Chapter Sixteen
Business Ethics and Crisis Management
Authors’ Comments
As an instructor in post-secondary education you likely have had the opportunity to
experience student reaction to or lack of interest in business ethics. While we have
observed this, we also note that “business ethics,” as perceived by many students is
one of the most intimidating aspects of “the real world.” Unfortunately, many students
A natural extension of this discussion is crisis management. We’ve seen numerous
examples of companies in the middle of some degree of crisis. We take the position
that inoculation–a good ongoing public relations effort–is the best preparation for
crisis.
Opening Vignette
TWA Flight 800
TWA did a decent job of handling the immediate response revolving around
communications, emotional counseling and legal processing. The other side of the
aftermath, determining the cause of the accident and deriving remedies for the future,
(mostly out of the hands of TWA) was where ethical questions arise.
Chapter 16: Business Ethics and Crisis Management 2
The real issue arose with the contradiction between the NTSB findings on TWA 800
and the ARAC report on fuel tank flammability. Contrary to the NTSB
recommendations, the ARAC report argued against inerting, saying the process was
too costly for the benefit obtained. But this was an economic justification, not one
that considered the human cost of accidents. Here was an advisory task force trusted
to protect consumer interests using the high costs to resolve a situation as reason not
to require the remedy. Cost-benefit analysis had shown that the ultimate solution was
too expensive. The core question becomes how the monetary costs of accident
prevention can be compared with the non-economic costs of a likely catastrophe in a
cost-benefit analysis.
You may ask students how they feel about cost-benefit analysis when human
Twelve years after the initial recommendation, in July 2008, it was ruled that the
complete solution−inerting–would be required. Some questions to consider (also
included in the vignette):
• Is it an ethical lapse when individuals make a decision as part of a
Learning Objectives
Understand that a good ethical foundation is a good business
foundation.
Recognize that ethics are, ultimately, an individual decision.
Our main purpose in this chapter is to get students to ask themselves questions
about their ethical choices and how they will cope with the inevitable dilemmas
they will face.
Chapter 16: Business Ethics and Crisis Management 3
The Societal Marketing Concept (PowerPoint 16.3)
Pursuing the societal marketing concept encompasses all aspects of the
organization–the whole value chain must be infused with the purpose of
meeting the organization’s goals while considering the well-being of society.
The organizational leadership needs to (PowerPoint 16.4):
The real test of the organization’s ethics comes when there are clashes of
standards. The text describes three kinds of ethical clashes (PowerPoint 16.5):
• Clash of ethical standards among stakeholders
o The example in the book–the manufacturing plant that is
Individuals ultimately make choices; sometimes the choices conflict with their
own values (PowerPoint 16.6).
Learning Objectives
Understand the source of ethics, both organizational and personal.
Chapter 16: Business Ethics and Crisis Management 4
uncomfortable environment.
Bases and sources of ethics (PowerPoint 16.7):
• Natural law–a higher order
Potential problem areas: common situations in which ethical issues pertain
(PowerPoint 16.8) [first three bullets]
• Product announcements–should the marketer preannounce using
language she knows will be unlikely to prove true?
• (PowerPoint 16.9) Others – these are ethically problematic
activities that usually grow out of a creeping commitment to do
what is seen as necessary to compete or to achieve value for
stockholders
o Paying bribes by having a consultant pay the bribe and
reimbursing the consultant for “miscellaneous marketing
costs”
o Charging an exorbitant price for your product at a time
Chapter 16: Business Ethics and Crisis Management 5
ethical choice.
Consider the events listed in the sidebar “They Did What?” as
topics for student discussion. Ask what they would have done.
Experience has shown that students will take the “high road” and
Learning Objectives
Recognize the role of publicity and public relations in crisis
management.
Become familiar with the elements of good crisis management.
CRISIS MANAGEMENT (PowerPoint 16.10)
• The ethical behavior of the organization is intertwined tightly with the
occurrence and the management of crises.
• One common source for crises is problems arising from less than stellar
Crisis preparation–start with the following mind set (PowerPoint 16.11):
• Some crises can be avoided through careful preparation
Chapter 16: Business Ethics and Crisis Management 6
Pauchant and Mitroff’s layers of a crisis are shown in Exhibit 16–5 (PowerPoint
16.12).
Crisis Preparation
Four Key Aspects (PowerPoint 16.13) [numbered 1 through 4]:
1. Establishing effective structures for planning and handling crises–
o ongoing, established crisis management team
o represent viewpoints of all stakeholder groups
Plan for Stages of a Crisis–Exhibit 16-6 (PowerPoints 16.14 and 16.15)
• Early buildup period–early signals indicating an impending crisis
Exhibit 16-5 Layers of Pauchant and Mitroff’s Crisis Management Model
Level one. Character of the people in the organization–willingness to
take responsibility and take corrective action
Level two. Culture existing in the organization–supports appropriate
preparation and response actions
Level three. Organizational structure–crisis management structure in
which all stakeholders are represented
Crisis-Prone Organization: Preventing Individual, Organizational, and
Chapter 16: Business Ethics and Crisis Management 7
• Following the crisis,
o lower-intensity period occurs in which the organization and its
environment and stakeholders proceed to a new normalcy
News media coverage of a crisis
It will scrutinize the company’s actions and speculate on motives. If their
Media Relations during a crisis
Basic rules: (PowerPoint 16.16)
• give the media access
Pre-crisis stage [Pre-crisis and Preparation stages in PowerPoint 16.17]
• Make sense out of incoming data
Triggering event/intense-crisis stage (PowerPoint 16.18)
Crisis management team needs to determine public response.
Chapter 16: Business Ethics and Crisis Management 8
Consider relating the “Here Comes the Goodyear Blimp” story as an
example of 3rd party support.
Here Comes the Goodyear Blimp!
Third Party Support in a
Crisis
In September 2000, at the peak of the tire controversy between
Ford Motor Company and Bridgestone/Firestone, the Goodyear
Tire and Rubber Company released data on the performance of its
Aftermath stage (PowerPoint 16.19)
• Begin repair of the company’s image (time consuming process)
• Thoroughly debrief, learn from experience
Minor crises (PowerPoint 16.20)
• Same approach for handling minor or everyday issues that can erode
Chapter 16: Business Ethics and Crisis Management 9
Small/Startup companies (PowerPoint 16.21)
• Special case–they have only begun to anticipate what problems can
Preparing for Crises vs. Marketing Entrepreneurially–is there a conflict?
(PowerPoint 16.22)
• Potential Conflict−Entrepreneurial orientation suggests moderate risk
Key Terms
natural law
positive law
Answers to Questions for Review and Discussion
1. Discuss consumer attitudes toward business ethics. Why are so many people
willing to accept business ethics as an inconsistency in terms?
People may be willing to accept business ethics as an inconsistency in terms because their
Chapter 16: Business Ethics and Crisis Management 10
2. Are ethical marketing practices more important at the business–to-business level or
at the consumer level? Is there a difference?
Ethical marketing practices ideally should be consistent in both business–to-business and consumer
3. Should a company respond (or “or go along with”) a customer that wants
something because it is best for them, but not aligned with what may be beneficial
for society?
The easy answer here is to say “of course not!” but when a customer is large and important, this
4. Considering the nature of relationships in business-to-business marketing versus
consumer marketing, are ethical lapses more likely to occur in consumer markets
or in business-to-business markets?
Ethical lapses would seemingly occur more readily in consumer markets due to the fact that
5. Select a recent crisis faced by a prominent member of society–politician,
statesman, community leader and so on–how well was the crisis handled with
regard to the principles discussed in this chapter?
Students’ answers will depend on the crisis ‘du jour.” Things that students might look for include:
6. What ethical factors can contribute to individual discomfort in a position in an
Chapter 16: Business Ethics and Crisis Management 11
organization?
Ethical factors that can contribute to individual discomfort in an organization position include the
7. Do all crises, big and small, involve ethics? Briefly explain.
Not all crises, either big or small, involve issues of ethics, but rather can find contributing factors in
8. Can all crises be averted with good crisis planning? Why or why not?
Not all crises can be averted with proper crisis planning, especially in complex and large
9. What should an organization look for in a PR agency to handle the company’s
public crises? When should the PR agency be hired? Why?
the appropriate news sources that might be needed by any firm planning for crisis management.
10. Think about the emotions experienced by TWA’s stakeholders (both internal and
external to the organization) during the Flight 800 crisis. If you were the
spokesperson for TWA, whose emotions would you be expected to address? How
might you, in your role as spokesperson, address these emotions?
As spokesperson for TWA during the Flight 800 crisis, you should be expected to deal with the
11. Go to the web site for the American Marketing Association, www.ama.org and
review the AMA Code of Ethics. Consider how difficult it would be for
you
to adhere
to it, in the examples described here and from your personal experience.
Chapter 16: Business Ethics and Crisis Management 12
12. How can a business-to-business marketing organization be watching for the
sources of minor crises without becoming too conservative in its strategies and
actions? How can marketers stay entrepreneurial while still proactively managing
crises?
A business-to-business marketing organization would watch for the sources of minor crises without