Business Ethics

Corporations Today Corporations, by charter, are immortal. Corporations have multiple relationships that they are unlikely to keep secret very long. – 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 Its not smart business to bite the hands that will feed your company for the next several decades. Dont lie to them or cheat them. – Advertisers/partners/subscribers/consumers dont buy from companies they dont trust

Current Headlines The press loves stories about corporate dishonesty. – Enron – WorldCom – Ogilvy & Mather over-billed the governments 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

Whats Going On? People perhaps dont know or dont care about business standards or ethics. – Put their interests first. People are perhaps greedy. People perhaps go along with unethical behavior because: –If I dont take their money someone else will. –No one will know.

Rationalization Criminals and other sociopaths typically rationalize their behavior with if I dont take their money, someone else will. A salesperson for a major media company forged a clients name on a contract, but got caught when the client got a bill and said, We didnt sign anything! – The salesperson thought no one will know; I wont 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 doessocial 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, doesnt There is an absence of standards. ­ Organizations must create and communicate ethical standards to trump the nobody told me copout. - We all know what were 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 Druckers 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. – Dont lie to them. – Dont sell them shoddy products. – Dont sell unsafe products. – Dont accept advertising for products you wouldnt recommend to a relative. – Dont invade their privacy with out clearly notifiying them.

Five Areas of Ethical Responsibility 2. To your conscience – Doing whats right according to ones 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 persons and a companys reputation and eventually will kill the organization. Innovators dilemma

– Some people are unethical because they believe they wont 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) dont buy from people and companies they dont trust. – Thus, under-promise and over-deliver to gain trust – A media company shouldnt sell advertisers: Something they dont need Something they cant afford Something that doesnt work – E.g. Telling them banners will generate lots of clicks

– A media company shouldnt accept advertising: That is in bad taste That hurts a customers image That is misleading – A media company shouldnt: 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 shouldnt: Promise what advertising itself cannot deliver. – The media can deliver potential exposure to an audience – Cant promise results – too many uncontrollable factors Promise privacy if it cant deliver Promise anything it cant 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 peoples 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 Dont 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 companys product. – That representative is the company in the eyes of customers. – Thus, a companys 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 thatpreserve a companys assets. Too often they have the wrong assets in mind. A companys 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. Kants categorical imperative – Act on the premise that the choices you make will become universal law – for all people for all time.