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Ethical and Social Problems in Business and the Corporate World
A few months ago, Arielle Cruz, Head of the Sales and Marketing Department of Mariposa Real Estate, formally announced to her staff that she
will be leaving the company in order to be able to concentrate on her family. She emphasized that since she will be leaving, there is room for a promotion and that she would nominate their two top performers, Mary and Jane, to the HRMD. In an effort to give herself an upper hand, Mary closes deals with three big clients two days right after Arielle’s announcement. Two weeks after Arielle’s announcement, stories about Mary’s promiscuity begin to make their rounds and quickly become the mainstay headlines of office gossip. The most scandalous rumor is that Mary offers sexual services to her clients – both male and female – in order to close her sales. In the face of all these rumors, Mary continues to deliver excellent work. The time has come to promote the candidates.
Question: Based on performance, Mary is the better candidate, but both could do the job. Should you consider the rumors? What should you do?
Lesson Proper/Course Methodology
Kindly comment on this quote. (10 points)
“The truth of the matter is that you always know the right thing to do. The hard part is doing it.”
Ethical Issues and Ethical Dilemmas
Ethical issues are the difficult social questions that involve some level of controversy over what is the right thing to do. A problem or situation that requires a person or organization to choose between alternatives that must be evaluated as right (ethical) or wrong (unethical).
Example of ethical issues in business are:
- Conflicts of Interest
- Sexual Harassment
- Whistleblowing or Social Media Rants
- Ethics in Accounting Practices
- Technology and Privacy Practices
Ethical dilemmas are situations in which it is difficult for an individual to make decisions either because the right course of action is unclear or carries some potentially negative consequences for the person or people involved. Make no mistake about it: when you enter the business world, you’ll find yourself in situations in which you’ll have to choose the appropriate behavior. How, for example, would you answer questions like the following?
- Is it OK to accept a pair of sports tickets from a supplier?
- Can I buy office supplies from my brother-in-law?
- If I find out that a friend is about to be fired, can I warn her?
Moral Choices Facing Employees
1. Conflicts of Interest
When you accept employment, you generally agree to perform certain tasks, usually during certain specified hours, in exchange for financial remuneration.
Whether it is oral or written, implicit, or explicit, a contract governs your employment relationship and provides the basic framework for understanding the reciprocal obligations between you and your employer.
Your employment contract determines what you are supposed to do or accomplish for your employer, and it may cover a variety of other matters from parking privileges to your dress and deportment while carrying out your responsibilities. The terms of your employment contract may be open-ended and vague or specific and detailed.
Because you are hired to work for your employer, you have an obligation, when acting on behalf of the organization, to promote your employer’s interest. Insofar as you are acting as an agent of your employer, the traditional law of agency places you under a legal obligation to act loyally and in good faith and to carry out all lawful instructions. But it would be morally benighted to view employees simply as agents of their employers or to expect them to subordinate their autonomy and private lives to the organization entirely.
Morality requires neither blind loyalty nor total submission to the organization. However, the notion of company loyalty is commonplace, and most people find it a coherent and legitimate concept.
For the many employees who willingly make sacrifices for the organization above and beyond their job descriptions, loyalty is a real and important value. Indeed, it is not clear how well any business or organization could function without employee loyalty, and certainly, most companies want more than minimal time and effort from their employees.
To be sure, many businesses demand more than this in the name of loyalty. They may expect employees to defend the company if it is maligned, to work overtime when the company needs it, to accept a transfer if necessary for the good of the organization, or to demonstrate their loyalty in countless other ways. Displaying loyalty in these ways certainly seems morally permissible, even if it is not morally required. In addition, employees, like other individuals, can come to identify with the groups they are part of, accepting group goals and norms as their own Of course, even the most loyal employees can find that their interests collide with those of the organization. You want to dress one way, and the organization requires you to dress another way; you’d prefer to show up for work at noon, the company expects to be present at 8 a.m.; you’d like to receive a P100,000 for your services, the organization pays you’re a fraction of that figure. The reward, autonomy, and self-fulfillment that workers seek aren’t always compatible with the worker productivity that the organization desires. Whatever the matter in question, the perspectives of employees and employers can differ.
Sometimes this clash of goals and desires can take the serious form of a conflict of interest. In an organization, a conflict of interest arises when employees at any level have private interests that are substantial enough to interfere with their job duties; that is, when their private interest lead them, or might reasonably be expected to lead them, to make a decision or act in ways that are detrimental to their employer’s interests. (Dumlao, 2005)
Conflicts of interest are a moral bother not only when an employee acts to the disadvantage of the organization but also when the employee’s private interests are significant enough that they could easily tempt the employee to do so.
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2. Financial Investment
Conflicts of interest may exist when employees have financial investments in suppliers, customers, or distributors with whom their organizations do business.
It is impossible to say how much financial investment is necessary for a serious conflict of interest to existing. Ordinarily, it is acceptable to hold a small percentage of stock in a publicly held supplier that is listed on the stock exchange. Some organizations state what percentage of outstanding stock their members may own—usually up to 10 percent.
Organizational policy goes a long way toward determining the morally permissible limits of outside investments because it reflects the firm’s specific needs and interests. Because such a policy can affect the financial well-being of those who fall under it, however, it should be subjected to the same kind of free and open negotiations that any form of compensation is.
3. Use of Official Position
A serious are of conflict of interest involves the use of one’s official position for personal gain. Cases in this area range from using subordinates for non-organization-related work to using an important position within an organization to enhance one’s own financial leverage and holdings.
Insider Trading: Many cases of abuse of official positions arise from insider trading. Insider trading refers to the use of significant facts that have not yet been made public and will likely affect stock prices. (Dumlao, 2005)
Increasingly in the world of big business, the pervasive desire to make quick money takes the form of illegally profiting from inside information. The business has been brisk for the Securities and Exchange Commission (SEC), which is charged with policing the stock market for insider-trading violations.
Insider traders ordinarily defend their actions by claiming they did not injure anyone. It is true that trading by insiders on the basis of nonpublic information seldom directly injures anyone, but moral concerns arise from indirect injury, as well as from direct.
To be sure, insider dealings raise moral questions not easily resolved. When can employees buy and sell securities in their own companies? How much information must they disclose to stockholders about the firm’s plans, outlooks, and prospects? When must this information be disclosed? Also, if people in business are to operate from a cultivated sense of moral accountability, it is important for them to understand who is considered an insider. In general, an insider could be anyone with access to inside information. In practice, determining precisely who this is not always easy.
Bribery: Bribery involves an obvious conflict of interest. A bribe is a remuneration for the performance of an act that’s inconsistent with the work contract or the nature of the work one has been hired to perform. The remuneration can be money, gifts, entertainment, or preferential treatment. (Dumlao, 2005)
Bribery sometimes takes the form of kickbacks, a practice that involves a percentage payment to a person able to influence or control a source of income. Thus, when an account executive offers a percentage of a handsome commission to a person representing a company she is selling a product to so the latter will buy the product, the money they received for the preferred consideration is a kickback.
Bribery is intended to induce people insider a business or other organization to make a decision that would not be justifiable according to normal business or other criteria. For example, by encouraging on nonmarket grounds the purchase of inferior goods or the payment of an exorbitant price, bribery can clearly injure a variety of legitimate interests—from stockholders to consumers, from taxpayers to other businesses. It weakens market competition by giving an advantage in a way that is not directly or indirectly product related. There is nothing “relative” about the damage that such corruption can do to a society. If we were to permit Philippine companies to engage in bribery overseas, we would be encouraging in other countries practices that we consider too harmful to tolerate at home.
Gifts and Entertainment: Business gifts and entertainment of clients and business associates are a familiar part of the business world. Still, both practices can raise conflict- of-interest problems, and knowing where to draw the line is not always easy. One this is clear: Those who cross that line, wittingly or not, can end up in big trouble.
For people in the business world, the rules are not so cut-and-dried, but a number of considerations can help one determine the morality of giving and receiving gifts in a business situation.
- What is the value of the gift?
- What is the purpose of the gift?
- What are the circumstances under which the gift was given or received?
- What are the positions and sensitivity to the influence of the person receiving the gift?
- What is the accepted business practice in the industry?
- What is the company’s policy?
- What is the law?
Related to gift-giving is the practice of entertaining. Some companies distinguish entertainment from gifts as follows: If you can eat or drink it on the spot, it’s entertainment. In general, entertainment should be interpreted more sympathetically than gifts because it usually occurs within the context of doing business in a social situation. Still, the morality of entertainment should be evaluated along the same lines as gifts—that is, with respect to values, purpose, circumstances, positions, and sensitivity to influence of the recipient, accepted business practice, company policy, and the law. In each case the ultimate moral judgment hinges largely on whether an objective party could reasonably suspect that the gift or entertainment might lead the recipient to sacrifice the interest of the firm for his or her personal gain.
Sexual Harassment: A type of harassment involving the use of explicit or implicit sexual overtones, including the unwelcome or inappropriate promise of rewards in exchange for sexual favors. Sexual harassment includes a range of actions from verbal transgressions to sexual abuse or assault. Harassment can occur in many different social settings such as the workplace, the home, school, churches, etc. Harassers or victims may be of any gender. (Axelrod, 2004)
In the workplace, harassment may be considered illegal when it is frequent or severe, thereby creating a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim’s demotion, firing or quitting). The legal and social understanding of sexual harassment, however, varies by culture.
Sexual harassment, which has been declared unlawful in the workplace, training and education environments, will not be tolerated as it violates the dignity and human rights of a person.
R.A. 7877, an “Act Declaring Sexual Harassment Unlawful in the Employment, Education or Training Environment, and for other purposes,” was approved on February 14, 1995. It is known as “The Anti-Sexual Harassment Act of 1995.”
Sexual harassment may take place:
- in the premises of the workplace or office or of the school or training institution
- in any place where the parties were found, as a result of work or education or training responsibilities or relations
- at work or education- or training-related social functions
- while on official business outside the office or school or training institution or during work or school or training-related travel
- at official conferences, fora, symposia or training sessions
- by telephone, cellular phone, fax machine or electronic mail
Forms of Sexual Harassment
- Physical, such as malicious touching, overt sexual advances, and gestures with lewd insinuation.
- Verbal, such as but not limited to, requests or demands for sexual favors, and lurid remarks.
- Use of objects, pictures or graphics, letters or written notes with sexual underpinnings.
Office Romance: Romantic relationships between two people employed by the same employer. The long hours’ many people spend at work make for a situation in which those with whom we work are for many not only colleagues but our primary source of social contact. Therefore, romantic relationships are bound to develop.
For businesses, workplace romances carry with them the potential to complicate the work environment and cause difficulties of various types—lost productivity due to distraction; accusations of favoritism; jealousy among co- workers; the potential for an antagonistic mood should the relationship end poorly; and, in a worst-case scenario, allegations of sexual harassment in the event that one of the parties asserts that he or she was coerced. Because of these potential pitfalls, many firms have policies that were established to try and discourage or even prohibit such liaisons from forming.
One concern with a newly forming romance in the workplace is that it will be accompanied by inappropriate displays of affection in the office. This, in turn, can cause an uncomfortable environment for others and certainly presents a less than professional image. A company may address this concern by establishing an on-the-job code of conduct that specifically addresses a professional work environment and prohibits “public displays of affection.”
Wages: From the employee’s point of view, wages are the principal (perhaps the only) means for satisfying the basic economic needs of the worker and the worker’s family. From the employer’s point of view, wages are a cost of production that must be kept down unless the product be priced out of the market.
Every employer, therefore, faces the dilemma of setting fair wages: How can fair balance be struck between the employer’s interests in minimizing costs and the workers’ interest in providing a decent living for themselves and their families.
There is, unfortunately, no simple formula for determining a “fair wage.” The fairness of wages depends in part on the public supports that society provides the worker (social security, Phil Health, welfare, etc.) on the freedom of labor markets, on the contribution of the worker, on the needs of the worker, and on the competitive position of the firm.
Although there is no way of determining fair salaries with mathematical exactitude, we can at least identify a number of factors that should be taken into account in determining wages and salaries. (Dumlao, 2007)
- The going wage in the industry and the area.
- The firm’s capabilities.
- The nature of the job.
- Minimum wage laws.
- Relations with other salaries.
- The fairness of wage negotiations.
Unions and the Right to Organize. Workers have the right to freely associate with each other to establish and run unions for the achievement of their morally legitimate common ends. The same rights of free association that justify the formation and existence of corporations also underlie the worker organization we call “unions.”
The worker’s right to organize into a union also derives from the right of the worker to be treated as a free and equal person. Corporate employers, especially during periods of high unemployment or in regions where only one or a very few firms are located, can exert an unequal pressure on an employee by forcing the employee to accept their conditions or go without an adequate job.
Unions have traditionally been justified as a legitimate “countervailing” means for balancing the power of the large corporation so that the worker, in solidarity with other workers, can achieve an equal negotiating power against the corporation. Unions thus achieve and equality between worker and employer that the isolated worker could not secure, and they thereby secure the worker’s right to be treated as a free and equal person in job negotiations with powerful employers.
Not only do workers have a right to form unions, but their unions also have a right to strike. The right of unions to call a strike derives from the right of each worker to quit his or her job at will so long as doing so violates no prior agreements or the rights of others. Union strikes are therefore morally justified so long as the strike does not violate a prior legitimately negotiated agreement not to strike, which the company might have negotiated agreement not to strike (which the company might have negotiated with the union) and so long as the strike does not violate the legitimate moral rights of others (such as citizens whose right to protection and security might be violated by strikes of public workers such as firefighters or police).
Explain the illustration below: (10 points)
Answer the question right after reading the article below: (10 points)
Gifts from the Boss’s Friend
By Kirk O. Hanson
Kelly works for an auditor who sent her to a half-day of ethics training where she learned to keep clients’ information strictly confidential, to steer clear of conflicts of interest with clients, and to refuse gifts of any value from clients. Lately, she has noticed that her boss has joined clients at golf outings at very luxurious golf resorts – and that he has not reported any expenses on his expense reports. He has also received expensive bottles of wine from other clients who say they are “old friends.” Kelly has never seen him return any of the bottles, which is what the company’s ethics policies direct.
Question: Should Kelly do anything about this? If so, what?
7. Reflection/Learning Insights (10 points)
Have you personally encountered any ethical issues and dilemmas in your job or studies (present or previous)? Discuss the situation and tell us how it was resolved.
II. Title of the Lesson:
Lesson 2. Moral Issues and Obligations to Third Parties
III. Duration: 3 hours, Week 6
Many of the difficult moral decisions that employees sometimes face involve such conflicts. How are they resolved? According to the recommended procedure, our moral decisions should take into account our specific obligations, any important ideals that our actions would support or undermine, and, finally, the effects or consequences of the different options open to us.
What about the obligations of employees to other third parties or to society in general? In particular, what obligations do employees have to people with whom they have no relationship and for whom they have no specific professional, organizational, or other role responsibility?
At the end of this lesson, you will be able to learn:
- To know the different moral issues and obligations to third parties.
VI. Pre-test (5 points each)
What will you do?
1. A worker knows that a fellow worker occasionally uses prohibited drugs on the Should she inform the boss?
2. A dishwasher knows that the restaurant’s chef typically reheats three- or four-day-old food and serves it as fresh. When he informs the manager, he is told to forget What should the dishwasher do?
3. On a regular basis, a secretary is asked by her boss to lie to his wife about his whereabouts, “If my wife telephones,” the boss tells her, “don’t forget that ‘I’m visiting a client.’” In fact, as the secretary well knows, the boss is having an affair with another woman. What should the secretary do?
. Lesson Proper/Course Methodology
Kindly comment on this quote. (10 points)
“A fool tells you what he will do; A boaster what he has done. The wise man does it and says nothing”.
Moral Issues and Obligations to Third Parties
1. Whistle Blowing
Whistle blowing refers to an employee’s act of informing the public about the illegal or immoral behavior of an employer or organization.
Professor of philosophy Norman Bowie provides the following detailed definition:
A whistleblower is an employee or officer of any institution, profit or nonprofit, private or public, who believes either that he/she has been ordered to perform some act or he/she has obtained knowledge that the institution is engaged in activities which (a) are believed to cause unnecessary harm to third parties, (b) are in violation of human rights, or (c) run counter to the defined purpose of the institution and who informs the public of this fact.
This definition limits the scope of what constitutes whistleblowing. A worker who publicizes in-house blunders and indiscretions is not a whistleblower but a gossip-monger. Such persons abuse confidentiality and neglect their obligation of loyalty to the firm. By contrast, “whistleblowing’ is reserved conceptually only for activities that are harmful to third parties, violations of human rights, or contrary to the public purpose and legitimate goals of the organization. Also, this definition limits whistleblowing in informing the public. It does not encompass taking retaliatory action against the employer or firm, as sabotaging operations.
Whistleblowing overrides loyalty to colleagues and to the organization in order to serve the public interest. But whistleblowing presents dangers. The whistle can be blown in error or malice, privacy invaded, and trust undermined. Not least, publicly accusing others of wrongdoing can be very destructive and brings with it an obligation to be fair to the persons accused. In addition, internal prying and mutual suspicion make it difficult for any organization to function.
2. The Question of Self-Interest
The concern with self-interest in cases that put loyalty to the firm against obligations to third parties is altogether understandable and even warranted. After all, workers who subordinate the organization’s interests to an outside party’s expose themselves to charges of disloyalty, disciplinary action, freezes in job status, forced relocations, and
even dismissal. Furthermore, even when an employee successfully blows the whistle, he or she can be blacklisted in an industry. Given the potential harm to self and family that employees risk in honoring third-party obligations, it is perfectly legitimate to inquire about the weight considerations of self-interest should be given in resolving cases of conflicting obligations.
3. Product safety.
A dominant concern of consumers. No one wants to be injured by the products he or she uses. But safety is far from the only interest of consumers. The last thirty years have seen a general increase in consumer awareness and an ever-stronger consumer advocacy movement.
4. Product Quality
The demand for high-quality products is closely related to a number of themes mentioned in the discussion of safety. Most people would agree that business bearer a general responsibility to ensure that the quality of a product measures up to the claims made about it and to reasonable consumer expectations. They would undoubtedly see this responsibility as deriving primarily from the consumer’s basic right to get what he or she pays for. Although high product quality can also be in a company’s interest, sometimes business avoids this responsibility.
One way that business assumes responsibilities to consumers for product quality and reliability is through warranties, which are obligations to purchasers that sellers assume. People generally speak of two kinds of warranties, express and implied.
Have you ever wondered why a product sells at three for P100.00 or is priced at P99.95 rather than simply P100.00? Or why a product that retails for P38.00 on Monday is selling for P41.00 on Friday?
The answer may have little to do with the conventional determinants of product prices, such as overhead, operating expenses, and the costs of materials and labor. More and more frequently, purely psychological factors enter into the price-setting equation.
For example, why would a retailer price t-shirts at P275.00 rather than P299.00? When people see P299, they say, that’s P300, explains the general manager of one company. But P275 is not P300. It’s just psychological. Similar psychological considerations are at work when airlines advertise one-way fares that are available only with the purchase of a round-trip ticket for twice the price.
For many consumers, higher prices mean better products, so manufacturers arbitrarily raise the price of a product to give the impression of superior quality or exclusivity. But as often as not, the price is higher than the product’s extra quality.
6. Price Fixing
Much more attention has been devoted to price-fixing, which, despite its prevalence, is widely recognized as a violation of the rules of the game in a market system whose ideal is open and fair price competition.
When a few companies gain control of a market, they are often in a position to force consumers to pay artificially high prices. Of course, controlling prices need not be done so blatantly. Firms in an oligopoly can quietly agree to remain uncompetitive with one another, thereby avoiding losses that might result from price-cutting competition. They can then play “follow the leader”: Let the lead firm in the market raise its prices, and then the rest follow suit. The result is a laundered form of price-fixing.
7. Labeling and Packaging
Business’s general responsibility to provide clear, accurate and adequate information undoubtedly applies to product labeling and packaging.
The reason is that, despite the amount of money spent annually on advertising, a product’s label and package remain the consumer’s primary source of product information. Yet labels are often difficult to understand or even misleading, and what they omit may be more important than what they say.
In addition to misleading labels, package shape that exploits certain optical illusions can trick consumers. Tall and narrow cereal boxes look larger than short, squat ones that actually contain more cereal; shampoo bottles often have pinched waists to give the illusion of quantity; fruits are packed in large quantities of syrup, and dry foods often come in tins or cartons stuffed with cardboard. Frequently shoppers are misled by such terms as large, extra-large, and economy size and have difficulty comparing the net quantities of the contents (ounces, pints, quarts, liters, grams). Without a pocket computer, consumers find it difficult in many stores to calculate the relative prices of items. Unit pricing is doing much to alleviate this problem, but it does not address over- the-counter medicines, the recommended doses of which manufacturers sometimes increase to disguise a reduction of the product’s active ingredient.
Answer the questions after reading the article below: (5 points each)
Whistleblowing & the Environment: the Case of Avco Environmental
By: Jerome Dumlao
ChantaleLeroux works as a clerk for Avco Environmental Services, a small toxic-waste disposal company. The company has a contract to dispose of medical waste from a local hospital. During the course of her work, Chantale comes across documents that suggest that Avco has actually been disposing of some of this medical waste in a local municipal landfill. Chantale is shocked. She knows this practice is illegal. And even though only a small portion of the medical waste that Avco handles is being disposed of this way, any amount at all seems a worrisome threat to public health.
Chantale gathers together the appropriate documents and takes them to her immediate superior, Dave Lamb. Dave says, “Look, I don’t think that sort of thing is your concern or mine. We’re in charge of record-keeping, not making decisions about where this stuff gets dumped. I suggest you drop it.”
The next day, Chantale decides to go one step further and talk to Angela van Wilgenburg, the company’s Operations Manager. Angela is clearly irritated. Angela says, “This isn’t your concern. Look, these are the sorts of cost-cutting moves that let a little company like ours compete with our giant competitors. Besides, everyone knows that the regulations in this area are overly cautious. There’s no real danger to anyone from the tiny amount of medical waste that ‘slips’ into the municipal dump. I consider this matter closed.”
Chantale considers her situation. The message from her superiors was loud and clear. She strongly suspects that making further noises about this issue could jeopardize her job. Further, she generally has faith in the company’s management. They’ve always seemed like honest, trustworthy people. But she was troubled by this apparent disregard for public safety. On the other hand, she asks herself whether maybe Angela was right in arguing that the danger was minimal. Chantale looks up the phone number of an old friend who worked for the local newspaper.
1. What should Chantale do?
2. What are the reasonable limits on loyalty to one’s employer?
3. Would it make a difference if Chantale had a position of greater authority?
8. Reflection/Learning Insights
Write an essay about: (10 points)
To tell or not to tell, is Whistle Blowing a good thing?
II. Title of the Lesson:
Lesson 3. Deception and Unfairness in Advertising
III. Duration: 3 hours, Week 7
We intend to take advertising for granted, yet sociologically and economically, it is enormously important. Ads dominate our environment. Famous ones become part of our culture; their jingles dance in our heads and their images haunt our dreams and shape our tastes. Advertising is also a big business.
When people are asked what advertising does, their first thought is often that it provides consumers with information about goods and services. In fact, advertising conveys very little information. Or are most ads intended to do so? Except for classified ads and newspaper ads reporting supermarket prices, very few advertisements offer any information of genuine use to the consumer. Instead, advertisements offer us jingles, rhymes, and attractive images.
At the end of this lesson, you will be able to learn:
- To know the different ways of how advertising can be deceiving and unfair.
Think of an advertisement that caught your attention. (5 points each)
1. What is the advertisement all about?
2. What makes the advertisement different from other competitors?
3. Is the ad good or bad?
VII. Lesson Proper/Course Methodology
What does this quote tell you: (10 points)
“A man who stops advertising from saving money is like a man who stops the clock from saving time.”
– Henry Ford
Deception and Unfairness in Advertising
The goal of advertising, of course, is to persuade us to buy the products that are being peddled. Providing objective and comparative product information may be one way to do this.
Deceptive Techniques: Because advertisers are trying to persuade people to buy their products and because straight product information is not necessarily the best way to do this, there is a natural temptation to conceal, misrepresent, or even lie. In an attempt to persuade, advertisers are prone to exploit ambiguity, conceal facts, exaggerate, and use psychological appeals.
Ambiguity: When ads are ambiguous, they can be deceiving. In all aspects of advertising, much potential moral danger lies in the interpretation. Aiding and abetting ambiguity is the use of “weasel” words, words used to evade or retreat from a direct or forthright statement. Consider the weasel word help. “Help” means “aid” or “assist,” and nothing else. Yet as one author has observed, “‘help’ is the one single word which, in all the annals of advertising, has done the most to say something that could not be said.” Because the word help is used to qualify, almost anything can be after it. Thus we are exposed to ads for products that “help us keep young,” help prevent cavities,” “help keep our houses germ-free.”
Concealed Facts: When advertisers conceal facts, they suppress information that is unflattering to their products. That is, they neglect to mention or distract consumers’ attention away from information, knowledge of which would probably make their products less desirable. Concealment of relevant facts and information can exploit people by misleading them; it also undermines truth-telling. Unfortunately, the truth rarely seems foremost in the minds of advertisers.
As one advertising-industry insider writes: “Inside the agency, the basic approach is hardly conducive to truth-telling. The usual thinking is forming a campaign is first what can we say, true or not, that will sell the product best? The second consideration is, how can we say it effectively and get away with it so that (1) people who buy will not feel let down by too big a promise that does not come true, and (2) the ads will avoid quick and certain reprimand by government agency overseeing advertisements. This observation shows the common tendency to equate what is legal with what is moral. It is precisely this outlook that leads to advertising behavior of doubtful morality.
If business has an obligation to provide clear, accurate, and adequate information, we must wonder if it meets this charge when it hides facts relevant to the consumer’s purchase of a product. Concealing information raises serious moral concerns relative to truth-telling and consumer exploitation. When consumers are deprived of comprehensive knowledge about a product, their choices are constricted and distorted.
Exaggeration: Advertisers can mislead through exaggeration—that is, by making claims that a pain reliever provides “extra pain relief” or is “50 percent stronger than aspirin,” that it “upsets the stomach less frequently” or is “superior to any other nonprescription painkiller on the market” contradict evidence that all analgesics are effective to the same degree. Manufacturers of vitamins and other dietary supplements are notorious for exaggerating the possible benefits of their products.
Clearly the line between deliberate deception and what an advertising expert has termed puffery is not always clear. By “puffery” we mean the use of “harmless” superlatives. Thus advertisers frequently boast of the merits of their products by using words such as best, finest, or most, or phrases like king of beers or breakfast of champions. In many instances the use of such puffery is indeed harmless. Other times, however, it is downright misleading.
When moral importance in determining the line between puffery and deliberate deception would seem to be the advertiser’s intention and the likely interpretation of the ad. Are the claims intended as no more than verbal posturing, rare they intended to sell through deceptive exaggeration? Even when the intention is harmless, advertisers must consider how the ad is likely to be interpreted. What conclusion is the general consuming public likely to draw about the product? Is that conclusion contrary to likely performance? Without raising questions like these about their ads, advertisers and manufacturers risk warping the truth and injuring consumers, two significant moral concerns.
Psychological Appeals: A psychological appeal is one that aims to persuade by appealing primarily to human emotional needs and not to reason. This is potentially the area of greatest moral concern in advertising. An automobile ad that presents the product surrounded by people who look wealthy and successful appeals to our need and desire for status. A life insurance ad that portrays a destitute family woefully struggling in the aftermath of a provider’s death tries to persuade through pity and fear. Reliance on such devices, although not unethical per se, raises moral concerns because rarely do such products fully deliver what the ads promise.
Ads that rely extensively on pitches on power, prestige, sex, masculinity, femininity, acceptance, approval, and the like aim to sell more than the product. They are peddling psychological satisfaction. Sex is one area that has always been used to sell products. And it has never been used as explicitly in advertising as it has today—as the scantily clad bodies used in various advertisements exemplify. The sexual pitches are by no means confined to products like clothes or perfume.
Explain how the advertisement below become unethical: (10 points)
After reading the article answer the questions below: (10 points)
The Nonuser Celebrity Endorser
By: Geoffrey P. Lantos
Annie, copywriter for Laird & Laird (L&L) Advertising, has just been assigned the Bud’s Best (BB) bacon account. She is tickled pink, because she knows that Bud’s Best has just signed a one-year contract to use Lance Willard as a celebrity endorser. Lance is a well-known, well loved, young, handsome, and vibrant Hollywood movie star who specializes in action drama roles. Victor, President of L&L, tells Annie that she will be writing commercials using Lance in the role of giving product testimonials. Victor explains to Annie that this endorsement is a testimonial given by a celebrity rather than an average consumer. He tells her that Lance has signed an affidavit swearing that he is a bona fide user of the product, as is legally required. The TV commercials featuring Lance, explains Victor, should feature Lance testifying as to the quality, value, and tastiness of the bacon. Victor suggests that this will take some good acting on Lance’s part, since he has just recently become a vegetarian.
Annie wonders whether a testimonial by Lance might not be dishonest, but she says nothing to Victor since she doesn’t want to blow her opportunity to meet Lance in person. She figures she can get all of the details later from Lance. Lance turns out to be as charming in person as he is on the silver screen. After some small talk, Annie decides to query Lance about his experience with Bud’s Best. Lance explains that he has had personal experience with the product, as is legally required for a testimonial. In fact, he says, it has been his favorite brand of bacon ever since he was a small child, and bacon and eggs were his favorite and most frequently consumed breakfast until about a month ago when he became a vegetarian for health reasons. Lance tells Annie that a recent checkup by his physician revealed that his cholesterol level was 200–in the danger zone. His doctor had warned Lance to cut down on high cholesterol foods, such as bacon and eggs. Lance decided to go even further and abstain from meat since so many meats are high in cholesterol.
Annie asks Lance diplomatically whether he feels comfortable testifying about how much he likes Bud’s Best bacon when he no longer uses the product. Lance replies that his conscience is clean. He has discussed the legalities with Victor, who told him that technically it was okay for him to discuss his past enjoyment of the product. After all, Lance reminds Annie, the selling points he would discuss in the commercials would be the bacon’s quality, value, and good taste. Lance explains that in his view, as far as bacon goes, Bud’s Best is second to none along these criteria. He tells Annie that nothing regarding the bacon’s healthiness, or lack thereof, will be mentioned. As long as people are going to eat bacon, Lance asserts, they might as well eat Bud’s Best.
1. If you are Annie, are you going to pursue getting Lance as the endorser of your product? Why or why not?
VIII. Reflection/Learning Insights
Write an essay about: (10 points)
“Advertising – An Advantage”
Identify the following. Write your answer on the space provided below the number.
- Refers to an employee act of informing the public about the illegal or immoral behavior of an employer or organization.
- A type of harassment involving the use of explicit or implicit sexual overtones, including the unwelcome or inappropriate promise of rewards in exchange for sexual favors.
- Romantic relationships between two people employed by the same employer.
- This refers to the use of significant facts that have not yet been made public and will likely affect stock prices.
- Are the difficult social questions that involve some level of controversy over what is the right thing to do.
- Are situations in which it is difficult for an individual to make decisions either because the right course of action is unclear or carries some potential negative consequences for the person or people involved.
- Arises when employees at any level have private interests that are substantial enough to interfere with their job duties.
- Is a remuneration for the performance of an act that’s inconsistent with the work contract or the nature of the work one has been hired to perform.
- Are the principal means for satisfying the basic economic needs of the worker and the worker’s family.
- Is one that aims to persuade by appealing primarily to human emotional needs and not to reason.
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