COMM6265

Business Ethics and Communication

Week 10

Ethics in Consumer Protection and Community

Relations
 Ethics in Consumer Protection
and Community Relations

1. The Rights of Consumers

2. Self-Advocacy for Consumer Interests
3. Using the Courts and Product Liability
Laws
4. Positive Business Responses to
Image(s) Consumerism
Area 5. The Business – Community
Relationship
6. Community Relations
 Ethics in Consumer Protection
and Community Relations
On successful completion of this course,
 LO2: Each student should be able to identify ethical dilemmas and
problems that arise in business from stakeholders’ perspectives that
presented through examples and case studies.
 LO3: Each student should be able to apply ethical and professional values
to dilemmas and problems to pursue good and ethical corporate
governance.
The Rights of Consumers
 Five Rights of Consumers

• The right to be informed

• to be protected against fraudulent, deceitful, or grossly misleading
information, advertising, and labeling, and to be given the facts to
make an informed purchasing decision.
• The right to safety
• to be protected against the marketing of goods that are hazardous to health
or life.
 Five Rights of Consumers
• The right to choose
• to be assured, wherever possible, access to a variety of products and services at
competitive prices; and in those industries in which competition is not workable
and government regulation is substituted, to be assured satisfactory quality and
service at fair prices.
• The right to be heard
• to be assured that consumer interests will receive full and sympathetic
consideration in the formulation of government policy and fair and expeditious
treatment in the courts.
• The right to privacy
• to be assured that information disclosed in the course of a commercial
transaction, such as health conditions, financial status, or identity, is not shared
with others unless authorized.
Self-Advocacy for Consumer
Interests
Four Methods of Protecting Consumers
 Consumer Movement

• The increasing complexity of economic life has led to

organized, collective efforts by consumers to safeguard their
own rights in many nations.
• These organized activities are usually called consumerism
or the consumer movement.
 Reasons for the Consumer Movement

• The consumer movement exists because consumers want to

be treated fairly and honestly in the marketplace.
• Consumers may be harmed by abuses such as unfairly high
prices, unreliable and unsafe products, excessive or
deceptive advertising claims, violations of privacy, and the
sale of products that may be harmful to human health.
 Additional reasons for the consumer movement

• Complex products have enormously complicated the choices

consumers need to make when they shop.
• Services, as well as products, have become more specialized and
difficult to judge.
• When businesses try to sell either products or services through
advertising, claims may be inflated, or they may appeal to emotions.
• Technology has permitted businesses to learn more than ever about
their customers — potentially violating their privacy.
• Some businesses have ignored product safety.
Product Liability Laws
 Product Liability
• The term product liability refers to the legal responsibility of a firm for
injuries caused by something it made or sold.
• Consumer advocates and trial attorneys have generally supported
these legal protections, saying they are necessary both to compensate
injured victims and to deter irresponsible behavior by companies in
the first place.
 Strict Liability
• Under the doctrine of strict liability, courts have held that
manufacturers are responsible for injuries resulting from use of their
products, whether or not the manufacturers were negligent or
breached a warranty. That is, they may be found to be liable, whether
or not they knowingly did anything wrong.
• Consumers can also prevail in court even if they were partly at fault
for their injuries.
 Product Liability Reform and Alternative
Dispute Resolution
• One approach to settling disagreements between companies and
consumers, other than going to court, is alternative dispute
resolution (ADR).
• ADR can take the form of mediation, a voluntary process to settle
disputes using a neutral third party, or arbitration, the use of an
impartial individual to hear and decide a case outside of the judicial
system.
Positive Business Responses to
Consumerism
 Managing for Quality

• Quality management refers to all the measures an organization takes to assure

quality. These might include:
• defining the customer’s needs
• monitoring whether or not a product or service consistently meets these needs
• analyzing the quality of finished products to assure they are free of defects, and
• continually improving processes to eliminate quality problems.
• Taking steps at all stages of the production process to ensure consistently high
quality has many benefits.
• Responsible businesses know that building products right the first time reduces
the risk of liability lawsuits and builds brand loyalty.
 Voluntary Industry Codes of Conduct

• Businesses in some industries have banded together to agree on

voluntary codes of conduct, spelling out how they will treat their
customers.
• This action may be taken to forestall even stricter regulation by the
government.
 Consumer Affairs Departments

• The consumer affairs officer typically manages a complex network of contacts

with customers.
• The contact infrastructure usually includes a website with a self-service
component; many sites are interactive, allowing customers to post comments or
questions that are answered electronically by customer relations staff.
• Most companies also host a call center, using an interactive voice response
system that leads callers to an appropriately trained customer service
representative.
 Product Recalls

• A product recall occurs when a company, either voluntarily or under

an agreement with a government agency, takes back all items found
to be dangerously defective.
• Wherever they are in the chain of distribution or use, the
manufacturer tries to notify consumers or potential users about the
defect.
The Business–Community
Relationship
 Community
• The term community refers to a company’s area of business
influence.
• Traditionally, the term applied to the city, town, or rural area in which
a business’s operations, offices, or assets were located.
• Today the term community may also refer not only to a geographical
area or areas but to a range of groups that are affected by an
organization’s actions, whether or not they are in the immediate
vicinity.
The Firm and Its Communities
What the Community and Business Want from
Each Other
 The Business Case for
Community Involvement
• The term civic engagement describes the active involvement of
businesses and individuals in changing and improving
communities.
• Civic means pertaining to cities or communities, and engagement
means being committed to or involved with something.
• The ideas of corporate social responsibility and citizenship,
introduced refer broadly to businesses acting as citizens of
society by behaving responsibly toward all their stakeholders.
 License to Operate

• Another specific reason for community involvement is to win

local support for business activity.
• Community sometimes object to the presence of companies
that will create too much traffic, pollute the air or water, or
engage in activities that are viewed as offensive or
inappropriate.
• A company must earn its informal license to operate—or
right to do business—from society.
 Social Capital

• Community involvement by business also helps build social

capital.
• Social capital has been defined as the norms and networks
that enable collective action.
• Scholars have also described it as the goodwill that is
engendered by the fabric of social relations.
Community Relations
 Community Relations

• The organized involvement of business with the community is called community

relations.
• Some corporations have established specialized community relations or community
affairs departments; others house this function in a department of corporate citizenship
or corporate responsibility.
• The job of the community relations manager (sometimes called the community
involvement manager) is to interact with local citizens, develop community programs,
manage donations of goods and services, work with local governments, and encourage
employee volunteerism.
• These actions are, in effect, business investments intended to produce more social capital
—to build relationships and networks with important groups in the community.
 Several specific ways of businesses and
community relations dept.
• Economic Development
• Housing
• Aid to Minority, Women, and Disabled Veteran-Owned Enterprises
• Disaster, Terrorism, and War Relief