Contemporary Selling, 5e
Chapter 4
Chapter 4 Outline: Ethical and Legal Issues in Contemporary Selling
Value-Added Information in Chapter 4
• Global Connection – “Companies Outside the United States Listed among the World’s
Most Ethical Companies”
• Exhibits
o Exhibit 4.1 – “Code of Conduct Dell Computer”
o Exhibit 4.2 – “The Best Corporate Citizens”
o Exhibit 4.3 – “Ethical Concerns for Salespeople”
o Exhibit 4.4 – “Ethical Concerns for Management”
I. The Importance of Ethics in the 21st Century
A. Renewed Emphasis on Ethical Practices
II. Ethical Concerns for Salespeople
A. Issues with Customers
1. Dishonesty
2. Gifts, Entertainment, Bribes
B. Issues with Employers
1. Cheating
2. Misuse of Company Resources
3. Inappropriate Relationships with Other Employees and Customers
III. Ethical Concerns for Management
A. Issues with Salespeople
B. Issues with Company Policies
1. Unethical Corporate Culture
2. Unfair Corporate Policies
IV. Legal Issues in Contemporary Selling
2. Restraint of Trade
3. Reciprocity
V. A Code of Sales Ethics
A. Corporate Code of Ethics
B. Individual Code of Sales Ethics
VI. Summary
VII. Key Terms
Discussion Questions
1. Much has been made of the scandals at Enron and other large companies. What
effect do you think these scandals have on the salespeople who work for these
companies? Do you think it makes their jobs easier or harder? Why?
The scandals have had a negative effect on salespeople who work for these companies. In order
to be successful, salespeople must have a strong relationship with their customers, especially in
2. Companies talk a lot about being socially responsible. What do you think that means
for a company like General Electric or IBM? As a salesperson, would you
incorporate your company’s social responsibility into your presentation? If so, how?
For a company like General Electric or IBM, social responsibility means making proper ethical
judgments, which should aid in maximizing shareholder wealth and preventing layoffs. It also
means taking into account the interests of several groups, including shareholders, employees,
3. The chapter talks about the business practice of “caveat emptor,” or “let the buyer
beware.” Do you think this philosophy is consistent with contemporary selling? Why
or why not?
The philosophy of “caveat emptor” is inconsistent with contemporary selling. This philosophy is
based on the buyer being required to uncover any untruths in the seller’s statements. However,
4. As a sales manager, how would you handle this situation? One of your salespeople
(not a top performer but one who consistently comes close to hitting sales objectives)
has turned in a receipt for a very expensive dinner with a client that is above the
company’s stated guidelines for customer entertainment expenses. When questioned,
the sales rep says the customer is thinking of giving the company a large order and
the salesperson was looking to close the deal. However, it’s been three weeks and
there’s no contract. Other salespeople have heard about the dinner and are
questioning why this employee was allowed to spend that much entertaining the
customer. What do you do?
• First, the expensive dinner could be construed as a gift designed to influence the client to
place the larger order. This technique is not wholly ethical, and in this case was not even
effective in winning the order.
5. A large customer has just told you it expects to introduce a new product over the next
45 to 60 days. This product will definitely enhance this customer’s position in the
market. Your company also sells to this customer’s major competitors. While you
have none of these companies as customers, this information would be helpful for
salespeople working with these other companies. Should you share with them?
No, the salesperson should not share this information with salespeople working with these other
companies. A key element of the trust between buyer and seller is confidentiality. Even though
6. As part of a mid-year cost reduction effort, your company has reduced your bonus for
achieving annual sales targets. This is widely perceived as unfair; even your manager
declares the company should not have instituted this policy. At the same time, the
company has a very flexible expense reimbursement policy that allows salespeople to
claim mileage. Historically, you have been very conservative in submitting mileage
for reimbursement. However, talking with a group of sales colleagues the other night,
you heard that several of them are going to start inflating the mileage expense reports
since the company has unfairly cut their bonuses. What will you do?
This scenario raises the issue of misuse of company resources by employees. Although the
salesperson may feel justified in inflating the mileage expense reports, as his or her colleagues
have threatened, the salesperson should not. The fact that the policy is unwanted or unfair does
7. You are a district sales manager for a high-tech company selling IT services in the
Southeast. Sales have been down in the last year and senior management is putting
significant pressure on you to hit the sales targets for the rest of the year. Your
superior, the eastern regional manager, implied that if the Southeast does not achieve
sales numbers, your job may be in jeopardy. How will you deal with this pressure
from management? What kind of pressure will you apply to your sales force?
It is important for management to know that setting unrealistic goals can demotivate and frustrate
the sales force, as well as cause the salespeople to consider unethical practices in order to make
8. You are head of sales for a large company with operations around the country. The
top-performing saleswoman in your western region has come to you with a sexual
harassment complaint. She says her immediate boss, a 20-year veteran with the
company who is well liked and in line for a promotion to regional vice president, has
made improper comments and touched her inappropriately. He denies everything and
says she is upset because her performance has been slipping over the last two years.
What do you do?
Although men and women work closely together in an environment of mutual respect and
professional business behavior, occasionally relationships become more intimate. Or sometimes
• Follow company guidelines and the law with respect to an employee making a sexual
harassment complaint.
• Investigate the facts of the situation.
9. How would you create an ethical business climate?
Every organization has a corporate culture, a set of unwritten norms and rules that influence the
behavior of its employees. The climate must encourage people to behave in an ethical manner.
Management can create an ethical business climate by doing the following:
• Commit senior management to ethical conduct through meetings and training.
• Create a code of ethics and core values that embodies the ethical beliefs of management.
• Through oversight, ensure that senior managers’ actions match their words.
10. You travel a lot for your company and fly at least twice a month, accumulating
thousands of frequent flyer miles with your airline of choice. Is it ethical to keep the
miles even though you earned them traveling on business for your company?
There will be a corporate policy about frequent flier miles. Often managers do not make
corporate policies and procedures, but they must enforce them. Also, sometimes policies and
procedures that work fine for the rest of the organization create a problem in the sales area. For
11. As sales manager, how would you educate your sales force about the Uniform
Commercial Code? Go to www.law.cornell.edu/ucc and review the UCC. What topics
do you think are most relevant for salespeople?
In order to educate the sales force about the UCC, the sales manager should refer them to the
appropriate website to read the law in full as well as make it simple for them by preparing a
summary of instructions and guidelines that apply to sales and updating the sales force on legal
updates and developments. The sales manager should also give a “quiz” with several scenarios to
test the sales force’s understanding of the relevant UCC provisions.
As indicated in Exhibit 4.5, the most relevant topics are the definitions of:
• Salesperson (2-103)
• Buyer (2-103)
12. A salesperson is giving a sales presentation to a customer purchase committee. At the
end, the head of purchasing looks at her and asks, “You know our specific
requirements. Can your product do the job?” The salesperson responds, “Yes.” Has
he just offered an implied warranty?
13. What policies and procedures can a company use to discourage salespeople from
discriminating on price with certain customers? As a manager, how would you deal
with the problem of price discrimination?
A company can make it clear to its employees that according to both federal and state law, it is
illegal to discriminate based on price, and it will not be permitted by the company. Different
prices could only be permitted if they reflect differences in the cost of operations, they meet
14. Develop a personal code of sales ethics using the ethical checklist in Exhibit 4.8 as a
guide.
Student answers will vary. See Exhibit 4.8 for an example. Here is another example:
Relationship Selling and Sales Management Credo
2. I recognize the importance of ethical practice and its positive impact on both the
company and my own professional career.
6. I will respect my competitors. I will not defame them nor publicly disparage them.
A personal code of sales ethics should generate behavior that meets most, if not all, of the ethical
tests in Exhibit 4.8, such as “How would I/we feel and be regarded by others if the details of this
decision and action plan were disclosed for all to know?”
Ethical Dilemma – Teaching Notes
Teaching Notes
While younger, less experienced students may not face the issues presented in this dilemma early
in their career, they will likely face it sometime during their work experience. This dilemma
highlights a significant concern for companies in 21st-century relationship selling—ethical issues
with a bribe) in one culture may be considered a normal business practice in other countries.
Students should be encouraged to read and review the entire chapter. If the class has international
students, a great discussion can be developed by asking how individuals in other cultures view
Answers to Questions
1. What do you do?
Often, there is ambiguity in how people ask for special consideration. As a result, the salesperson
should first clarify if the request for a contribution is, in fact, a bribe. The salesperson should not
make a decision in the moment but, rather, ask for time to consider the request. Assuming the
request is a bribe, the salesperson needs to consider his or her individual code of ethics. Does he
2. If you were the vice president of sales, what would you tell your salesperson when he
contacts you for advice?
The vice president of sales needs to understand the policies of the company regarding any and all
ethical issues. It is important that the vice president offer clear direction to the salesperson.
Ambiguity in the communication process could create a big problem down the road. For example,
Mini-Case 4 – Health Sense Pharmaceuticals
Obviously, this case points out several instances of unethical behavior by the various sales
representatives depicted in the case. The chapter material useful for developing responses to the
case questions comes from the section titled “Ethical Concerns for Salespeople.” For this case, it
might be useful for students to pick a character from the case and assume his or her identity.
Answers to Questions
1. The ethical situation faced by Mike and Lisa was “do we go to work despite the adverse
weather conditions or not?” It doesn’t get much simpler than that. Given that all of these sales
representatives work away from their employer, Health Sense is relying on their honesty and
integrity to complete the job as assigned. The case provides some information that perhaps ten is
The manager of Mike and Lisa could find out about their not working a full day by asking
pointed questions about their activity reports for the day, zeroing in on specific activities or
doctors they included in their report. In addition, if the manager suspects something, the manager
could ask to visit these same doctors the next time he or she rides along with Mike and Lisa.
Doing so will allow the manager to ask the doctor about supposed conversations that occurred on
2. Dave’s behavior in selling the copier to the doctor is clearly unethical. First, Dave was
dishonest to the doctor when he did not disclose that the copier could still be repaired under
warranty at the service center just 50 miles away. Second, Dave cheated his co-workers by
getting the copier order delayed until the next month so that it would qualify for the sales contest.
company. Through Dave’s actions, he has given up any opportunity to develop goodwill with
this doctor. Dave has decided that short-term gain for him is more important than developing a
long-term relationship. If the doctor finds out that Dave was dishonest in his dealings with him,