactive and is used to enhance the image of a company.  Altham notes that CSR can actually increase the risk of a firm since the company may be going out of its way to support a particular cause. Not all causes are popular.  She also claims that CSR is concerned with doing good; business ethics focuses more on preventing harm.

Altham also notes business ethics programs were introduced in reaction to defense industry scandals that took place during the 1980s. Thus, many business ethics programs (especially in the defense field) were instituted to help companies comply with regulations.

Altham also feels that the CSR approach defines stakeholders much more broadly than does the business ethics approach.

[See also "Corporate Ethics, Governance and Social Responsibility: Comparing European Business Practices to those in the United States" by Nathan E. Hurst    http://www.scu.edu/ethics/publications/submitted/hurst/comparitive_study.pdf]

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If you would like to read "Biblical Foundations of Business Ethics," an article I wrote for the Journal of Markets & Morality, click here:  http://acton.org/publicat/m_and_m/2000_spring/friedman.htm

Websites of Interest

International Business Ethics Institute
http://www.business-ethics.org/

Center for Ethical Business Cultures
http://www.cebcglobal.org/

Markkula Center for Applied Ethics
http://www.scu.edu/ethics/

Business Ethics Center of the Colorado State University
http://e-businessethics.com/

 

 


(c) 2011 H.H. Friedman