B2B Ethics, Crisis B2B Ethics, Crisis Management & Legal Management & Legal

Considerations Considerations

A Poem by R.W. Grant• You’re gouginggouging on your prices if you

charge more than the rest.

• But it’s unfair competition if you think you can charge lesscharge less.

• A second point that we would make to help avoid confusion:

• Don’t try to charge the same amount:

• That would be collusioncollusion!

Ethical Clashes

•Ethical standards among stakeholders

•Ethical standards at different levels of an organization

• Individual ethical standards vs. organization’s performance standards

•Facts vs. viewpoints •Knowledge of consequences

The Societal Marketing Concept

•Generating customer satisfaction based on:–Being market sensitive (sensitive

to target customers’ needs), and–Being considerate of societal well

being

•Goal: Improve life quality– Includes company’s social

responsibility

Ethics vs. Social ResponsibilityEthics vs. Social ResponsibilityBUSINESS

ETHICS

Moral principles and standards that guide behavior in the world of business

SOCIAL

RESPONSIBILITY

Obligations a business assumes to have for society, including economic, legal, ethical, and philanthropic

Corporate Social Responsibilities• Legal

– Play by the rules of the game

• Economic– Be profitable

• Ethical– Do what is right, just, and fair; avoid harm

• Philanthropic– Contribute resources to community; improve

quality of life

The Role of Leadership

•To encourage subordinates’ ethical behavior, good leaders:oEnsure that the firm’s mission

statement encourages ethical behavior & societal good as part of the mission

oCreate reward structures that allow & reinforce ethical behavior

oBehave ethically themselves (Do as I do; not Do as I say)

Differing Moral Philosophies• Deontology

– The action itself matters. No “gray” areas.

• Teleology– The outcome matters. Level of harm caused.

• Egoism– The outcome related to “ME” matters.

• Relativism– Everything is relative. All actions are moral or

immoral within their own context.

Potential Ethical Problem Areas

Usually grow out of a need to: do what is seen as necessary to compete, or to achieve value for stockholdersMay include:Paying bridesCharging exorbitant prices (price gouging)Taking unearned marketing allowancesPosing as a prospective customer to obtain competitive informationCreating an unfair advantage for one distributor over anotherPadding orders & shipmentsPromising more than can be delivered

Myths about Business Ethics• Ethics is a personal, individual affair.

– We do not operate in a vacuum.

• Business and ethics do not mix.– Business is a human activity.

• Ethics in business is relative.– Contradicts everyday experience. – I.e., just because this society practiced slavery, did that

make it right?

• Good business means good ethics.– Basically says that ethics do not provide solutions to

business problems.

Quick Ethical Tests

• Is it right / fair?

• Who gets hurt?

• What would you tell your child to do?

• Do unto others as you would have them do unto you.

• Use your intuition (gut-feel).

• Are the ends really worthwhile?

Crisis Management

• Ethical behavior intertwined with the occurrence & the management of crises

• Problems arise from less than stellar ethical choices or ethical conflicts

• A strong ethical theme in the company’s culture– Inoculates against crises–Resolves issues regardless of cause

Crisis Preparation

•Some crises can be avoided through careful preparation

•Some will still occur, but can be contained with foresight & good coping systems

•Some inevitably become crises, no matter how much preparation occurs

A Crisis Management Model

Layers of Pauchant and Mitroff’s Crisis Management Model

1.Character of the people in the organization

– willingness to take responsibility & take corrective action

2.Culture existing in the organization

– supports appropriate preparation & response actions

•Organizational structure

– crisis management structure in which all stakeholders are represented

•Plans and mechanisms for dealing with crises

– crisis management team has fully prepared plans, disseminated them, & trained people in key roles

Source: Thierry C. Pauchant and Ian I. Mitroff, Transforming the Crisis-Prone Organization: Preventing Individual, Organizational, and

Environmental Tragedies, (San Francisco: Jossey-Bass, 1992).

Layers of Pauchant and Mitroff’s Crisis Management Model

1.Character of the people in the organization

– willingness to take responsibility & take corrective action

2.Culture existing in the organization

– supports appropriate preparation & response actions

•Organizational structure

– crisis management structure in which all stakeholders are represented

•Plans and mechanisms for dealing with crises

– crisis management team has fully prepared plans, disseminated them, & trained people in key roles

Source: Thierry C. Pauchant and Ian I. Mitroff, Transforming the Crisis-Prone Organization: Preventing Individual, Organizational, and

Environmental Tragedies, (San Francisco: Jossey-Bass, 1992).

Crisis Preparation

1. Establish effective structures for planning & handling crises

2. Assess the elements of company’s operations that produce risks & reduce these risks

3. Plan procedures to follow as events occur

4. Inoculate (include or plan for) negative public attention that will occur during a crisis

Plan for Stages of a Crisis

• Organization goes through a preparation period if early signals are perceived

• If signals have not been picked up, crisis will be triggered by some event

• A period of intense activity & public scrutiny will ensue following the crisis

• The organization may take follow-up actions & may go through a period of serious learning

Media Relations During a Crisis

• Avoid wild speculation (by yourself & others)

• Give the media access

• Tell the truthTell the truth• Be proactive• Stay calm • Respond quickly, backed by effective action• Limit points of contact for consistent,

focused message• Company may have to accept blame, make

apologies, and “fix” things

Crisis Aftermath

• Begin repair of the company’s image (time consuming process)

• Thoroughly debrief & learn from experience

• Maintain ethical approach (image can be sustained/repaired if so)

• Reinforce management &/or employees that have done the right thing(s)

Federal Legislation to Protect Competition

• Sherman Act 1890– no monopolies

• Clayton Act 1914– no price discrimination

• FTC Act 1914– no unfair competition

• Wheeler-Lea 1938– no false advertising

• Robinson-Patman Act 1936– no price discrimination to resellers

To Protect the Consumer

• Meat Inspection Act 1906• Wool Products Labeling (1940): %

of wool• Cigarette Labeling (1965)• Truth in Lending (1968)• Consumer Product Safety (1972)• Nutrition Labeling and Education

Act (1990)

Regulatory Agencies

• FTC: no false/deceptive advertising• FDA: no harmful drugs/products• ICC: rates of interstate RR,

trucking – dissolved• STB: regulates motor carriers,

railroad• EPA: pollution• FCC: regulates wire, radio, TV

broadcasts