CHAPTER 2: MANAGING ETHICS IN A SALES ENVIRONMENT

I. WHAT IS BUSINESS ETHICS?

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 that deals with
ethically managing the sales function.

Sales manager have a special role in maintaining an ethical work and sales environment.
It’s their duty to make sure morally corrupt individuals are not employed by the firm
and to put a check on any system providing an incentive for immoral behavior.

II. SALESPEOPLE ARE BOUNDARY SPANNER

Boundary spanners –is someone who perform his or her job in the boundary between a
company and customer. Salespeople represent the company to the customer and the
customer to the company.

III. CUSTOMER VULNERABILITY

A vulnerable consumer is someone who, due to their personal circumstances, is

especially susceptible to detriment, particularly when a firm is not acting with
appropriate levels of care.

Customer is often vulnerable, meaning they are at a disadvantage to the company. Most
often, the disadvantage comes in these forms:

1. Ignorance –a lack of some vital knowledge, often product knowledge,

needed to participate in a fair exchange.
2. Naiveté –lack of experience or ability to conduct a transaction or
negotiate terms in a fair deal.
3. Powerless –a lack of either competition within the marketplace or
sufficient assets which to be persuasive.

IV. APPLYING PROFESSIONAL SALES CODES OF ETHICS

Codes of ethics – express the values of the firm by specifying, in writing, specific
behaviors that are consistent or inconsistent with those values

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 - often list of employee behaviors that the firm does condone or accept.

Four Basic Types of Code of Ethics:

1. Company codes define ethical boundaries for employees.

2. Professional codes that define the ethical boundaries for occupational group.
3. Business association codes that define ethical boundaries for people engage in
the same line of business.
4. Advisory group code suggested by government agencies or other special interest
groups.

V. ETHICAL PHILOSOPHIES AND MORAL JUDGEMENT

Moral philosophy –deals with the systematic ways that individuals recognize and
resolve decisions having moral content.

Concept of Idealism, Relativism, Teleology as the basis for different moral

philosophies.

a. Idealism

Ideals- are set of principles by which individuals determine morality.

Moral Absolute – represents the rule that should always be applied with no
exceptions or excuses.

b. Relativism –as a moral philosophy, it is a process by which individuals reach a

moral decisions based more on the actions they perceive to be acceptable
given a particular situation.
- Sometimes called situational ethics, that a behavior acceptable in
one situation can be unacceptable in another.
c. Taleology – is a philosophy that defines morality based on consequences of
the behavior.

1. Moral Judgments – is a person’s evaluation of the situation form an ethical

perspective.

Ethical Dilemma –is a situation which alternate courses of action, each having different
moral implications.

Moral Judgment can be based on three criteria:

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 a. Moral equity –is the inherent fairness or justice in a situation.
b. Acceptability –describes how culturally or socially acceptable we perceive an
action to be.
c. Contractualism –is the extent to which an act is consistent with stated or
implied contracts and/or laws.

Dealing with unethical behavior

Sales managers should not encourage or tolerate behaviors with professional sales
standards or with the moral of the firm.

An effective sales manager will strive to discipline all salespeople with the same
standards. Although unethical tactics may benefit the firms in the short run, they almost
always end up being detrimental in the long run.

VI. CREATING AN ETHICAL WORK CLIMATE

Organizational climate- is the way employees perceive the organizational culture.

Ethical work climate –is a specific aspect of the organizational climate. It is a

multidimensional concept, with four unique aspects.

1. Policies and Rules –when sales managers and salespeople internalize the policies
and rules that govern selling and marketing conduct with the firm, they more likely
to behave ethically. Sometimes the policies and rules are summarized in a code of
ethics.
2. Trust and Responsibility – defines how far people are trusted to behave in a
responsible way and are held personally responsible for their actions.

Trust is increased when salespeople are allowed to set their own schedules and are
not constantly being monitored. However, this freedom should be accompanied by
a sense of responsibility.

3. Peer Behavior –as dimension of ethical climate, is the extent to which employees views
coworkers as having moral standards.
4. Bottom-Line Sales Emphasis
Sales emphasis –is the extent to which employees feel pressured to prioritize
increased sales, profits margins, or other financial returns over all other
concerns.

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 A strong sales emphasis or bottom-line orientation, coupled with a control
system based on quotas, lead to a more negative ethical work climate.

VII. MANAGING ETHICAL CLIMATE

Managing the ethical climate should be a top priority for firms. Promoting an ethical
climate is the responsibility of the management at all levels of the organization. If top
management is unconcerned about ethics in developing strategies, then sales managers
are likely to be unconcerned with the way their sales force behaves. Similarly,
salespeople are not likely to be concerned with the way they treat customer.

VIII. LEGAL CONSIDERATIONS IN THE SALES ENVIRONMENT

Domestic and international selling and sales management activities are regulated by
local, state and federal laws and regulations, as well as legislation with each foreign
country.

1. FEDERAL REGULATIONS
U.S. regulating business into two major categories:
a. Laws protecting companies from each other
b. Laws and policies protecting consumers and society from unfair business
practice.

Philippines Setting:

Department of Trade and Industry (DTI) This is where you register if your
enterprise is a single proprietorship. The agency will issue a certificate of
registration of business name. Securities and Exchange Commission (SEC) If your
enterprise is a partnership or a corporation, this is where you will register.

a. Laws protecting companies from each other

Republic Act 10667: Philippine Competition Act
b. Laws and policies protecting consumers and society from unfair business
practice.
Republic Act 7394: The Consumer Act of the Philippines

GROUP RESEARCH ( SEARCH FOR LAWS, and explain the purpose

of the law)

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 2. Price Discrimination
Price Discrimination – charging a different price to different groups of
people for the same good and such act has a harmful effect on the
competition.

Different behavior associated with discrimination in the market place.

a. Collusion – 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, they are practicing illegal collusion.
b. Price Fixing –competitors who conspire to set price or maintain uniform
prices and profit margin are fixing the price.
c. Exclusive Dealings –agreement in which a manufacture or wholesaler
grants one dealer exclusive rights to sell a product in a certain trading
area or insist that the dealer not carry competing lines are illegal under
the clayton act.
d. Restraint of trade –competitors colliding to divide a market into
noncompetitive territories or to restrict competition in a market are in
restraint of trade. Nor can dealers be required to refrain from selling
competitor’s product as condition of receiving the right to sell the
manufacturers product.
e. Reciprocity – selecting only suppliers who will also purchase from the
buyer.
f. Tie-in Sales. –purchaser cannot be force to buy an unwanted item or
items in return of being allowed to purchase a product of heavy demand.
g. Unordered Goods –prohibits companies from shipping unordered goods
or shipping larger amount than ordered, hoping the buyer will pay them.
h. Orders and Terms of Sales –selling substitute goods different from those
ordered, intentionally misrepresent delivery dates, fail to actually fill an
order and not fill an order in reasonable time.

Terms of sale or conditions of sales offers cannot be misrepresented.

i. Business Description –salespeople must never misrepresent the

company’s financial strength, length of time in business, reputation, or
facts concerning its plants, equipment or facilities.

j. Product description – must not misrepresent the method by which a

product is produced.

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 k. Consumer Coercion –coercing the customer into sale can be illegal when
sale practices places undue pressure, intimidation, or fear.

l. Business Defamation - Making of false, derogatory statement(s) in

private or public about a person's business practices, character, financial
status, morals, or reputation.

Business defamation includes these offenses:

1. Business Slander – when an unfair and untrue oral statement is
made about competitor, the statement become actionable when
communicated to a third party and can interpreted as damaging
the competitor’s reputation or the personal reputation of an
individual in that business.
2. Business libel – when an unfair and untrue about competitor is made in
writing, the statement become actionable when communicated to a third
party and can interpreted as damaging the competitor’s reputation or the
personal reputation of an individual in that business.
3. Product disparagement –false or deceptive comparison or distorted
claim are made concerning a competitor’s product, services or property.
4. Unfair competition –injury to a competitor can result from the false
advertising of one’s own product, misrepresentation of the qualities or
characteristics of the product or related unfair or deceptive trade
practices.

3. International Regulation of Sales

International sellers must cope with three different set of laws restricting their
operation.
a. National laws where the business was incorporated.
b. Laws of foreign country in which it operates.
c. International laws that enforce across national boundaries.

4. Personal Selling
Business practices vary from one place to another, salespeople should aware
that business ethical standard may also vary.

The role of sales managers is to protect the salespeople under their direction, as
well as the reputation of the firm. Certain practices may be acceptable, legal and

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 even expected in other culture, the sale manager should be leery of condoning
actions that are unethical at home.

5. State and Local Regulation

The most important state and local laws and ordinances design to
regulate the selling activities are the Uniform Commercial Code and the
Green River Ordinances.

Uniform Commercial Code – is a basic set of guidelines adopted by most

states that set forth the rules of contracts and the law pertaining to sales.
The code regulates the performance of the goods, sellers warranties and
the maximum allowable rates of interest and carrying charges.

Green River Ordinances –requiring non-residents to obtain a license from

city authorities to sell goods or services direct to consumers in that
vicinity.

Cooling-off Rules – are closely connected to Green River Ordinances and

require door-to-door sales people to give written notice to the customer
placing orders of $25 or more that they can cancel their purchase within
three days.

IX. UNDERSTANDING GOOD ETHICS AMONG THE SALES FORCE

Sales managers often experience ethical stress in the form of ambiguity or

conflict.
Ambiguity –occurs when the sales managers simply does not know what to do in
a given situation.
Conflict – arises when the sales manager is torn between multiple courses of
action, each with different moral implications for the people involved.

Maintaining a Positive Ethical Climate

a. Understanding Ethics
Ethical maturity – when salespeople place the moral treatment of
others ahead of short term personal gain.
b. Measuring Ethical Cliamate –reduction of ethical climate could signal
problem. By measuring multiple dimension, the sales managers may be
able to diagnose particular are needed attention. If salespeople begin to

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 sense a climate increasingly typically a bottom-line sales orientation, it is
the time to reconsider the motivational tactics used to shape job
performance.
c. Leading by Example – A positive, healthy and moral ethical work climate
begins at the top. Salespeople should realize that the people they
supervise look to them in forming expectations of their own moral
behavior. Sales managers must thoroughly know and practice the
company code of ethics it they expect sales people to follow it.

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