Important Definitions:

Marketing Ethics – Principles and standards that define acceptable marketing conduct as determined by various stakeholders

Social Responsibility – An organization’s obligation to maximize its positive impact and minimize its negative impact on society

Strategic Philanthropy  – The synergistic use of organizational core competencies and resources  to address key stakeholders’ interests and achieve both organizational  and social benefits

Codes of Conduct (Codes of Ethics) – Formalized rules and standards that describe what the company expects of its employees

Marketing Ethics Summary

The following is the full text from an article that appears in Harvard Business Review.   The important idea conceptualized in this article is that ethics is  much broader than often presented in the popular press articles. From an  organization’s point of view, proactive ethical behavior is  instrumental in long-term company performance, and in establishing  positive perceptions of the organization in the minds of consumers.

“Enron.  Wells Fargo. Volkswagen. It’s hard for good, ethical people to imagine  how these meltdowns could possibly happen. We assume it’s only the Ken  Lays and Bernie Madoffs of the world who will cheat people. But what  about the ordinary engineers, managers, and employees who designed cars  to cheat automotive pollution controls or set up bank accounts without  customers’ permission? We tell ourselves that we would never do those  things. And, in truth, most of us won’t cook the books, steal from  customers, or take that bribe.

But, according to a study  by one of us (Christopher) of C-suite executives from India, Colombia,  Saudi Arabia, the U.S., and the U.K., many of us face an endless stream  of ethical dilemmas at work. In-depth interviews with these leaders  provide some insight and solutions that can help us when we do face  these quandaries.

We  were surprised that 30 leaders in the study recalled a total of 87  “major” ethical dilemmas from their career histories. Over 50 had  occurred in the course of the last five years. Another surprise was how  few of the incidents were caused by bribery, corruption, or  anti-competition issues (only 16% of all ethical dilemmas mentioned).  More often the dilemmas were the result of competing interests,  misaligned incentives, clashing cultures.

Based  on this study and our collective experience of working with thousands  of business leaders, there are a number of obstacles and contradictions  we see most often impact the ability to act ethically:

• Business transformation programs and change management initiatives. Companies  can warp their own ethical climate by pushing too much change from the  top, too quickly and too frequently. Leaders in the study reported  having to implement staff reduction targets, dispose of big businesses  in major markets, and lead mergers and acquisitions. Some of these  activities included inherent conflicts of interest; others simply caused  leaders to have to act counter to their values (loyalty, for example).  Many leaders felt poorly prepared for the dilemmas they faced and felt  compelled to take decisions they later regretted.
• Incentives and pressure to inflate achievement of targets. People  do what they are rewarded to do, and most leaders are rewarded for  hitting targets. Take Wells Fargo as an example: Managers were rewarded for the number of accounts they opened and managed.  As a result, apparently, many felt driven to open accounts that  customers didn’t request or approve. The lure of incentives are a  problem in boardrooms too: Bonus payments and executive share schemes  are often based on short-term business metrics, which can be counter to  long-term success.
• Cross-cultural differences. Most  leaders in the study reflected on how rapidly their businesses had  globalized over the last 10 years and how ethical issues can be  profoundly difficult when operating across different cultures. They  talked about how challenging it was to decide whose cultural “rules”  were paramount when making business decisions. They gave examples like  closing a sales office in Japan, breaking a verbal promise made during  after-work drinks in China, or ignoring “sleeping” business partners in a  Saudi Arabian deal, all of which have cultural and ethical components.

While  these obstacles stand in the way of making ethical decisions, they  aren’t insurmountable. Here’s what we learned from the leaders in the  study about what worked for them in improving the ethical climate in  their organizations:

Know where you stand
The  senior leaders in the study told us that, in contrast to what corporate  compliance officers would like us to believe, their organizations’  codes of conduct and ethics training wasn’t particularly helpful when it  came to managing ethical dilemmas. Rules and regulations often don’t  cover the majority of ethical issues, especially those around people and  resource trade-offs. Even the law, they said, is limited as it’s  usually geared to big transgressions.

Instead,  you need to understand what matters to you. Companies become ethical  one person at a time, one decision at a time. If you don’t know where  you stand, or if you can’t accurately read your organization’s  underlying culture, you’ll find yourself blowing in the wind (at best). Emotional intelligence  can help you here. Self-awareness enables you to build and strengthen  that inner compass. Organizational awareness enables you to identify the  forces in your company’s culture and processes that could drive you and  others to do the wrong thing. You also need emotional self-control: it  takes courage to step away from the crowd and do the right thing.

Learn what really matters in your organization
To  be prepared to challenge the unwritten rules of your organization — and  the systems that support them — you need to learn to listen to weak  signals about what the organization truly values. There will usually be  lip service to doing the right thing, but what happens in practice? You  can, for example, pay more attention to:

• How people are paid. Does your compensation scheme reward the right things? Is the focus on short-term results or long-term sustainable success?  Are the right staff included? Long-term schemes should include shop  floor workers, supervisory staff, and different demographic groups. This  ensures that the entire workforce is focused on longer-term sustainable  goals.
• Who gets promoted and why.  Is there a true meritocracy in your company, or are certain people  treated better than others? Are people who reflect on ethical issues,  who speak up and challenge accepted ways of doing things, truly valued?  Perhaps people are promoted according to unwritten rules that will  ensure compliance with the status quo. In an ethical organization,  talent management is a transparent and objective process — everyone gets  a fair shake.
• How employees feel about the company. We  want to work for businesses we can be proud of. If your engagement  surveys show that people don’t trust managers, or that employees are  disengaged and ashamed of the company, you might have a widespread  ethical problem on your hands.

Build a strong and diverse personal network
According  to the study, the most useful resource that leaders have when faced  with an ethical dilemma is their own personal network. This provides an  informal sounding board and can highlight options and choices that the  leader may not have considered. When making ethical decisions, it’s  important to recognize that your way isn’t the only way, and that even  mandated choices will have consequences that you must deal with.

The  challenge is that most leaders have networks full of people who think  and act like them and many fail to seek out diverse opinions, especially  in highly charged situations. Instead, they hunker down with people who  have similar beliefs and values. This can lead to particularly dire  consequences in cross-cultural environments.

To overcome this, you need another core emotional intelligence competency, empathy,  which allows you to learn how to read others and truly understand what  matters to them and what they care about. This will, in turn, help you  connect with people and gather their thoughts, opinions, and help when  you need them.

Speak up
If,  after consulting your network, you believe something’s going wrong, it  may be time to be brave and speak up. Leaders in the study repeatedly  highlighted the positive consequences of speaking out and at least  trying to resolve their ethical dilemmas by remaining true to their own  personal values.

If  you find you need to speak up, there will be a number of choices to be  made. Do you talk to the boss? Consult with peers? Work with advisory  functions such as legal, compliance or human resources? You can draw on  your personal network for support and guidance on the right way forward  within the context of your unique situation.

The  leaders in the study were clear about the consequences of taking these  actions: increased self-respect, improved confidence in their ability to  address future dilemmas, and a more ethical work climate. And perhaps  more importantly, taking brave action made them happier at work.”

[McLaverty, Christopher, and McKee, Annie, (2016), “What You Can Do to Improve Ethics at Your Company,” Harvard Business Review, December 29, 2016.]

https://hbr.org/2016/12/what-you-can-do-to-improve-ethics-at-your-company

Discussion Point #1 – Discuss organizations that have attempted to bolster the ethical behaviors of their executives and managers.  

Discussion Point #2 – Also, attempt to identify organizations that have not been proactive in attempting to bolster ethical behaviors. 

Discussion Point #3 – Finally, what does your organization do to encourage ethical behaviors and actions?