Unit 2

Ethics in Marketing , Finance and HRM

Jyostna Jain
 Ethics in Marketing

 Ethics in Marketing

 Ethical issues in Marketing Mix

 Unethical Marketing Practices in India

 Ethical Dilemmas in Marketing

 Ethics in Advertising

 Types of Unethical Advertisements

Factors Influencing Ethics in Marketing

Organization
Morals
culture

Commitment Personal
of employees values
 Ethical issues in Marketing

Stereotyping
 Marketing campaigns often cast particular groups in stereotypical roles, such as washing
powder advertisements that show women as housewives preoccupied with their laundry, or
do-it-yourself marketing that seldom portray anyone other than men as being “handy.”
 In addition, the stereotypical impression created by much commercial marketing is that
having an abundance of possessions will lead to fulfillment and happiness, but the
opposing message is that the consumer will not be part of the happy group if he does not
purchase the product.
 Subliminal messaging
 Inserting subliminal messages in marketing material is an effort to
manipulate the thinking of the consumer.
Example:Assume that there is a customer, who has not experienced Starbucks before, walking around the
street. There are two different coffee shops one of them is Starbucks the other one is any coffee shop.
The same coffee is sold in both of them but customer usually choose to go Starbucks.
Why? Because there are many things that affects on customer brain like the beautiful coffee smell that is
blowed to the street knowingly or the logo of starbucks includes sexual object.
So Starbucks has a big market value now, they sell millions of coffees.
Of course the economic strategies are playing a big role in that success but we cannot ignore subliminal
advertising’s effect
 Exploiting Social Paradigms

 Cultural and ethnic sensitivities may cause certain groups to find some types of marketing
offensive. For example, marketing for a luxury car that shows the driver as a man who is
able to charm an attractive woman makes a number of social statements that could offend.
 These include the suggestion that a woman only cares about financial success, the idea that
a man needs a luxury car to attract the woman of his dreams, and the promise that if the
consumer buys such a car, he will immediately become desirable.
 Vulnerable Audiences

 In the same way that the use of racial or ethnic groups in advertising can serve to
stereotype them, the absence from using these groups in marketing in a multiethnic society
can create image and identity problems among those that are excluded.
 Marketing aimed at children, in particular, is fraught with the risk of causing ethical
implications. The targeting of children with fast food and unhealthy snacks can lead
children to not want to eat anything else and result in childhood obesity.
 Post-Purchase Dissonance

 What you see is often not what you get. Post-purchase dissonance occurs when the
consumer buys something marketed through mail order, for example, and finds on receipt
of the goods that the quality is inferior to his expectations.
 He can usually return the product for a refund, but the marketer counts on the fact that
sending the item back and incurring the cost of postage and insurance may cause buyers
not to bother.
 Ethical Dilemmas in Marketing

Invasion of Privacy
 Actions that unknowingly infringe on the privacy of social networking participants should be
considered unethical if it potentially harms an individual’s personal and professional credibility.
 This would include any non-permissive approaches taken by a marketer to disclose profile information
as well as the sharing of sensitive personal information through channels that could exploit or
otherwise harm the individual’s standing.
 A questionable area to consider when evaluating social media ethics is the role of behavioral targeting.
Consider the ways advertisers track where you shop and browse from “click-through” behaviors used
in retargeting campaigns
 . An assumption here is that ad viewers will appreciate the the improvement in message relevance.
 Spamming
 Over-promoting unsolicited messages is often viewed as unethical given the manner in which
messages are broadcasted.
 Users are often deceived through a trail of spamming Twitter and Facebook links.
 The unwanted messages often clutter up opportunities for more useful information.
 Public Bashing
 Publicly disparaging others (e.g., your competition) in your social media dialogs is typically
considered unethical.
 Such negative sentiment can quickly go viral without permitting fair rebuttals.
 These defenseless attacks will not only damage your reputation, they run the risk of libelous lawsuits
if not properly founded.
 Dishonesty and Distortions
 At the core of social media intentions is transparent communication.
 Dishonest claims or untruthful derogatory comments can jeopardize the long-term reputation of your
company with an uncontrollable number of message recipients.
 This issue has become especially contentious with the trend towards native ads.
 Although the FCC is likely to step into the arena, brand publishers have essentially been given a green
light on disguising their ad content as publishing content.
 Distorted Endorsements and Improper Anonymity
 A similar ethical violation involves the misrepresentation of your credential, affiliations and expertise.
 Many once reputable companies have been severely damaged with fake stories of consumers using
their products. i.e., What may appear to be an anonymous testimony is instead backed by a voice with
a vested interest in the sponsor.
 Any practice of hiring folks to comment favorable or fabricate a story about your company’s offerings
should be considered unethical.
 In a similar vein, overly aggressive employees have been found guilty of exaggerating competitive
shortcomings. This activity is especially harmful if it catches the parent company off guard.
 Misuse of Free Expertise and Contests
 With the growing use of Facebook contests and crowdsourcing for soliciting design ideas, contest
participants run the risk of divulging their secrets with no reward.
 Oftentimes, design ideas are rewarded to the most profitable partners of the social network sponsor
leaving many with unrewarded work.
 This abuse is especially unethical if the sponsor knowingly gathers superior design ideas from
contestants they have no intention of compensating.
 Ethical Issues in Marketing Mix

PRODUCT
 Consumer safety
 Product liability and reliability
 Designing for special needs
  PACKAGING
 Label information
 Packaging graphics
 Packaging safety
 Environmental implication of packaging
  PRICE: SECOND P OF MARKETING
 Bid rigging is a form of fraud in which a commercial contract is promised to one party even
though for the sake of appearance several other parties also present a bid. This form
of collusion is illegal in most countries. It is a form of price fixing and market allocation, often
practiced where contracts are determined by a call for bids, for example in the case of
government construction contracts.
 Price skimming
 Predatory pricing: the pricing of goods or services at such a low level that other firms cannot
compete and are forced to leave the market.
 Price war: a period of fierce competition in which traders cut prices in an attempt to increase
their share of the market.
 Dumping: is the act of charging a lower price for the like product in a foreign market than the
normal value of the product, for example the price of the same product in a domestic market of
the exporter or in a third country mark
 Product distribution
 (or place) is one of the four elements of the Marketing MIX.
 Distribution of product or service is transporting them from manufacture to stockiest, wholesalers,
retailer and then to consumers.
 ETHICAL ISSUES IN DISTRIBUTION
 Ethical questions may also arise in the distribution process.
 Because sales performance is the most common way in which marketing representatives and sales
personnel are evaluated.
 performance pressures exist that may lead to ethical dilemmas. For example: pressuring vendors to
buy more than they need and pushing items that will result in higher commissions are tempt
 Promotion
 It is one of the four elements of marketing mix (product, price, promotion, place). It is the
communication link between sellers and buyers for the purpose of influencing, informing,
or persuading a potential buyer's purchasing decision.
 • To present information to consumers as well as others
 • To increase demand
 • To differentiate a product
 Ethical Issues in Advertising

 Puffery
 Advertising to Children
 Promoting Unhealthy Products
 Subliminal Advertising
 Deceptive Advertising
 Ethics in finance

 When you think about it, you realize that you put your hard-earned savings in the care of
financial firms – asset managers, banks, insurance, and all kinds of funds – and you trust
them to look after the money.
 You want the best return, but there is a balance between risk and reward.
 You need to feel confident that you can trust the finance professionals to act with integrity,
in your interests.
 Financial Sector in India

 REGULATORS: RBI, SEBI, FMC, IRDA, PFRDA, MoF, HLCC

 MARKETS: Commodities, equities, debt , foreign exchange
 PLAYERS :Brokers, firms, banks, financial institutions, FII ,mutual fund managers,
investors, exchanges, depositories, custodians, registrars
 Ethical Violations

Insider trading:Insider trading is the trading of a corporation's stock or other securities (e.g. bonds or
stock options) by individuals with potential access to non-public information about the company
• Such a trade is motivated by the possibility of generating extraordinary gain with the help of nonpublic
information (information not yet made public). It gives the trader an unfair advantage over other traders in
the same security.

Stakeholder interest V/s stockholder interest:Shareholders hold shares in the company – that
is they own part of it.Stakeholders have an interest in the company but do not own it (unless they are
shareholders).
Often the aims and objectives of the stakeholders are not the same as shareholders and they come into
conflict. The conflict often arises because while shareholders want short-term profits, the other
stakeholders’ desires tend to cost money and reduce profits. The owners often have to balance their own
wishes against those of the other stakeholders or risk losing their ability to generate future profits (e.g. the
workers may go on strike or the customers refuse to buy the company’s products).
 Suggestions for Ethical Practice in Organizations

 Cultural change
 Codification
 Education and Training to employees
 Monitoring and adjudication
 Code of Conduct for Financial Managers

 He should act with honesty and integrity,avoiding actual or apparent conflicts of interest in personal
and professional relationships
 He must disclose information to all relevant consituents,both positive and negative,that is necessary tp
present an accurate picture of financial status and to ensure the effective running of business.
 He should comply with rules and regulations of central,state,provincial,local government and other
appropriate private and public regulatory agencies.
 He should act in good faith,responsibly,with due care,competence and diligence,without
misrepresenting material facts or allowing independent judgement to be subordinated.
 He should achieve responsible use of and control overall assests and resources employed by or
entrusted to him.
 He must respect the confidentiality of information acquired in the course of his work
 Whistle Blowing

 Whistle blowing in its most general form involves calling(public)attention to wrong doing,
typically in order to avert harm. Whistle blowing is an attempt by a member or former
member of an organization to disclose wrong doing in or by the organization.
 Kinds of Whistle Blowing

 Internal Whistle blowing is made to someone within the organization.

 Personal Whistle blowing is blowing the whistle on the offender, here the charge is not
against the organization or system but against one individual.
 The impersonal, External Whistle Blowing.Rarely whistleblower are honored as
heroes by their fellow workers, for the following reasons:
• Those did not blow the whistle guilty of immorality.
• They doubt the loyalty of the whistle blower to the employer.
• The whistleblower is perceived as a traitor, as someone who has damage the firm -
the working family to which he/she belongs.
 CRITERIA FOR JUSTIFIABLE
WHISTLEBLOWING
According to Richard T De George there are three conditions that must hold for whistle-
blowing to be morally permissible, and two additional conditions that must hold for it to be
morally obligatory. The three conditions that must hold for it to be morally permissible are:
1. The firm through its product or policy will do serious and considerable harm to the public,
whether in the person of the user of its product, an innocent bystander, or the general public.
2. Once an employee identifies a serious threat to the user of a product or to the general
public, he or she should report it to his or her immediate superior and make his or her moral
concern known. Unless he or she does so, the act of Whistle blowing is not justifiable.
3. If one's immediate superior does nothing effective about the concern or complaint, the
employee should exhaust the internal procedures and possibilities within the firm. This usually
will involve taking the matter up the managerial ladder, and if necessary and possible to the
board of directors.
 Ethics in Taxation

 Tax evasion is an illegal practice where a person, organization or corporation intentionally

avoids paying his true tax liability. Those caught evading taxes are generally subject to
criminal charges and substantial penalties. To willfully fail to pay taxes is a federal offense
under the Internal Revenue Service (IRS) tax code.

 Tax avoidance is the use of legal methods to modify an individual's financial situation to
lower the amount of income tax owed. This is generally accomplished by claiming the
permissible deductions and credits. This practice differs from tax evasion, which uses
illegal methods, such as underreporting income to avoid paying taxes.
 Corporate Crimes

 Corporate crime is a crime committed by a corporation or business entity or by individuals who are
acting on behalf of a corporation or business entity.
 However, a corporate crime can also be committed by someone who is employed by a corporation if
the crime benefits the organization.
Types of corporate crimes

Violence against
workers

Violence against
False Advertising
consumers

Corporate
Price fixing
pollution
 White Collar Crime

White collar crimes are criminal acts that are performed by people in the course of business committed
for financial gain. These types of crimes can cost citizens millions of dollars!
These crimes are difficult to prosecute because they often involve sophisticated systems and even many
different people.
 Types of White Collar Crimes

 Bank Fraud
 Blackmail
 Bribery
 Cellular Phone fraud
 Computer Fraud
 Credit Card Fraud
 Extortion
 Insider Trading
 Insurance Fraud
 Role of SEBI in ensuring Corporate Governance

 SEBI sets governance standards in which the securities market must operate, protecting the
rights of issuers and investors.
 SEBI has power to investigate circumstances where the market or its players have been
harmed and can enforce governance standards with directives.
 An appeal process in place ensures accountability and transparency.
 SEBI may terminate from the securities list any company that does not comply with its
governance standards and regulations.
 Cadbury Committee Recommendations

 The boards of all listed companies should comply with the code of best practice set out by the
committee.
 As many companies as possible should aim at meeting its requirements.
 The listed companies reporting in respect of years ending on or after 31 December, 1992, should make
a statement about their compliance with the code in the report and accounts and give reasons for any
areas of non-compliance.
 Companies should publish their statement of compliance only after they have been the subject of
review by the auditors.
 The Auditing Practices Board should consider the extent and form that an endorsement by the auditors
could take.
 Ethics in Human Resource Management

 Human Resource Management is the systematic and effective management of people to achieve the
desired objectives.
 To gain a strategic edge, it is very important to manage the 'people' resources productively.
 This will help to attain the strategic goals as well as the satisfaction of the individual employee needs.
 All the Human Resource practices are based on ethical foundation.
 It is the responsibility of the employers to maintain health and safety of their employers in the
workplace.
 Importance of Workplace Ethics

 Protects Fundamental Rights:When companies and workers think of workplace ethics, they typically
think about protection against immoral behavior and illegal activity on the job. But workplace ethics also
provide protection of basic human rights in the office worldwide.
 Protects Company Assets:Workplace ethical standards protect the company from employees stealing
property and falsifying documents, such as expense reports.
 Provides Emotional Security:Workplace ethics provide emotional security because employees can go to
work knowing other workers won’t harass them, their supervisors will respect both them and their work and
their co-workers will reap disciplinary measures if they steal supplies or equipment or falsify company
records.
 Promotes teamwork:workplace ethics programs align behaviors of workers with the values of their
employers. This “meeting of the minds” fosters an atmosphere of openness, trust and partnership, all of which
are critical for team building.
 Fosters Positive Public Image:High ethical standards in your workplace let such “outsiders” know
that you will use their money as you’ve stipulated and that they will see the end results of their contributions.
 Role of Management in Inculcating Workplace
Ethics
 Act as a source of inspiration for the employees
 Lend a sympathetic ear to problems of employees
 Release employees when they feel to
 Need to motivate the employees
 Constant Communication about the code of conduct
 Careful while recruiting potential employees
 No employee should be given special treatment
 Importance of Employee Code of Conduct

 Focuses on expected ethical Behaviour

 Emphasis on Laws and rules
 Better Inter action
 Image
 Relationships
 Measures to improve Ethical Conduct of Business

At organizational level At Society Level At government Level

Investors participatory
Independent rules of Behaviour Proper implementation of Laws
Programs
Abolition of outdated
Motivational Factors Consumer Forum
Requirements
Rapid Actions Against
Guest lectures Role of media
Criminals
Felicitation of Social
Workshops and seminars Role of NGO
Reformists

Review and Feedback Use of legal Weapons

 Cash and
Compensation
plans
Employment Employee
issues Resposibility

Ethical issues in HR

Safety and Health Performance

Appraisal

Race and
Privacy issues
disability
 Ethical Leadership

 Ethical leadership is exhibiting morals and values in a management position. An ethical leader
demonstrates character, morals, and virtue in their work, focusing on the needs and rights of their
employees.
 An ethical leader demonstrates appropriate and professional behavior for his or her team.
 For instance, a leader who lies, avoids responsibility, or does as little as possible in his own job is not
demonstrating ethical behavior. His team will not respect him.
 Unless their personal code of conduct causes them to be ethical, employees will exhibit the same
unethical behaviors as the manager.
 Ethics can also be exhibited when working with clients and vendors. An ethical manager is honest and
straightforward with everyone he or she deals with, not just employees.
 Ethical Leadership Characteristics

 Justice
 Respect others
 Honesty
 Humane
 Focus on Team Building
 Encourages initiative
 Leadership
 Value Awareness