1. Copyright © 2001 by Harcourt, Inc. All rights reserved.

2. C HAPTER 2 S OCIAL, E THICAL, AND L EGAL R ESPONSIBILITIES OF S ALES P ERSONNEL

3. Copyright © 2001 by Harcourt, Inc. All rights reserved.  Management’s social responsibilities.  What influences ethical behavior.  Management’s ethical responsibilities.  Ethical dealings among salespeople, employers and customers.  The international side of ethics.  Managing sales ethics. L EARNING O BJECTIVES This chapter is one of the most important in this textbook. Understanding social, ethical and legal issues helps build a solid foundation on which to base future decisions and to manage sales personnel. After studying this chapter, you should be able to explain the following:

4. Copyright © 2001 by Harcourt, Inc. All rights reserved. M ANAGEMENT’S S OCIAL R ESPONSIBILITIES Social responsibility is management’s obligation to make choices and take actions that will contribute to the welfare and interests of society as well as to those of the organization.

5. Copyright © 2001 by Harcourt, Inc. All rights reserved. Stakeholder Any group within or outside the organization that has a stake in the organization’s performance.

6. Copyright © 2001 by Harcourt, Inc. All rights reserved. FIGURE 2.1 MAJOR STAKEHOLDERS IN THE ORGANIZATION’S PERFORMANCE

7. Copyright © 2001 by Harcourt, Inc. All rights reserved. CCC GOMES This acronym is an effective way to remember an organizations stakeholders: Customers, Community, Creditors, Government, Owners, Managers, Employees, and Suppliers.

8. Copyright © 2001 by Harcourt, Inc. All rights reserved. A N O RGANIZATION’S M AIN R ESPONSIBILITIES E CONOMIC R ESPONSIBILITIES L EGAL R ESPONSIBILITIES E THICAL R ESPONSIBILITIES D ISCRETIONARY R ESPONSIBILITIES

9. Copyright © 2001 by Harcourt, Inc. All rights reserved. H OW T O D EMONSTRATE S OCIAL R ESPONSIBILITY 1.Taking corrective action before it is required. 2.Working with affected constituents to resolve mutual problems. 3.Working to establish industry-wide standards and self- regulation. 4.Publicly admitting mistakes. 5.Getting involved in appropriate social programs. 6.Helping correct environmental problems. 7.Monitoring the changing social environment. 8.Establishing and enforcing a corporate code of conduct. 9.Taking needed public stands on social issues. 10.Striving to make profits on an ongoing basis.

10. Copyright © 2001 by Harcourt, Inc. All rights reserved. W HAT I NFLUENCES E THICAL B EHAVIOR? T HE I NDIVIDUAL’S R OLE Level one: preconventional Level two: conventional Level three: principled T HE O RGANIZATION’S R OLE

11. Copyright © 2001 by Harcourt, Inc. All rights reserved. M ANAGEMENT’S E THICAL R ESPONSIBILITIES W HAT I S E THICAL B EHAVIOR? Ethical behavior refers to treating others fairly.

12. Copyright © 2001 by Harcourt, Inc. All rights reserved. Being honest. Maintaining confidence and trust. Following the rules. Conducting yourself in the proper manner. Treating others fairly. Demonstrating loyalty to company and associates. Carrying your share of the work and responsibility with 100% effort. W HAT I S E THICAL B EHAVIOR?

13. Copyright © 2001 by Harcourt, Inc. All rights reserved. W HAT I S AN E THICAL D ILEMMA? An ethical dilemma arises in a situation when each alternative choice or behavior has some undesirable elements due to potentially negative ethical or personal consequences.

14. Copyright © 2001 by Harcourt, Inc. All rights reserved. Three main ethical areas most frequently faced by sales personnel: Salespeople Employers Customers

15. Copyright © 2001 by Harcourt, Inc. All rights reserved. E THICS IN D EALING WITH S ALESPEOPLE L EVEL OF S ALES P RESSURE D ECISIONS A FFECTING T ERRITORY T O T ELL THE T RUTH? T HE I LL S ALESPERSON

16. Copyright © 2001 by Harcourt, Inc. All rights reserved. EMPLOYEE RIGHTS Rights desired by employees regarding the security of their jobs and the treatment administered by their employer while on the job, irrespective of whether such rights are currently protected by law or collective bargaining agreements of labor unions.

17. Copyright © 2001 by Harcourt, Inc. All rights reserved. E MPLOYEE R IGHTS Termination at will Privacy Free from Sexual Harassment

18. Copyright © 2001 by Harcourt, Inc. All rights reserved. Cooperative Acceptance The right of employees to be treated fairly and with respect regardless of race, sex, national origin, physical disability, age, or religion while on the job as well as when applying and regarding a job.

19. Copyright © 2001 by Harcourt, Inc. All rights reserved. Reasons for respecting employee rights Providing a high quality of work life. Attracting and retaining good sales personnel; making recruitment and selection more effective less frequently needed. Avoiding costly back-pay awards and fines. Establishing a balance between employee rights and obligations and employer rights and obligations.

20. Copyright © 2001 by Harcourt, Inc. All rights reserved. S ALESPEOPLE’S E THICS IN D EALING WITH T HEIR E MPLOYERS Misusing Company Assets Moonlighting Cheating Affecting Fellow Salespeople Technology Theft

21. Copyright © 2001 by Harcourt, Inc. All rights reserved. E THICS IN D EALING WITH C USTOMERS Money Gifts Entertainment Travel Opportunities B RIBES OR G IFTS

22. Copyright © 2001 by Harcourt, Inc. All rights reserved. M ISREPRESENTATION AND B REACH OF W ARRANTY Exaggerated capabilities of products or services and sometimes making false statements to close a sale.

23. Copyright © 2001 by Harcourt, Inc. All rights reserved. Misrepresentation and breach of warranty are two legal causes of action.

24. Copyright © 2001 by Harcourt, Inc. All rights reserved. Price reductions Promotional allowances and support Robinson-Patman Act of 1936 P RICE D ISCRIMINATION

25. Copyright © 2001 by Harcourt, Inc. All rights reserved. Robinson-Patman Act of 1936 Allows sellers to grant what are called quantity discounts to large buyers based on savings in the cost of manufacturing, but individual salespeople or managers may not practice price discrimination to improve sales.

26. Copyright © 2001 by Harcourt, Inc. All rights reserved. To purchase a particular line of merchandise, a buyer may be required to buy other unwanted products. Prohibited under the Clayton Act. T IE-IN S ALES

27. Copyright © 2001 by Harcourt, Inc. All rights reserved. Requires a wholesaler or retailer to purchase from one manufacturer. Prohibited under the Clayton Act. E XCLUSIVE D EALERSHIP

28. Copyright © 2001 by Harcourt, Inc. All rights reserved. Buying a product from someone if the person or organization agrees to buy from you. Federal Trade Commission and the U.S. Department of Justice will consider such a trade agreement illegal. R ECIPROCITY

29. Copyright © 2001 by Harcourt, Inc. All rights reserved. Cooling-off Laws provide for a cooling-off period in which the buyer may cancel the contract, return any merchandise, and obtain a full refund. Covers sales of $25 or more made door to door. Green River Ordinances require persons selling directly to consumers to be licensed by the city in which they are doing business if they are not residents. A bond may also be required. S ALES R ESTRICTIONS

30. Copyright © 2001 by Harcourt, Inc. All rights reserved. M ANAGING S ALES E THICS All managers feel they face ethical problems. Most managers feel they and their employers should be more ethical. Managers are more ethical with their friends than with people they do not know. M ANAGERS’ V IEWS

31. Copyright © 2001 by Harcourt, Inc. All rights reserved. M ANAGERS’ V IEWS continued Even though they want to be more ethical, some managers lower their ethical standards in order to meet job goals. Managers are aware of unethical practices in their industry and company ranging from price discrimination to hiring discrimination. Business ethics can be influenced by an employee’s supervisor and by the company environment.

32. Copyright © 2001 by Harcourt, Inc. All rights reserved. Management methods to help organizations be more responsive: Follow the Leader Leader Selection Establish a Code of Ethics

33. Copyright © 2001 by Harcourt, Inc. All rights reserved. Establish a Code of Ethics Code of ethics is a formal statement of the company’s values concerning ethics and social issues.

34. Copyright © 2001 by Harcourt, Inc. All rights reserved. Principle-Based Statements Designed to affect corporate culture, define fundamental values, and contain general language about company responsibilities, quality of products, and treatment of employees. Policy-Based Statements Outline the procedures to be used in specific ethical situations. Two types of codes of ethics:

35. Copyright © 2001 by Harcourt, Inc. All rights reserved. Management methods to help organizations be more responsive : Follow the Leader Leader Selection Establish a Code of Ethics Create Ethical Structures

36. Copyright © 2001 by Harcourt, Inc. All rights reserved. Ethical Committee A group of executives appointed to oversee company ethics. Ethical Ombudsperson An official given the responsibility of corporate conscience who hears and investigates ethical complaints and informs top management of potential ethical issues. Ethical Structures

37. Copyright © 2001 by Harcourt, Inc. All rights reserved. Management methods to help organizations be more responsive: Follow the Leader Leader Selection Establish a Code of Ethics Create Ethical Structures Encourage Whistle Blowing Create an Ethical Sales Climate Establish Control Systems

38. Copyright © 2001 by Harcourt, Inc. All rights reserved. T HE B OTTOM L INE Ethics and social responsibility are hot topics for managers. Corporate social responsibility concerns a company’s values towards society. Salespeople and managers realize that their business practices, including international dealings, should be carried out in an ethical manner.