Chapter 3 ♦ Ethics and Social Responsibility 3-1
CHAPTER 3 Ethics and Social Responsibility
CHAPTER FEATURES
Chapter Features
Key Points
✓ Marketing & You
Students are given a survey to determine how important they view
ethics and socially responsible behavior.
✓ Customer Experience
Researchers conduct a series of experiments to see whether ethical
standards within companies pay off.
USING THIS MANUAL
Chapter three includes six learning outcomes that help students become more familiar with ethics and social
responsibility. The chapter outline provides detailed analysis of the six learning outcomes, listing PowerPoint slides
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LEARNING OUTCOMES
1 Explain the determinants of a civil society
The “social glue” that holds a society together is comprised of six factors. They are: ethics, laws, formal and
2 Explain the concept of ethical behavior
Ethics are the moral principles or values that generally govern the conduct of an individual or a group. Ethics can
3 Describe ethical behavior in business
The law typically relies on juries to determine whether an act is legal or illegal. Society determines whether an
4 Discuss corporate social responsibility
Responsibility in business refers to a firm’s concern for the way its decisions affect society. A second theory says
that the corporation should always pay attention to the interests of its stakeholders. These are: management,
5 Describe the arguments for and against social responsibility
Today, virtually all managers endorse social responsibility of corporations. It is, instead, a matter of what types of
6 Explain cause-related marketing
Cause-related marketing is the cooperative effort between a for-profit firm and a non-profit organization. It is
different from philanthropy, which is a specific, tax-deductible donation. Cause-related marketing is very popular
supposedly been helped. These cases are a small minority.
Chapter 3 ♦ Ethics and Social Responsibility 3-3
CHAPTER OUTLINE
1 Explain the determinants of a civil society
I. Determinants of a Civil Society
There are six modes of social control:
Review Questions 1.1, 1.3
Review Question 1.2
A. Ethics: Ethical rules and guidelines along with customs and traditions that
provide principles of right action.
E. The Media: In an open, democratic society, the media play a key role in
informing the public about actions of individuals and organizations.
2 Explain the concept of ethical behavior
II. The Concept of Ethical Behavior
Review Question 2.1
PowerPoint 3-7:
Ethical Theories
Review Question 2.3
Ethics refers to moral principles or values that generally govern the
A. Ethical Theories
1. The Deontological theory states that people should adhere to
their obligations and duties when analyzing an ethical dilemma.
benefit the most people, regardless of personal feelings
ii. Rule utilitarianism—takes into account the law and is
concerned with fairness
3. The casuist ethical theory compares a current ethical dilemma
with examples of similar ethical dilemmas and their outcomes.
3 Describe ethical behavior in business
III. Ethical Behavior in Business
Factors Influencing
Review Question 3.1
PowerPoint 3-9:
Ethical Behavior in
Business
Review Question 3.2
Morals are rules or habits, typically stated as good or bad, that people develop
as a result of cultural values and norms.
A. Morality and Business Ethics
1. Business ethics are actually a subset of the values held by society as
a whole. Those values are acquired through family, and through
educational and religious institutions.
4. There are three levels of morality:
a. Preconventional morality is childlike in nature, calculating,
self-centered, and selfish.
B. Ethical Decision Making
Studies show that the following factors influence ethical decision
making and judgments:
1. The extent of ethical problems within the organization
Ethical Decision Making
PowerPoint 3–13:
PowerPoint 3–14:
Creating Ethical
Guidelines
3. Social consensus within managerial peers
C. Ethical Guidelines and Training
1. More and more companies are employing ethics officers and are
Creating ethics guidelines has several advantages:
a. Identify acceptable business practices
Businesses must be careful not to make their codeS of ethics too
vague or too detailed.
2. Ethics training is a good way to help employees put good ethics into
practice.
3. Each year, Ethisphere magazine lists the top 100 most ethical
Review Question 3.3
D. Cultural Differences in Ethics
1. Studies suggest that ethical beliefs vary only little from culture to
culture.
2. The Foreign Corrupt Practices Act is a law that prohibits U.S.
E. Ethical Dilemmas Related to Developing Countries
1. Expanding into developing countries offers multinational firms the
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2. Many multinational firms have been criticized for exploiting
developing countries.
Customer Experience
Will Consumers Buy and Pay more for an Ethical Company’s Products?
Review Question 4.1
4 Discuss corporate social responsibility
IV. Corporate Social Responsibility
Review Question 4.2
Review Question 4.3
Review Question 4.4
PowerPoint 3–18:
A. Corporate social responsibility is business’s concern for society’s
welfare. Specifically, this concern is demonstrated by managers who
B. Sustainability
Sustainability is not simply “green marketing.” Environmental sustainability,
C. Stakeholders and Social Responsibility
1. Stakeholder theory holds that social responsibility is paying
attention to the interest of every affected stakeholder in every
aspect of a firm’s operation.
Typical stakeholders include:
a. Employees
2. Four types of social responsibility make up the pyramid of
corporate social responsibility:
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a. Economic: Be profitable. Profit is the foundation on which all
5 Describe the arguments for and against social
responsibility
V. Arguments Against and For Corporate Social Responsibility
Review Question 5.1
Review Question 5.2
PowerPoint 3–22:
Arguments For Social
Responsibility
A. Arguments Against CSR
1. Businesses should focus on making a profit and leave social and
B. Arguments for Social Responsibility
1. It is simply the right thing to do.
C. Growth of Social Responsibility
1. The UN Global Compact is the world’s largest global corporate
2. Proactive Social Responsibility
a. Ben & Jerry’s was founded and built on the concept of
sustainability. It has created a large number of initiatives and
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Global Perspectives:
Social Media Push Nestle to Sustainability Action
In 2010, Greenpeace posted a video to YouTube that linked Nestle’s Kit Kat candy
to rainforest destruction in Indonesia. Protestors criticized Nestle on the company’s
6.2
6 Explain cause-related marketing
VI. Cause-related Marketing
PowerPoint 3–24:
Cause-Related Marketing
A. Cause-related Marketing Controversy
According to the Susan G. Komen Breast Cancer Foundation, five
questions to ask before participating in a cause-related marketing
program include:
Review Questions 6.3
1. Is the company committed?
Terms
ethics
sustainability
deontological ethical theory
stakeholder theory
utilitarian ethical theory
responsibility
casuist ethical theory
cause-related marketing
Suggested Homework:
• The end of each chapter contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.
REVIEW AND APPLICATIONS
REVIEW AND APPLICATIONS
1.1 Explain how each of the six factors contributes to a civil society.
The six factors of a civilized society are the “social glue” that binds society together. These are the factors that
1.2 Why is a free and uncontrolled media important in a country?
Free and uncontrolled media is important because the stories inform the public and spotlight the good behavior
1.3 Can customs and laws sometimes conflict, especially when a society experiences an influx of immigrants?
Studies suggest that ethical beliefs vary only little from culture to culture. However, with a vast array of
2.1 It is sometimes said that ethics hold a person to higher standards than laws. Explain.
The laws address the lowest common denominator of socially acceptable behavior. Ethics refer to the moral
2.2 Moral relativists are basically time and place ethicists. Explain what this means.
Moral relativists believe in time-and-place ethics. Moral relativists do not believe in absolute rules. Their beliefs
2.3 Explain the differences between utilitarianism, casuist, and deontology theories.
The utilitarian ethical theory is founded on the ability to predict the consequences of an action. According to a
utilitarian, the choice that yields the greatest benefit to the most people is the choice that is ethically correct.
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3.1 Explain the difference between ethics and morals and describe the relationship between the two.
Ethics refer to the moral principles or values that generally govern the conduct of an individual or a group.
3.2 What are the differences between preconventional morality, conventional morality, and postconventional
morality? Give an example of each.
3.3 Give several examples of how ethical practices can vary from one culture to the next.
Student responses may vary. According to studies, ethical beliefs vary only little from culture to culture.
4.1 Describe at least three situations in which you would not purchase the products of a firm even though it is
very socially responsible.
4.2 A firm’s only responsibility to society is to earn a fair profit. Comment.
Student answers will vary. There are several theories pertaining to corporate social responsibility. A recently
4.3 Is sustainability a viable concept for America’s businesses?
Sustainability refers to the idea that socially responsible companies will outperform their peers by focusing on
4.4 Illustrate how there can be conflicts between the needs and desires of various stakeholders.
The stakeholders in a typical corporation are employees, management, customers, the local community,
Chapter 3 ♦ Ethics and Social Responsibility 3-11
5.1 Explain the relationship between the global economy and social responsibility.
Corporate social responsibility could potentially damage companies in the global marketplace. Cleaning up the
5.2 Defend the proposition that the only responsibility of the firm is to make money for the stockholders.
One argument against CSR is that businesses are created to produce goods and services, and not to handle
5.3 Explain how a firm can earn additional profits by being socially responsible.
Being socially responsible can be a profitable undertaking. Smart companies can prosper and build shareholder
value by tackling global problems. Firms such as GE have earned additional profits by selling more wind power
6.1 Why are more firms jumping on the cause-related marketing bandwagon?
6.2 Explain the controversy surrounding some cause-related marketing.
The controversy surrounding some cause-related marketing speaks about breast cancer awareness. Some
6.3 What are some questions that consumers should consider before participating in a cause-related
campaign?
Prior to participating in a cause related marketing campaign it is best to make sure the company is committed,
Supplemental Exercise: Group Work
Review and Applications
Review and Application Questions 1.1, 1.3, 3.1, 4.1, 4.2, 4.3, 4.4, 5.2, 6.1 lend themselves well to group work. For
APPLICATION EXERCISE
Purpose: Many companies today are concerned with social responsibility. They may pursue philanthropic activities
and/or strive to be ethical. Your goal for this assignment is to evaluate how firms are being socially responsible.
Limit your answers to one page and provide a printout of the Web site you visited.
Setting It Up: Have the students choose a company and find that company’s Web site on the Internet. Once they get
to the Web site, have them look for information that tells them about the firm’s efforts to be socially responsible.
They should look for things like news releases, company information, information about community programs, etc.
Have them look in their textbook and their notes to help them define what might be considered socially responsible
ETHICS EXERCISE
1. Should Jane claim that she is Hispanic American? Explain your response.
Jane should not claim to be Hispanic American; this classifies as falsifying claims. To develop a personal set of
2. Does the Federal Trade Commission address this issue? Go to http://www.ftc.gov and search for
guidelines for small business advertising or e-commerce. What does Jane risk in making false claims in
her ads?
Under the Fair Trade Commission Act
There are several risks that Jane would encounter by making false claims in her ads. The penalties that the FTC
imposes depend on the nature of the violation. The remedies that the FTC or the courts have imposed include:
A. Cease and desist orders. These legally–binding orders require companies to stop running the deceptive ad
MARKETING PLAN EXERCISE
Purpose: Students will use the following exercises as a guide for the next part of the strategic marketing plan.
1. Identify any ethical issues that could impact your chosen firm. What steps should be taken to handle these
issues?
2. How should your company integrate corporate social responsibility into its marketing plan?
3. In addition to suggestions for philanthropic responsibilities, write up a brief code of ethics for your firm. To see
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CASE STUDY
(Product) Red
1. Discuss the four components of corporate social responsibility (CSR) and how they relate to a charitable
campaign such as (Product) RED. How does participation in a cause-marketing event contribute to a
company’s corporate social responsibility? What role does sustainability play?
A socially responsible company is aware of how its decisions and actions affect the rest of society. Social
2. Do you think a partnership with (Product) RED can improve Gap’s image? Is it a sign that they are
making a commitment to corporate social responsibility or do you agree with critics who say their
involvement is an attempt to spit-shine the company’s image while continuing to do business as usual?
Student answers will vary about (Product) RED’s ability to improve Gap’s image as a socially responsible
3. Describe the various types of technology that have contributed to the media coverage, marketing efforts,
and public discussion of the RED campaign.
The October 2006 launch of (Product) RED received extensive television coverage. Oprah’s daytime talk show
4. A year after (Product) RED’s launch, Ad Age reported that although $100 million had been spent on
marketing the campaign, only about $25 million had gone to the charity itself. Industry observers
speculated that this could trigger a backlash against the campaign. Do you believe the criticism is
justified? Do you think the campaign could lose supporters as a result?
Student answers will vary. Some critics believe that any money raised for The Global Fund is better than
Chapter 3 ♦ Ethics and Social Responsibility 3-15
LESSON PLAN FOR VIDEO
Company Clips: Method—People Against Dirty
Segment Summary:
Method’s first “lab” was the kitchen of founders Eric Ryan and Adam Lowry, two friends whose goal was to evolve
the household cleaner from a toxic object that hid under the sink to an all-natural, biodegradable, and stylish
counter-top accessory. This video segment shows method through yet another lens, that of corporate social
responsibility and sustainability. Chemical engineer Adam Lowry outlines the chemical aspects of traditional
cleaning products and describes how method’s products are healthier. As you watch the video, keep in mind the
various marketing orientations you learned in Chapter 1.
1. Does Method have a societal marketing orientation, or is it just a market-oriented company that
integrates a number of environmental practices into its operation? Explain.
Students’ answers will vary but might consider that Method exhibits a societal marketing orientation in that it
2. How is Method practicing sustainability?
It uses a renewable energy source, uses recyclable packaging, plants trees so as to be carbon dioxide neutral
3. Discuss the changing social factors that have made it possible for Method to be so successful.
The scientific research co-founder Adam Lowry was engaged in at the time that led him to consider creating an
Supplemental Exercise: Video
Company Clips
These teaching notes can be assigned for students to prepare before class, in-class before watching the video, during
class while watching the video, or after students watched the video.
During the viewing portion of the teaching notes, stop the tape periodically where appropriate to ask students the
Pre-Class Prep for You:
• Preview the Company Clips video segment for Chapter 3. This exercise reviews concepts for LO1, LO2, LO4,
Pre-Class Prep for Students:
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• Have students familiarize themselves with the following terms and concepts: corporate social responsibility,
and sustainability.
Video Review Exercise Activity
• Warm Up – Begin by asking students: “What is corporate social responsibility (CSR)?” and “What do
businesses that want to be socially responsible need to consider?”
• In-Class Preview
answer them after viewing the video.
• Follow-up
Supplemental Exercise: Class Activity
Corporate Social Responsibility
The work done by volunteers has long been an integral part of the social fabric of a community. In today’s social
environment, the majority of families has two wage earners or is headed by a single wage earner. This phenomenon
has reduced the number of persons who have time apart from work and family responsibilities to do volunteer work.
Chapter 3 ♦ Ethics and Social Responsibility 3-17
GREAT IDEAS FOR TEACHING CHAPTER 3
Raymond F. Keyes, Boston College
EXPERIMENTAL COURSE IN MARKETING ETHICS
We are experimenting with a new approach for teaching marketing ethics in a way that will make it more interesting
and challenging for our marketing majors. In our Marketing Topics course, we are experimenting with an approach,
which may be the forerunner to a “Marketing Ethics and Creative Thinking” course—if the experiment is successful.
Towards the end, the experimental course focuses on two main topics: Marketing Ethics and Creative Problem
Solving:
• Marketing Ethics: We begin by reviewing the traditional foundations of ethical reasoning, followed by a
• Creative Problem Solving: This portion of the course utilizes a more freewheeling approach for
• Merging the Topics: The two topics, joined together in this seminar, provide interesting opportunities for
_____________________________________________________________________________________________
Chung-kue Hsu, Montclair State University
SEX ROLES AND PRODUCT CONSUMPTION
This exercise is designed to help students think critically about how sex roles may affect consumer perception
or even their actual consumption of certain consumer products or brands. Societies tend to assign a set of traits or
characteristics to males (e.g., aggressiveness, toughness) and anther set to females (e.g., tenderness, obedience).
Such a division in sex roles can also affect consumers’ perceptions and consumption of certain products or brands.
Traditionally, some products or brands are perceived masculine (e.g., pocketknife, Marlboro cigarette) while others
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Randy Stuart, Kennesaw State University
A LESSON ON PACKAGING AND SOCIAL RESPONSIBILITY
This exercise was developed in conjunction with a university-wide, community food drive and to reinforce the
lesson on packaging. To encourage participation, it was presented as an extra credit opportunity.
paper is worth 10 points. Encourage them to address such topics as:
➢ Size and pricing
Due to the difficulty of finding generic merchandise in our market, the exercise was modified so that the
students who were unable to find generic could do the exercise with two manufacturers and one house brand.
Students who were able to find a can of generic food earned an additional 5 points.
Nancy M. Carr, Community College of Philadelphia
SCENARIOS IN SALES MANAGEMENT:
ETHICAL ISSUES FOR CLASS DISCUSSION
Scenario I. As sales manager, you have noticed changes in salesman Mike lately. Mike used to be your
“bright–eyed and bushy-tailed inside salesmen” but now he seems tired all the time. You even caught him asleep at
his desk twice in the last week. You ask Mike if he is okay and he says wearily “I’m adjusting to my wife leaving
Mike.
Scenario II. You are very lucky to have two outstanding salespeople desiring the two straight commission
sales positions in your new company. Both have impressive past sales records, want a new challenge, and have the
confidence to desire straight commission pay. Their personal lives are quite different. Susan is from a wealthy
family and married a very successful man. Susan volunteers that she is childless by choice and says she “wants to
You would like to give David a higher commission rate because of his circumstances. Would you do it?
Scenario III. A prospect calls the office and is looking for a property in the $300,000 price range. This is
much higher than most of the company’s prospects can pay. This excellent prospect quickly states that she is only
Scenario IV. You have never had a sales trainee like Joe. When you arrive early in the morning, he is already
there working. He is thoughtful, courteous, and a real self-starter. The only problem is that Joe smells. Since you
work with the trainees individually, no one else is affected but you feel ill from Joe’s body odor. Much as you would
him “over the brink”. You fear that Joe will truly go “over the brink” if you say anything to him.
Scenario V. You have been taking phone applications for counter positions in your doughnut shop. One
applicant, Cindy, is very well-spoken and polite. You tell Cindy to come in after lunch when you will be in the shop.
At 1:30 p.m., a car pulls up and a gigantic young woman gets out. She comes in and introduces herself as Cindy. She