Business Ethics

1. Business Ethics

2. Corporations Today • Corporations, by charter, are immortal. • Corporations have multiple relationships that they are unlikely to keep secret very long. • www.sec.gov/edgar.shtml • For media companies revenue depends on: • Advertisers • Partners • Subscribers

3. 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 • It’s not smart business to bite the hands that will feed your company for the next several decades. • Don’t lie to them or cheat them. • Advertisers/partners/subscribers/consumers don’t buy from companies they don’t trust

4. Current Headlines • The press loves stories about corporate dishonesty. • Enron • WorldCom • Ogilvy & Mather over-billed the government’s 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

5. What’s Going On? • People perhaps don’t know or don’t care about business standards or ethics. • Put their interests first. • People are perhaps greedy. • People perhaps go along with unethical behavior because: • “If I don’t take their money someone else will.” • “No one will know.”

6. Rationalization • Criminals and other sociopaths typically rationalize their behavior with “if I don’t take their money, someone else will.” • A salesperson for a major media company forged a client’s name on a contract, but got caught when the client got a bill and said, “We didn’t sign anything!” • The salesperson thought “no one will know; I won’t get caught.”

7. 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 does—social pressure and conformity: “everyone does it.” • An absence of clearly defined and communicated standards: “nobody told me.”

8. 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, doesn’t • There is an absence of standards. • Organizations must create and communicate ethical standards to trump the “nobody told me” copout. • We all know what we’re supposed to do.

9. 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?

10. 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

11. 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 Drucker’s sage advice… • “It is more important to do the right thing than to do things right.”

12. Five Areas of Ethical Responsibility • 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

13. Five Areas of Ethical Responsibility • To consumers (audience/partners/subscribers) • Put consumers first. • Don’t lie to them. • Don’t sell them shoddy products. • Don’t sell unsafe products. • Don’t accept advertising for products you wouldn’t recommend to a relative. • Don’t invade their privacy with out clearly notifiying them.

14. Five Areas of Ethical Responsibility • To your conscience • Doing what’s right according to one’s 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 person’s and a company’s reputation and eventually will kill the organization. • Innovator’s dilemma

15. Some people are unethical because they believe they won’t 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.

16. Five Areas of Ethical Responsibility • To customers • Customers (advertisers) don’t buy from people and companies they don’t trust. • Thus, “under-promise and over-deliver” to gain trust • A media company shouldn’t sell advertisers: • Something they don’t need • Something they can’t afford • Something that doesn’t work • E.g. Telling them banners will generate lots of clicks

17. A media company shouldn’t accept advertising: • That is in bad taste • That hurts a customer’s image • That is misleading • A media company shouldn’t: • 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

18. A media company shouldn’t: • Promise what advertising itself cannot deliver. • The media can deliver potential exposure to an audience • Can’t promise results – too many uncontrollable factors • Promise privacy if it can’t deliver • Promise anything it can’t deliver: • Promotions • Merchandising • Tickets • Position • Placements • Completion of schedules • Results

19. Five Areas of Ethical Responsibility • 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?”

20. 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 people’s 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 • Don’t foul your nest or cheat your neighbor. • Broadcasters get licenses to serve the community.

21. Five Areas of Ethical Responsibility • 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 company’s product. • That representative is the company in the eyes of customers. • Thus, a company’s credibility and reputation depend on the credibility of any person or any communication that represents that company. • CEO, salesperson, website, press release.

22. 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.

23. CFOs or top management sometimes recommend accounting practices that “preserve a company’s assets.” • Too often they have the wrong assets in mind. • A company’s most precious asset is an excellent reputation. • Protect a reputation by always doing the right thing. • Especially with online data

24. The Ethical Hierarchy • The Five Cs • Consumers • Conscience • Community • Customers • Company

25. Ethics Check • Is it legal? • Laws • Regulations • Company policy • Is it fair? • To both sides • To all stakeholders • Is it true to my conscience?

26. 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. • Kant’s categorical imperative • Act on the premise that the choices you make will become universal law – for all people for all time.