Ethics, the Law, and Sales Leadership：中国经济管理大学 MBA课堂笔记《销售管理：塑造未来的领导者》
Ethics, the Law, and Sales Leadership
中国经济管理大学 MBA课堂笔记《销售管理：塑造未来的领导者》
中国经济管理大学/中國經濟管理大學
Ethics, the Law, and Sales Leadership
Learning Objectives:
After completing this chapter, students will be able to:
· Identify the more common ethical dilemmas that face salespeople, sales managers, and sales executives.
· Distinguish between those organizational policies and practices that support ethical behavior and those that enable unethical behavior.
· Explain how principled leadership can foster a firm’s ethical principles and corporate culture.
· Be able to develop an appropriate course of action when you’re personally faced with an ethical dilemma.
Introducing the Chapter:
Salespeople, as boundary spanners, may find themselves faced many ethical challenges because they have to represent both the company and their customers. Common ethical issues specific to sales can include misrepresentation, bribery, and encouraging rogue purchasing.
Companies and sales managers can reduce unethical behavior by creating the right ethical climate. Codes of ethics are also useful tools, not only because these can provide guidance to salespeople when faced with ethical challenges but also in the creation of the right kind of ethical climate. Companies may also create different forms of systems for identifying and responding to ethical breaches.
Laws also govern salespeople’s and sales managers’ actions. Such laws include the Uniform Commercial Code, which defines when a sale occurs, the limitations of warranties, and other important elements in selling. Also important are laws such as state laws governing business defamation, the CAN-SPAM act, the FTC’s Do Not Call registry, and the Federal Corrupt Practices Act. Managers also have to worry about labor laws, such as those protecting employees from sexual harassment.
Chapter Outline:
I. Approaches to Ethics
A. Common approaches to ethics
1. The Golden Rule: do unto others as you would have them do unto you.
2. The Conventionalist Approach: take any and all actions allowed by law or by convention
3. The Protestant Ethic: do what you can defend to a committee of peers.
4. The Market Imperative: the market will determine what is right.
5. The Libertine Ethic: ethics are based on the principle of individual freedom.
6. The Utilitarian Ethic: do what has the best outcome.
a. Situational Ethics
b. Bentham/Mills proportional ethic
II. Common Ethical Issues Facing Salespeople
A. Ethical Issues Associated with the Salesperson’s Customers
1. Misrepresentation: lying about a product, making claims for it that are not true.
2. Bribery: offer of a gift that secures undue influence.
3. Encouraging rogue purchasing: the practice of purchasing products from non-approved vendors
B. Ethical Issues Associated with the Salesperson’s Company
1. Stealing
2. Sexual Harassment: unwelcome sexual advances and jokes.
III. Ethical Climate: the degree to which a firm’s corporate culture supports ethical business practices
A. Code of Ethics: A company’s outline of its standards for ethical behavior. Established to:
1. Provide salespeople and other employees with guidelines and standards for conduct.
2. Help salespeople inform others that they intend to conduct business in an ethical way.
3. Support salespeople’s intentions to remain ethical, offering salespeople an “out” when under pressure.
4. Attract high quality salespeople.
B. Federal Sentencing Guidelines (FSG): enacted in 1987 and updated in 2007 as a response to an increase in white collar crime, specifically crime committed by businesses. Include:
1. Developing a clear and complete code of ethics capable of reducing misconduct.
2. Securing top management’s support for high ethical standards and charging an executive-level officer of the company with responsibility for establishing and managing a compliance program.
3. Establishing and managing a compliance program that includes mandatory training and regular communication.
4. Creating internal auditing systems to monitor behavior and detect misconduct.
5. Consistently enforcing standards and punishing violations.
6. Reviewing and modifying the compliance program on a regular basis to demonstrate a focus on continuous improvement.
IV. Identifying and Responding to Ethical Breaches
A. Ways of identifying and responding to ethical breaches
1. Whistle blowing: the reporting of unethical or inappropriate behavior by an employee
2. Using technology
V. Responding to Ethical Breaches
A. Due Process Systems Responding to Ethical Breaches
1. Compliance Investigation and punishment systems: upper manager investigates potential violations, determines guilt, and assesses punishment to the guilty
2. Grievance and arbitration systems: guilt and punishment is investigated and discussed by progressively higher levels of management with an arbitrator resolving the case if management and labor cannot agree on guilt or on the amount or type of punishment
3. Mediator/counseling systems: a manager investigates, leads discussions, and builds consensus about the potential guilt of an accused person, as well as the need for any changes in the organization’s practices or policies
4. Employee board systems: Mediator/counselor role is taken on by a board of the accused’s peers.
VI. Dealing with Ethical Breaches
A. Strategies for Dealing Personally with Ethical Breaches
1. Leave the organization
2. Take a stand
3. Negotiate for an alternative course of action
4. Appear to agree with the tactic but choose to remain ethical
VII. State Related Laws
A. Examples
1. Uniform Commercial Code: legal guide to commercial practices
a. Agent: person who has the ability to make a binding agreement for a company.
b. Sale: the transfer of title from the seller to the buyer in exchange for money.
c. Warranty is an assurance by the seller that the product or service will do what it was sold to do
2. Laws governing business defamation: occurs when salespeople (or other company representatives) make unfair or untrue statements to customers about a competitor, its products, salespeople, or other aspects of that organization
3. The Gramm-Leach-Bliley Act: requires companies to notify their customers regarding their privacy policies
4. CAN-SPAM act: requires companies to clean up their email lists and only contact those with whom they have an ongoing relationship
5. FTC’s Do Not Call registry: allows individuals to place their phone number off-limits to telemarketers.
6. Foreign Corrupt Practices (FCP) Act: requires salespeople to live up to the law of the
7. Federal Corrupt Practices Act.
VIII. Laws for Sales Managers
A. Labor laws
B. Market Laws
1. Foreign Corrupt Practices Act
2. Robinson-Patman Act: forbids price discrimination, the giving of special prices, discounts, or services to some customers and not to others.
3. Anti-trust Act: prohibit certain forms of non-competing agreements
IX. Chapter Summary
Questions and Problems:
1. The different approaches to ethics discussed in this chapter focus on the salesperson’s actions. Now consider what buyers might consider appropriate or inappropriate behavior under each of the different approaches.
a. Golden rule approach
· The buyer might consider it appropriate to be concerned about the salesperson’s result if a sale is made (worried about how the other person benefits).
· The buyer might consider it inappropriate for the salesperson to sell a product to them for more than it is worth or to be worried only about making the sale.
b. The conventionalist approach
· The customer would want to comply with professional standards, such as those put forth by the Institute for Supply Management, because that is what other purchasing agents do. Alternatively, the customer would want the salesperson to act as other salespeople do, which could mean buying lunch or providing gifts.
· The customer would consider it inappropriate for the rep to offer lunch if no one else did that.
c. The Protestant Ethic
· The customer would be much more concerned about the appearance of ethical behavior. A bribe would be ok if it could be dressed up in a way that could be defended, if the buyer were not particularly ethical.
· Alternatively, a scrupulous buyer would avoid any activity that would appear questionable, such as accepting a lunch, even though the activity was innocent.
d. The Market Imperative
· The customer would want the greatest value at the lowest price with the most generous of payment terms.
· The customer might consider negotiating inappropriate because it results in different prices and terms and that might not allow the customer to compete against other companies because they got better prices or terms.
e. The Libertine Ethic
· The customer could be happy to accept favors, free lunches, gifts, etc., as long as the company got a competitive product at a competitive price (wasn’t hurt by the action).
· The customer would consider it inappropriate for a salesperson narrowed down choices without being offered the options.
f. The Utilitarian Ethic
· The customer may not worry about the purchase process and fairness to anyone involved, as long as the company got the best value.
· The customer might consider it inappropriate for a salesperson to worry only about making the sale and not about the customer’s outcome.
2. Likewise, consider each of the different approaches and review the ethical challenges faced by sales managers. How might a sales manager’s response to an ethical challenge differ under the different approaches?
a. Golden rule approach- There could be a conflict on how different people want to be treated; therefore the sales manager might face a challenge in deciding how each party wants to be treated.
b. The conventionalist approach- There are gray areas where it would be difficult to tell whether certain acts are legal or illegal. Further, what is conventional within a company may be different than what is conventional in general society.
c. The Protestant Ethic- The sales team might focus on doing what can be defended, not what is right. Thus, a great deal of effort might be spent on arguing or developing arguments to support activities.
d. The Market Imperative- What might be right for the customers might not be right for the organization and vice versa.
e. The Libertine Ethic-Some customers can be harmed indirectly by salespeople’s actions even though the salespeople performed those actions in good faith. The question then becomes how to resolve those fairly for everyone involved.
f. The Utilitarian Ethic-It can be difficult deciding what would be the best outcome for all who are involved. Further, means are not an issue, which means that there could actions that are questionable but undertaken in order to achieve objectives.
3. Jim Stradinger, a sales manager for Holland 1916, argues, “Do what’s right for the customer and everything else will take care of itself.” Discuss the pros and cons from each perspective: the perspectives of the sales representative, customer, and sales manager.
While answers may vary, here are some samples:
Sales Representative
Pros: Customer satisfaction should increase or be very high, which will result in repeat business from customers.
Cons: What the customer wants may not be to the advantage of the sales rep – for example, lower prices may benefit the customer but harm the rep’s commission.
Customer
Pros: The customer gets what is best for them.
Cons: The customer could spend an inordinate amount of time making sure that what was sold was “right.”
Sales Manager
Pros: If the customer is treated right, it may result in higher sales for the organization and consequently higher profits for the sales team; in addition, the policy takes some decision making authority away because of the need to always do what is right for the customer – there is no need to consider what is right for anyone else.
Cons: If the focus is on the customers only, then the sales manager might neglect the welfare of his or her salespeople, resulting in low team morale.
4. The Federal Trade Commission has generally ruled that puffery is acceptable. What is not acceptable is deception that is subjectively interpreted as injurious to consumers – that is to say, the claim can be interpreted in a way that harms the buyer. Review the following claims. Are they puffery or deceptive misrepresentation?
a. This sinus medication was developed by a scientist to alleviate his own sinus headaches!
b. There is no other wrench like it!
c. You can’t buy a faster copier in this price range.
d. I’ve sold lots of other customers this same product at the full list price.
The first statement would be considered puffery, though of little consequence. The issue really isn’t who developed it but does it work.
The second statement would also be considered puffery.
C, though, is measurable and if not true, would be considered deceptive misrepresentation.
The final statement would be considered puffery. The challenge is defining “lots;” is three, for example, lots?
5. A sales manager listened to a customer complain about a salesperson and thought, “This is the third complaint like this I’ve gotten this week. We’ve got a code of ethics – why aren’t my people following it?” Discuss some reasons why her sales team is acting unethically and what she can do about it.
· Perhaps the company does not have a system that monitors the employees’ behavior and detects misconduct.
· Even though the company has a code of ethics, it may not have a system for punishing violations therefore the employees continue to act unethically.
· The code of ethics may be vague and as a result employees may not know what is required of them
· If the code of conduct is vague, the sales manager should ensure that a clear code of conduct is developed. The sales manager should also come up with a way of detecting violation and punishing employees who are in violation of the code of ethics.
6. Your university has probably established multiple ethics violation investigation systems. An honors council, for example, often acts like an employee board when it comes to the actions of students. Ethics violations by a professor, however, are likely to be addressed in another system. As a student, if you were treated unethically by a professor, which type of system (discussed in the chapter) would you want and why? Would it make a difference to you if the unethical behavior involved the professor claiming your work were his or her own versus, say, sexual harassing you?
Responses will vary. A sample answer is “If I was treated unethically by a professor I would want the compliance and punishment system to be applied” and “I would feel more aggrieved if the unethical behavior involved sexual harassment compared to the professor claiming my work were his or her own.”
7. Which of the following are legal practices and which might be considered illegal? If you determine that not enough information is provided, what would make the practice legal or illegal?
a. A salesperson offers a discount to a small drugstore if the store will set up a special display of his product at its entrance.
This practice is legal and fairly common.
b. A salesperson sends two bottles of wine, valued at $100 each, to a customer as a thank-you gift after making a large sale.
This could be considered illegal. The sale was large, so thank you gifts worth $200 might be ok, but the value of the gifts is certainly more than the IRS would allow as a reasonable expense.
c. The buyer asks the salesperson out for drinks after work.
Not enough information is provided. If the buyer is just taking the salesperson out after a successful sale, then there might be nothing wrong. If the buyer is using it as a condition to offer the salesperson business, then this might be considered unethical but would be difficult to prove as a bribe.
d. A buyer provides a salesperson with a competitor’s proposal, including pricing information.
If the competitor’s proposal were marked “confidential, for the customer’s eyes only,” then the competitor could take civil, not criminal, action. If the buyer is a buyer for the government, then there may be laws dealing with the situation that might make it illegal. For example, it would be illegal in certain instances to open a competitor’s bid early and then use that to leverage other prices down.
8. As a sales manager, you find yourself faced with the following situations. Identify the ethical or legal issue in each and discuss how you would handle the problem. (All of these were experienced by former students.)
a. The regional sales manager, your boss, forwards several ethnic jokes and lewd emails to you and your entire sales and support staff. Two of your salespeople complain to you.
This practice creates a negative work environment and the salespeople could take legal action. A possible way to handle the problem is to tell the regional sales manager that the emails are offensive and some employees have already complained and not to do it again. Further, the instance should be documented and placed into the manager’s permanent file with the warning that if done again, the manager would be terminated. Alternatively, the manager could be terminated immediately if there is a clear computer use policy forbidding such behavior.
b. A customer has called and asked you to send someone else to his office as he does not want to be called on by his currently assigned salesperson. When you ask why, it is because he doesn’t want someone of that sexual orientation calling on him.
If discussing in class, note that this type of situation has occurred for many reasons – sexual orientation, race, ethnicity, and faith are just a few examples. While there are no legal ramifications for the customer, the manager has to tread carefully. To comply with the customer’s wishes may win the company business, but if the salesperson who owns the account is penalized as a result, then the company has also discriminated against that salesperson and legal action could ensue. In many situations, the manager has left it up to the salesperson to decide whether anyone should call on that account and how credit for the account is awarded. A key point is to document any and all conversations regarding the situation.
c. You’ve asked a salesperson to create a training session for the entire sales team, a task that will require the salesperson to spend about $60 on materials that company policy expressly prohibits salespeople from charging on their expense report. She agrees, then submits an expense report with the $60 down as entertainment of a client, an acceptable expense. You notice it on the expense report; she hasn’t said anything about it but you know she was conducting the training session on the day in question and couldn’t have entertained the client that day.
The manager should deny the expense because it cannot be documented. We’ve seen managers turn a blind eye to such a practice because the company policy is wrong; however, such a choice carries the potential consequence of the manager being reprimanded or fired as a result.
d. The company has introduced a new product and requires all salespeople to memorize a demonstration script. To encourage salespeople to learn it, a contest was developed by your boss to award a new HDTV to the best presentation of the demonstration. Two salespeople come to you and say, “Let’s just let Beverly represent our team, we don’t have time for time for this. We need to be out selling.”
As a side note, Beverly won the demonstration contest anyway. However, what is the purpose of the contest? That purpose still needs to be accomplished. To skip the competition may not be a violation of ethical principles but it isn’t sound management. However, to put Beverly forward as the winner is lying if there has been no team level competition and would degrade the trust management would have in you.
9. Look at the article describing the Caux Round Table principles. Which model of ethics would you say most aptly describes those principles? What is the impact on salespeople and sales managers if they ascribe to the CRT principles?
The Utilitarian approach most aptly describes the CRT principles. If salespeople ascribe to CRT principles, they will do what is best for the society-for the shareholders, other employees and the customer.
Answers for Chapter Caselets:
Caselet 4-1
Patman Paper Co.
Case Question:
Jared declined, but later wondered if he was an idiot. Entertaining clients was not unusual. He needed the sale. What should he have done?
While entertaining clients was not unusual, in this case Suzy’s approach was inappropriate and therefore in conflict with Jared’s standards of ethics. Jared could have talked the matter over with his manager and come up with an alternative-for instance, he could have told Suzy that while the company allows salespeople to entertain clients, the company’s policy was that there be two or more sales representatives present.
Caselet 4-2
Callahan Car Parts
Case Question:
What type of approach to monitoring, investigating, punishing, and improving ethics policies should Tommy suggest to the committee? What should he do to get salespeople to support the need for clear ethics policies?
Tommy can suggest an employee board system. To get the employees to support the need for clear ethics policies he could talk to them and assure them that while he does not doubt their honesty, having an ethics policy would provide an official guideline for standards of conduct. He could ask the salespeople to give their contribution on how the policies can be structured and how to deal with misconduct, if any.
Students may develop other choices; the issue is to make sure that they have thought it through carefully.
Role Play:
Magnum Performance
Assignment: Break into groups of three. In each group, one person is Jackie, the office general manager, and another is the salesperson who is responsible for the Shoshiba account (and for finding the salespeople to fill the jobs). Don’t worry about matching gender to the names in the case. Discuss strategies for how to handle Jackson (the client) and how to respond to Magnum’s regional vice president. The role of the third party is “the devil’s advocate,” and this person’s job is to suggest unethical strategies to each person. The devil’s advocate should call time-out and whisper suggestions to each person, who must then act out that suggestion. The general manager or salesperson then listens to the unethical suggestions and responds with implications of those choices and then presents alternatives.
Strategies Jackie can use to handle Jackson and respond to the vice president:
Tell Jackson that there are 8 qualified candidates who can fill the job immediately; ask for a little time more time to fill the remaining positions.
An example of unethical strategies from the “devil’s advocate”:
Suggest to Jackie to agree to Jackson’s demand for as many salespeople as possible even though they are not qualified. After all, this will ensure that the order gets filled up and Jackie will therefore not have to answer to the vice president about not filling the order. Jackie could respond by saying that the qualifications of the salespeople is of importance and would rather send out a few qualified ones than several who are not qualified.
Self-Assessment:
In your copy of Sales Management, you will find an Access Code Card. By using this code at www.pearsonhighered.com/tanner, you will gain access to the SAL program. Students will find an Access Code Card in their copy of the book as well. The first SAL instrument is addressed in the text, the second is provided as an additional exercise.
ID3 - How Do My Ethics Rate?
When you have completed the instrument, your answers are then compared to those offered by a group of 243 business students. Because the instrument presents both philosophical positions and individual situations, answers could vary greatly from the student average. The report compares the individual student to the student average from the study, which may or may not reflect your students.
IB1 - What do I Value?
Students are asked to rank a list of terminal and instrumental values, based on Rokeach.
Using Videos:
Go to the website with videos from Selling Power and consider the two videos selected for this chapter. Listed below are potential ways to introduce each video and questions you might consider to encourage further discussion after you have viewed the videos. To access the videos go to www.pearsonhighered.com/tanner.
What Makes a Great Leader: Asher Milgrom
This video, while longer than most, is very inspiring and can lead to much introspection. Gerhard begins by talking about Jack Welch, a former CEO who is vilified by many for his hard-nose approach to managing people, as well as idolized for his success. Milgrom is one who idolizes Welch, and brings to the fore Welch’s philosophy toward supporting people. One topic Milgrom covers in depth is skeptical curiosity. He also describes how his self-doubts and experiences have held him back in making the progress he’s wanted. (There is another Milgrom interview on the Selling Power website where he describes a near-death experience he had – another amazing video.)
Questions:
1. What is skeptical curiosity and how is different from cynicism?
2. Why does a leader have to be “authentic” and what does that mean?
3. Milgrom brings up the writings of Mother Theresa, who was wracked with doubts about her faith. Yet these doubts did not hold her back. What are the things that hold you back? How can you address those?
Trump Fired Her, Now She’s a Millionaire: Nicole D’Ambrosio.
Interesting video starring a woman who now owns her own real estate company. She talks a bit about getting on the show and how her first attempt through the normal process failed. So she made her own tape and sent it in, then got a call-back. She also was offered a job after, but decided to strike out on her own. She also describes about her philosophy of selling and why she went into selling.
Questions:
1. What does D’Ambrosio’s experience in getting on the show mean to salespeople who have difficulty getting in to see prospects?
2. She graduated from
3. She knocks company training, or at least points out some of the weaknesses in company training programs. What does this mean for you if you are managing a sales force?
Full Case Recommendations:
The Afgar case is a good one for this chapter. A sales rep has been fired and has left behind a number of customer issues. His practices were certainly unethical and possibly illegal. The field sales manager must now clean up the situation as well as ensure that the situation is isolated.
Lexington Industries can also be used with this chapter. This case explores cultural issues facing a sales manager in
Other In-Class Exercises:
An interesting debate is whether ethics can really be a function of a corporate culture (i.e. leadership) or whether the best route is to hire ethical people. This exercise can be started by briefly debating that question. But while interesting, the debate serves little practical value because the Federal Sentencing Guidelines (FSG) require that companies develop policies and practices that encourage and support ethical behavior. Companies that fail to do so face significantly greater penalties should problems arise. Thus managers have to operate as if ethics can be a function of corporate culture.
One mechanism for illustrating the various ethical approaches is to divide the class into groups and assign each group an ethic: The Golden Rule, the Libertine, the Protestant ethic and so forth. Using that approach and that approach only, develop policies and procedures for the following behaviors:
· Dating subordinates who report directly to you
· Personal use of company equipment and materials
· Loaning equipment to customers that you intend to later sell as new
· Entertaining customers
Any policies and procedures must include limits as to what is and is not acceptable, mechanisms for reporting and evaluating potential violations, and punishment if determined guilty of a violation.
Each group can then report out its recommendations. Ask if differences or similarities are due to personal preferences or the nature of the ethical philosophy.
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