Chapter 10: Ethical Leadership

A) Why Ethics are Important

a. Issues are prevalent in salespeople because they have to
make decisions in response to customers’ demands and
competitive offerings.
b. Business ethics are used to guide behaviors in the managing
and business world
c. The choices can often be between what’s right and right, not
just what’s right and wrong
d. Deceptive sales practices for encouraging customers to do
something even though it’s unnecessary in order for the
company to make more money
e. Housing and banking industries who sold houses and loans to
unqualified customers offering them “subprime mortgages”
f. Sales force is highly influenced by a company’s ethical
climate. Can increase trust in the manager, reduce a
salesperson’s role ambiguity, and increase job satisfaction
B) Principles of Ethical Decision Making
a. Shareholder view to earn the highest profits for the
company’s owners
i. Example: replacement who will work longer hours than
Kathy would boost profits but how much would it cost to
find that person?
ii. Adds little to the practical issues that he would face
b. Stakeholder view by possibly reducing company profits in
order to protect employee welfare
c. Role Morality
i. Relativism tend to reject universal moral rules and
makes decisions on the basis of personal values and
ramifications of each situation.
1. High value on personal perspective and won’t
make a harsh judgment without understanding
the situational information
ii. Idealism accept moral codes and believe positive
outcomes for all can be achieved by morally correct
actions.
1. Perceive questionable behaviors as violations of
ethical standards and will labor that behavior as
unethical
iii. Differences will result in different hiring tendencies
1. Idealistic likely won’t hire an unethical candidate
2. Relativism decreases with age as idealism
increases
d. Machiavellianism would focus on how to advance one’s own
career (“are you playing to win?”)
 i. Machiavelli observed human behavior and workings of
powers, basically a realist
ii. Employ craftiness, duplicity, and deceit for self-
preservation
e. Conventional Morality/Situation Ethics shifts the emphasis
from the individual to what society thinks about the ethical
issue.
i. What is acceptable to others at a particular time or
place
ii. Based on social convention and group consensus
iii. Can be difficult to adapt to the changing cultures or
people may use the excuse that “everybody does it”
C) Making Decisions on Ethical Problems
i. General Values and Norms of Society
1. Values of the executives can conflict with the
salespeople
ii. Definition of Goals and Ethical Standards
iii. Relationship between Corporation Values and Values of
a Manager
iv. Managerial Decisions
b. Ethical Checklist
i. Use a simple checklist to guide decisions
1. Recognize the dilemma
2. Get the facts
3. List your options (are they legal, right, or
beneficial?)
4. Make your decision
c. The Case of the Drug-Using Salesperson
i. Recognizing the Dilemma: can no longer put it off once
you notice it affecting the salesperson’s performance
and customers are complaining
ii. Assembling the facts
1. He had a good performance past and the firm has
trouble finding new salespeople
2. Drug use is preventing his success
3. Hurting company sales and profits
iii. Making an Ethical Decision
1. Meet with them and set up a reasonable quota
while also establishing a plan to achieve the new
goals. Personal problems shouldn’t detract from
performance at work
2. State unhappiness and also that they have heard
rumors about the drug problem. Give an
ultimatum unless they perform a drug test.
3. Concerned with the dual problems of poor sales
and possible drug use. Suggest seeing the
 psychologist and want to keep them because of
their past successes.
4. Express displeasure with poor sales and the drug
problem. Could go to rehab for a month at the
company expense or be terminated
D) Common Sales Ethics Issues
a. Hiring and Firing
i. Hiring
1. Laws prohibiting discrimination in hiring practices
2. Hiring must be based off of qualifications
3. Hiring people from competitors is an issue
a. Well trained and experienced
b. Lawsuits will ensue if trade secrets are
involved
c. Many companies have unwritten
agreements that local competitors
ii. Firing
1. Many lawsuits over wrongful termination which
can be avoided by having the duties and
responsibilities clearly defined in the job
description
a. Role performance, hours on the job, and
goal attainment requirements
2. Discriminating against age is highly illegal as well
b. House Accounts are taken over by a manager in a company
and are the larger accounts that require special attention
exceeding the time and skills available from the salesperson
i. This classification is defended based on the grounds
that it results in customer service
ii. Can be viewed as unfair by the salesperson losing the
account
c. Expense Accounts are used by employees to spend money on
the company’s behalf and then be reimbursed
i. Can often claim higher expenditures than they actually
used
ii. Must determine how tight of controls they want to place
on their expense accounts
iii. Monitor the actual expenses of some reliable
salespeople for a month each year and then set
reimbursement policies based on that.
d. Gifts for Buyers to express appreciation for past and future
business.
i. How can a gift be distinguished from a bribe?
ii. 64 percent of a survey believed it to be a gift over $100
even though 89 percent had witnessed those gift
amounts occurring.
 iii. Depends on the company
iv. IRS rules that only $25 can be deducted for company
business gifts for any one person
v. The following is recommended
1. Follow your company’s policy
2. Keep the gift value low to avoid the appearance of
bribery
3. Never gift a gift prior to closing the deal
4. Be prepared to walk a way if the customer pushes
for something excessive
e. Bribes are gifts with terms involved such as receiving a gift in
turn for your vote on a legislative matter.
i. Foreign Corrupt Practices Act in 1977 made it a criminal
offense to offer a payment to a foreign government
official to obtain or retain foreign business.
1. France, Italy, Belgium, and the Netherlands
haven’t passed a law like it yet.
2. Only illegal if the make an illegal payment
overseas
f. Entertainment
i. Taking a client to lunch or a meal or quite common
ii. Should expenses of spouses be expenditures for trips to
major plants and quarters
iii. Should be a complementary part of a salesperson’s
relationship strategy, not the sole selling strategy. Keep
level of entertainment in line with the account level
E) Government Regulation to set minimum standards of business
morality and then to enforce the rule.
a. Consumer Protection
i. Clayton Antitrust Act prohibits price discrimination,
exclusive dealing arrangements, and mergers that
reduce competition or create a monopoly. I.E. Setting
restrictions so high that they end up with an exclusive
dealer
ii. Magnuson-Moss Warranty Act can’t threaten to void a
customer’s warranty if they purchase a replacement
part from a third party vendor rather than the original
company itself. Full disclosure required
iii. Federal Sentencing Commission for Organizations
established a low that holds the employee and company
responsible for compliance with federal regulations.
Employees must be able to report criminal activities,
punish those who violate the standards, and take steps
to prevent further activity from occurring
iv. Fair Packaging and Labeling Act standard package sizes
and disclosure of the manufacturer’s or distributor’s
 name
v. Consumer Credit Protection Act mandate that there is
full disclosure of annual interest rates and other charges
on loans and credit sales
b. Why are they needed?
i. Handle ethics when they are too big for the firm to
handle
ii. Can sometime prohibit the flexibility needed to respond
to changing conditions
iii. Should be a balance between too little government
(mini-bond underwriting) and too much regulation
(natural gas industry)
F) Building a Sales Ethics Program
a. Best way to is to get the backing of the board chairperson and
the president of the company. Get support from top
management
b. Develop a sales ethic policy
i. Code of Ethics policies of the company revolving around
ethics
ii. Ethics policy statement indicates to the sales force that
the company believes in playing fair with customers and
competitors
iii. Many employees want written policies to help them
perform better and it gives them scenarios
c. Establish the proper moral climate
d. Assign realistic sales goals so they aren’t likely to find a
kickback scheme
e. Set up controls when needed
f. Suggest salespeople call for help when they face unethical
demands
g. Get together with your competition if its an industry problem
h. Whistle Blowing is a last-resort action here an employee
informs the public about an employer’s or supervisor’s
immoral or illegal behavior.
i. Evidence should be strong enough to convince the
average person that an illegal activity is taking place
ii. Government will pay rewards of 15 to 25 percent of any
recovery plus attorney’s fees.
G) Ethics Training
a. Many companies don’t adequately address how it should be
dealt with
b. Many people feel that their companies have actually
encourage unethical practices
c. Offer classes to ensure that employees know what to do in
ambiguous situations. Should involve role-playing.
d. Adjust the training to certain age groups.
e. Want to equip them with knowledge about what they might
experience in the real world.