Business Ethics

Corporations Today

Corporations, by charter, are immortal. Corporations have multiple relationships

that they are unlikely to keep secret very long.– www.sec.gov/edgar.shtml

For media companies revenue depends on:– Advertisers– Partners– Subscribers

Advertisers

Large advertisers/partners such as Verizon, P&G, and Coca-Cola will be around for decades.– As will their agencies– As will their consumers

It’s not smart business to bite the hands that will feed your company for the next several decades.

Don’t lie to them or cheat them.– Advertisers/partners/subscribers/consumers don’t

buy from companies they don’t trust

Current Headlines

The press loves stories about corporate dishonesty.– Enron– WorldCom– Ogilvy & Mather over-billed the government’s Office

of National Drug Control.– Five bankers fired from Barkley Bank for spending

$62,200 on dinner – for themselves.– Bear Stearns hedge fund managers lied to investors.– Bernie Madoff– Goldman Sachs

What’s Going On?

People perhaps don’t know or don’t care about business standards or ethics.– Put their interests first.

People are perhaps greedy. People perhaps go along with unethical

behavior because:– “If I don’t take their money someone else will.”– “No one will know.”

Rationalization

Criminals and other sociopaths typically rationalize their behavior with “if I don’t take their money, someone else will.”

A salesperson for a major media company forged a client’s name on a contract, but got caught when the client got a bill and said, “We didn’t sign anything!” – The salesperson thought “no one will know; I

won’t get caught.”

Three Reasons

There are many reasons for unethical behavior, but three common ones are:– Strong tendency to bow to authority and follow

orders: “just following orders.”– Strong tendency to do what peer group does—

social pressure and conformity: “everyone does it.”

– An absence of clearly defined and communicated standards: “nobody told me.”

Bow to authority. People give up their individual free will and autonomy

and turn their conscience over to someone else.- Nazis at Nuremburg trials said, “just following orders.”

Cave in to peer pressure in order to conform. People negate their free will and autonomy and hand

over their individuality to the crowd.- Individuals have a conscience, the crowd, a mob, doesn’t

There is an absence of standards. Organizations must create and communicate ethical

standards to trump the “nobody told me” copout.- We all know what we’re supposed to do.

Why the Ethical Lapses?

Sociopath, narcissist, excessive greed, or other personality disprders?

Perhaps due to extreme pressure from management?

Perhaps because of an absence of clearly defined and communicated standards or a code of ethics?

Ethics - Definition

Clearly defined standards of right and wrong set out by written codes or standards by a company

Individual standards of right and wrong based on:– Deep-seated personal values– Accepted beliefs and modes of conduct by

groups in which people choose to work and play

With heightened press coverage of business scandals…

The public has become increasingly concerned about ethical behavior…

Now, more than ever is the time to follow Peter Drucker’s sage advice…– “It is more important to do the right thing than

to do things right.”

Five Areas of Ethical Responsibility

1. To consumers– Definition of consumers

Customers buy a product or service. Consumers use a product. In some businesses (retail, utilities, transportation,

e.g.) the customer and the consumer are the same In other businesses (CPG, media, e.g.) they are

different Audience/readers/subscribers = consumers Advertisers = customers

Five Areas of Ethical Responsibility

To consumers (audience/partners/subscribers)– Put consumers first.– Don’t lie to them.– Don’t sell them shoddy products.– Don’t sell unsafe products.– Don’t accept advertising for products you

wouldn’t recommend to a relative.– Don’t invade their privacy with out clearly

notifiying them.

Five Areas of Ethical Responsibility

2. To your conscience– Doing what’s right according to one’s own

moral standards.– “There is no pillow as soft as a clear

conscience.”– Doing the right thing increases self-esteem,

self-image, and self-confidence.– Greed is a cancer that will kill a person’s and a

company’s reputation and eventually will kill the organization.

Innovator’s dilemma

– Some people are unethical because they believe they won’t get caught.

The ring of Gyges– But they are playing an ethical lottery with the

odds of losing extremely high.– Doing the right thing every business day is the

only sure way of not getting caught and of maintaining a reputation and the self-esteem that goes along with an excellent reputation.

Five Areas of Ethical Responsibility

3. To customers– Customers (advertisers) don’t buy from people

and companies they don’t trust.– Thus, “under-promise and over-deliver” to gain

trust– A media company shouldn’t sell advertisers:

Something they don’t need Something they can’t afford Something that doesn’t work

– E.g. Telling them banners will generate lots of clicks

– A media company shouldn’t accept advertising: That is in bad taste That hurts a customer’s image That is misleading

– A media company shouldn’t: Give kickbacks Use bait-and-switch tactics Let customers feel like they lost a negotiation Reveal information before a campaign runs or reveal

competitive information Give away or sell customer data unless customer gives

permission

– A media company shouldn’t: Promise what advertising itself cannot deliver.

– The media can deliver potential exposure to an audience– Can’t promise results – too many uncontrollable factors

Promise privacy if it can’t deliver Promise anything it can’t deliver:

– Promotions– Merchandising– Tickets– Position– Placements– Completion of schedules– Results

Five Areas of Ethical Responsibility

4. To the community– The global community

The world community, society “Do no harm” “Suppose everybody in the world did this?”

– The business community To maintain faith in the free-market system Investors, regulators, general public “Suppose everybody in business did this?”

Five Areas of Ethical Responsibility

– The industry community The advertising-supported media

– Americans get their news and often their values, beliefs, and attitudes from the media.

– The traditional media altered people’s view of the world because they were free of government control.

– The media have a responsibility to keep itself free by fueling it in part or in whole with advertising and/or subscriptions.

– Out of government control

– The local community Don’t foul your nest or cheat your neighbor. Broadcasters get licenses to serve the community.

Five Areas of Ethical Responsibility

5. To the organization/company– Anyone who represent an

organization/company to customers, especially with intangible products such as the media, becomes a surrogate for a company’s product.

– That representative is the company in the eyes of customers.

– Thus, a company’s credibility and reputation depend on the credibility of any person or any communication that represents that company.

CEO, salesperson, website, press release.

Company incentives often unwittingly reinforce doing the wrong thing:– Compensation and incentive systems often

reward generating revenue or “shareholder value” regardless of what is best for customers.

– Bonuses for making budgets regardless of what is reasonable can cause unethical practices.

CFOs or top management sometimes recommend accounting practices that “preserve a company’s assets.” Too often they have the wrong assets in mind.

A company’s most precious asset is an excellent reputation.

Protect a reputation by always doing the right thing.– Especially with online data

The Ethical Hierarchy

The Five Cs– Consumers– Conscience– Community– Customers– Company

Ethics Check

Is it legal?– Laws– Regulations– Company policy

Is it fair?– To both sides– To all stakeholders

Is it true to my conscience?

Ethics

The new golden rule– Do unto customers as they would have others

do unto them. Do what they want, not what you might want.

Kant’s categorical imperative– Act on the premise that the choices you make

will become universal law – for all people for all time.