1. Managing Ethics in a Sales Environment
Chapter 2
Managing Ethics in a Sales Environment
PowerPoint presentation prepared by
Dr. Rajiv Mehta
New Jersey Institute of Technology

2. Chapter Outline What Is Business Ethics?
Salespeople Are Boundary Spanners
Applying Professional Sales Codes of Ethics
Ethical Philosophies and Moral Judgments
Creating an Ethical Work Climate
Managing the Ethical Climate
Legal Considerations in the Sales Environment
Practicing Good Ethics Among the Sales Force

3. Learning Objectives
After reading this chapter, you should be able to do the following:
Define ethics and defend its importance to sales and sales management.
Show how salespeople are boundary spanners.
Apply a code of ethics to sales and sales management situations.
Apply the criteria for making moral judgments.
Create and manage an ethical climate.
Observe legal regulations that affect the sales environment.
Model good ethical behavior among the sales force.

4. Business Ethics, Sales, and Sales Management
Ethics describes the moral content of behavior.
Business ethics is the study of how businesspeople behave when facing a situation with moral consequences.
Sales management ethics is the specific component of business ethics that deals with ethically managing the sales function.
Source: S. Pearce/PhotoLink

5. Balancing Between Individual, Professional, and Organizational Values
Pressures
Individual ethics
personal integrity
moral values
social influences
Organizational ethics
profit
growth
survival
Professional ethics
professional standards
group goals
prestige

6. Customer Vulnerability1.
Vulnerability 3.
Powerlessness 2.
Ignorance
Consumer-directed
approaches
lack of some vital knowledge, often product knowledge, needed to participate in a fair exchange
lack of experience or the ability to conduct a transaction or negotiate terms of a fair deal
lack of either competition within a marketplace or sufficient assets with which to be persuasive

7. Types of Codes of Ethics
suggested by government agencies or other special interest groups
ethical boundaries for employees
ethical boundaries for occupational groups such advertisers, sales representatives, doctors, lawyers, and accountants
ethical boundaries for people engaged in the same line of business; e.g., Direct Selling Association of America

8. Moral Philosophy
Moral philosophy deals with the systematic ways that individuals recognize and resolve decisions having moral content. 1.
Idealism 3.
Teleology 2.
Relativism
Bases of
moral philosophy
Ideals are a set of principles by which individuals determine morality.
A moral absolute represents a rule that should always be applied with no exceptions or excuses.
Relativism is a process by which individuals reach moral decisions based more on the actions they perceive to be acceptable given a particular situation.
Teleology defines morality based on the consequences of the behavior that allows some indiscretion based on the argument that the “good” that results is more important than the harm caused.

9. Moral Judgments
A moral judgment is a person’s evaluation of the situation from an ethical perspective. 1.
Moral equity 3.
Contractualism 2.
Acceptability
Bases of
moral judgments
the inherent fairness or justice in a situation
how culturally or socially acceptable we perceive an action to be
the extent to which an act is consistent with stated or implied contracts and or laws

10. Unethical Sales Practices: Prohibited Actions
bribes, gifts, kickbacks
conflicts of interest
illegal political payments
violation of laws in general
use of insider information
violations of secrecy agreements
falsification of sales accounts
moonlighting
violation of antitrust laws
fraud and deception
illegal payments abroad
justifying the means by the intended end

11. Ethical Concerns in Selling and Sales Management

12. Employer Ethics with Their Salespeople
Compensation
prompt, accurate payment of salary, commissions, and bonuses as well as timely reimbursement of selling expenses
Sales territories
fair assignment of sales territories
Sales quotas
setting realistic achievable sales quotas
Hiring, promoting, and firing
sexism, racism, and ageism must not influence managerial decisions
Source: Digital Vision

13. Ethical Violations misusing company assets expense account padding
unauthorized use of company funds
personal use of company time
fabrication of sales records
manipulation of customer orders
cheating in sales contests
circumventing company policy
Au: The heading on this page does not match the list given, which is not a list of ethics, but rather ethical violations.
Source: Digital Vision

14. Ethical Violations Against Coworkers and Competitors
Treatment of coworkers
sexual harassment
stealing customers from colleagues
undermining coworkers
Treatment of competitors
disparaging competitors and their products or services
tampering with competitor's products
competitive snooping
Source: Digital Vision

15. Ethical Issues Regarding Treatment of Customers
special gifts
entertainment
over-promising
over-selling
misrepresenting, covering up the facts, or distorting the truth
manipulating order forms
disclosing confidential information
showing favoritism
conflicts of interest
Source: Digital Vision

16. Ethical Issues: Marketing Mix
Product quality and service
poor product quality
unsafe products
unreasonable return policies
poor after-sales service
Pricing
inflated list prices
not honoring pricing incentives
adding hidden costs

17. Ethical Issues: Marketing Mix
Distribution
using resellers that are aggressive, dishonorable, “fly-by-night” operators
using “bait and switch” strategies
Promotion
deceptive advertising
misleading product warranties
phony promotional contests
dishonest fundraising activities

18. Creating an Ethical Work Climate
standard business norms and regulations as defined by senior management
pressure employees feel to prioritize increased sales, profits, margins, or other financial returns over all other concerns
how far people are trusted to behave in a responsible way and are held personally responsible for their actions
the extent to which employees view coworkers as having high moral standards

19. Managing the Ethical Climate
Sales managers should be sure of the following:
that salespersons are aware of rules and policies
that salespersons are rewarded and reprimanded with no favoritism or bias
that an ethical climate is promoted at all levels of the sales organization
Source: Digital Vision

20. Legal Considerations in the Sales Environment: Federal Regulation Protecting Companies from Each Other
Laws that ensure that a competitive marketplace exists include the following:
Robinson-Patman Act
Sherman Antitrust Act
Clayton Act
Source: Hisham Ibrahim

21. Federal Regulation Protecting Companies from Each Other1.
Price
discrimination 3.
Price fixing 2.
Collusion
Laws protect firms
against
Price discrimination consists of favoring different customers on price or terms of sale when the discrimination has a harmful effect on competition.
Price discrimination is allowed under two conditions:
(a) The price differential is given in good faith to meet a price offered by a competitor.
(b) The price differential is based upon cost savings stemming from quantities in which products are sold or delivered.
Collusion occurs when competitors conspire to set prices, agree to divide territories on a noncompetitive basis, or join together to act to the detriment of another competitor.
Competitors who conspire to set or maintain uniform prices and profit margins are fixing prices.

22. Federal Regulation Protecting Companies from Each Other
Exclusive dealing consists of agreements in which a manufacturer or wholesaler grants one dealer exclusive rights to sell a product in a certain trading area or insists that the dealer not carry competing lines.
Tie-in sales occur when purchasers are forced to buy an unwanted item or items in return for being allowed to purchase a product in heavy demand.
Competitors colluding to divide a market into noncompetitive territories or to restrict competition in a market are in restraint of trade.
Reciprocity consists of selecting only suppliers who will also purchase from the buyer—“Buy from me and I’ll buy from you.”

23. Federal Regulation Protecting Companies from Each Other
Companies may not misrepresent delivery dates, fail to actually fill an order, or not fill an order in a reasonable time.
Terms of sale include warranties and guarantees, the ability of the buyer to cancel a contract or obtain a refund.
Unordered goods are goods that are not ordered but shipped along with an existing order in hopes that the buyer will pay for them.
Salespeople must never misrepresent the company’s financial strength, length of time in business, or reputation, nor may they misrepresent facts concerning its plant, equipment, or facilities.
Salespeople must not misrepresent the way a product is produced (e.g., claim that mass-produced products are custom-made.)

24. Federal Regulation Protecting Companies from Each Other
13. Business
Defamation
12.
Customer
coercion
Laws protect
against
Business slander
Business libel
Product disparagement
Unfair competition
Placing undue pressure, intimidation, or fear on the buyer into a sale is illegal.

25. Legal Considerations in the Sales Environment: Federal Regulation Protecting Consumers from Companies
U.S. legislation protecting consumers and society from unfair business practices includes the following:
Fair Packaging and Labeling Act
Consumer Goods Pricing Act
Nutrition Label and Education Act
Au: The first two bullet points on this page are the same.
Source: David Buffington

26. State and Local Regulation
State and local laws that regulate selling activities include the following:
Uniform Commercial Code, which regulates the performance of goods, sellers’ warranties, and the maximum allowable rates of interest, misrepresentations, and promises not kept
Green River Ordinances, which requires nonresidents to obtain a license from city authorities to sell goods or services direct to consumers in that vicinity
Cooling-Off Rules, which requires door-to-door salespeople to give written notice to customers placing orders of $25 or more that they can cancel their purchase within three days
Source: Hisham Ibrahim

27. Ethics and Regulation in International Sales
In international negotiations, salespeople must not confuse varying ethical standards with the U.S. and foreign laws governing their activities.
In planning to sell products or services to a foreign country, sales representatives should contact the commercial attaché at the U.S. embassy for information on legal requirements in conducting business there.
Source: Jack Star/PhotoLink
Source: Jack Star/PhotoLink

28. Practicing Good Ethics Among the Sales Force: Maintaining a Positive Ethical Climate
Understanding ethics
Salespeople reach ethical maturity when they place the moral treatment of others ahead of short-term personal gain.
Measuring the ethical climate
Monitor the ethical climate with surveys.
Leading by example
A positive, healthy, and moral ethical work climate begins at the top with sales management.
Sales manager ethics checklist
Source: Triangle Images

29. Sales Manager Ethics Checklist
Will the action I take diminish the value of the product we are selling?
Will the action I take result in inequitable or disrespectful treatment of a salesperson?
Will this action place a greater emphasis on sales or profits than on the ethical treatment of the customer?
Will my action, either intentionally or unintentionally, motivate a salesperson to treat someone unethically?
Would I be comfortable telling my children about the way I acted in this situation?
Source: © Jack Hollingsworth/Corbis

30. Ten Ethical Commandments for Sales Managers and Salespeople
For an interesting article on the ten commandments of sales ethics, see
Peruse the Direct Selling Association’s code of ethics at
Au: The first link on this page does not work.

31. Ethical Situation: What Would You Do?
Discussion Question:
It’s Friday night and your family car has just broken down. You promised your wife that you would take her to her high school reunion about 200 miles away this weekend. The company car assigned to you as a sales manager is parked in the company parking lot, so you’re considering using it for the high school reunion trip. No one at work will know that you used the company car for pleasure since you often pick the car up early on Monday mornings in case you have to accompany any of your salespeople to make sales calls.

32. Ethical Situation: What Would You Do?
Discussion Question:
Your salesperson just signed a contract with a hard bargaining customer who has never bought from your company before. You, as a sales manager, are pleased to have finally sold this potentially large account after trying for two years. But, the sales agreement price leaves your company with virtually no profit on the deal because a major part of the contract requires your company to provide a high level of expensive monthly customer service. You’re wondering whether you should recommend to the company’s customer service people to just cut back on the quality and quantity of service provided this customer, so the deal will become profitable.