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Sharing the burden of ethical conduct: the educational system and the corporation.

Sharing the Burden of Ethical Conduct:

The Educational System and the Corporation

Introduction

Ethical problems can be thought of as being analogous to physical ailments. Professionals, in some cases, can identify and treat the symptoms of a disease, but are not able to effectively cure the actual disease. There is a form of social satisfaction in being able to at least identify the ailment or problem, even though there is little hope for a "speedy recovery." Yet, complete satisfaction can really only come when the problem can be not only properly diagnosed, but correctly treated. Thus, one of the difficult aspects of ethical issues is not how to identify the problem, but instead how to influence the present social climate and cause a positive, lasting change.

Questionable ethics, specifically within the sales force, is not a new issue, but in today's complex market, more time is being allocated to find ways to keep ethics within prescribed social and corporate guidelines. Ever since mankind's earliest business transactions, there have been those individuals who were able to maximize their efforts at the expense of the rest of the community. Even with the threat of punitive action applied as negative reinforcement, there has always been economic incentives to diverge from established social values.

Potential Cause of Ethical Digression

One can hypothesize that ethical divergence equates in some way with the potential for unusual economic gain. The personnel in the sales departments have a greater opportunity to benefit from economic gain, since effort is directly related to income.

In reviewing the literature, studies indicate that successful salespeople are able to translate their efforts to financial rewards. From a study conducted by McMurry and Arnold, one of the primary attributes of a successful salesperson was the persistent hunger for wealth[11]. In an article written by Raymond Dreyfack, an identifiable quality of success was the ability to link sales success to specific material acquisition[3]. However, just because a salesperson can better visualize financial gain does not necessarily imply he will be unethical. In fact, no relationship between personality characteristics and unethical behavior can be legitimately established. In a study by Dubinsky and Ingram, six variable where examined that may also be linked to ethical divergence[4]. The variables were:

* Role conflict * Role ambiguity * Job tenure * Educational level * Major sources of income * Intensity of competition.

The results of the survey found no relationship between any of the six variables and ethical conflict[4]. Thus one of the future problems with ethical issues may be how to learn more about what personality or situational characteristics actually provoke unethical behavior.

Role of the Business School

Consistent reinforcement of ethics in education may be thought of as a necessary step which will develop and strengthen a well developed sense of personal morality. Also a curriculum incorporating ethics can teach future business leaders how to manager their companies in such a way as to minimize the likelihood of unethical behavior[18].

Some studies suggest that ethics should be blended into the existing courses that are already taught by college level business schools. As stated by Noah, "When (the subject of) ethics is taught separately, students get the idea it is divorced from subjects like marketing, finance, and accounting"[13].

Other studies agree that ethics should be incorporated into the specific subject areas that are taught. For instance, the accounting department should commit themselves to teaching situations where ethics can be directly involved with the accountant. This same study goes on to point out four main areas that make up the students development of ethical awareness:

* Legitimizing ethical consideration * Fostering an awareness of the ethical

components that make up the decision process * Providing conceptual framework * Helping students to apply ethics to real world

activities[7]. The real world application seems to be one of the areas of ethics that is key to education. The students need to understand what actually happens to the offender and what effects poor ethics has upon the rest of the business world.

In his speech given to graduating business students, Willard Butcher, Chairman of the Chase Manhattan Corporation, referred to the seniors' ethical values as one of the primary ingredients for long term success as a business person. Mr. Butcher quoted the U.S. Secretary of Education as believing that ethics should not be just a required course, but a comprehensive collegiate program[2].

In a study done by the American Assembly of Collegiate School of Business (AACSB), deans of business schools were surveyed about their situation regarding ethics courses. One-half of the deans at the undergraduate level and one-third of the deans at the graduate level stated that their programs offered a special course on the subject of ethics. The remaining one-half and two-thirds of the deans said they integrate ethics into certain required courses, because it was felt that ethics courses are superficial and unrelated to real life business applications[8].

Of the schools who are working with the integration approach to ethics, various formats have been tried. The most popular approach is the case study method combined with lectures, since it helps students make a connection between theory and reality. Other formats use the sensitization to issues approach and also the use of outside experts to discuss specific real life applications[12]. Once again, the real world application is very helpful.

Not all studies believe that higher education can help the ethics problem. In a study by Lane, Schaupp, and Parsons, suggestions were made that business colleges may actually have a negative impact on ethical actions and perceptions[10]. These standards contribute to the development of business behavior, which is generally regarded as unethical by emphasizing profit maximization and "winning is everything." The three authors go on to state that they believe that one class in ethics is unlikely to make a difference in how people handle temptation when pursuing their careers.

Other studies agree that one class in ethics may not change any ethical values. In a survey given to undergraduate and graduate business students both before and after a course on Business and Society, the results showed no change in the way that the students prioritized social values. However, the Business and Society course did seem to raise the students awareness on the social issues, as indicated by the amount of weighted importance the students indicated when answering the final survey[16]. Also, not all studies agree that ethics can be effectively taught in the upper levels of the educational system.

There seems still to be support for ethics in education, but education should begin long before the student arrives at college. As one author stated, "If they (the students) haven't been taught ethics by their families, their clergymen, their elementary and secondary schools, their liberal arts colleges or engineering schools or the business firms ... there is very little we (business schools) can do"[17]. This study has a legitimate point. By the time the individual enters college, a firm ethical foundation should have been formed. Thus the college experience cannot be expected to put into place missing values, but instead should be responsible for further reinforcement.

The key to ethical behavior training may be to integrate ethics into the schools long before college. Once a person has developed a set of fundamental ethics into their personality, changing ethical values may be an impossible assignment for the higher educational system.

Role of the Corporation

The corporate structure is a good example of a "system" that is ultimately controlled by the public owners. For example, if the company establishes no ethical boundaries for their sales employees and the consumer is treated unfairly and goes to another supplier, there will probably be a decline in sales revenue. The loss of revenue will then make the shareholders and the Board of Directors take a long hard look at the existing group of executives and possibly change to a different management team, who are more in harmony with social expectations. However, even with social pressure, estimates have been made that in the past decade approximately two-thirds of the 500 largest U.S. corporations have been involved, to varying degrees, in some form of illegal behavior. When the ultimate goal of a corporation is to earn an above average return on the owners (stockholders) investment, pressures for the "end" result may eventually succumb to justify the "means."

Many companies have had to "overhaul" their ethical directives in an attempt to polish their image. General Dynamics, for example, has established a company philosophy to ensure ethical practices. The company has issued a 20 page code of ethics which include subjects such as expense accounts fraud, supplier behavior, and product information disclosure.

General Dynamics has even gone to the point of implementing an "ethics hot line" to aid employees when confronted with an ethical decision. The original idea for establishing these ethical standards unfortunately did not flow from the directors' good intentions, but instead from punitive actions delivered by the Pentagon[19]. Hopefully, the General Dynamics example does not indicate that universal integration of corporate ethics will be accomplished, certainly not on a voluntary basis, only when the offenders are caught in the act.

In a survey of 300 corporations, the results showed that about 76 percent of all the respondents had a Corporate Code of Ethics[1]. The study gives a list of reasons why they believe a company implements such a code of ethics:

* CEO's commitment * Retention/maintenance of public trust * To stress managerial professionalism * To protect against employee misconduct * To abide by established laws * Due to a change in corporate structure. This study makes a point that although there is a code of ethics available, there still is no indication that the corporation adheres to these rules.

In an article by Gandossy, the author stresses the ethics problem and gives a list of reasons why he believes ethics has not yet come under corporate control:

* The responsibility for ethics is too widely

distributed. * There is strong financial incentives to overlook

ethical issues. * There is a lack of support for those who suspect

wrongdoings. * Management does not take a stand to either

encourage or discourage unethical practices[6]. The author goes on to give recommendations for ways to better control corporate ethics, the most interesting being the idea of linking employees performance with cash rewards.

Gandossy's idea of "Paying for Good Performance" is not a new concept; however, it may be an interesting way of promoting acceptable business ethics. By using cash as the incentive to do what is ethically right may give the employee the strength to not use financial gain as a promotion for poor ethics.

Role of the Sales Manager

A sales manager may know the ethical codes of conduct, but the actual implementation of ethical standards, on a day by day basis, must be the manager's responsibility[1]. It is true that a sales manager cannot be expected to function within an ethical vacuum; thus, managers need reassurance that the direction of the corporation is in accord with their beliefs, and that is the responsibility of the upper management.

In order to establish ethical standards, the expectations of the manager must be clearly communicated to the sales force. Many sales manager feel that the best way to maintain good business practices is to consistently set appropriate examples when working with the sales staff.

Studies have shown that the top management will have a far greater effect on developing the employee's ethics than with their peer group[15]. Herein lies a dangerous twist; a salesperson could have the potential to be led into unethical practices by poor management guidance.

The Individuals' Responsibilities

As one writer stated, "Knowing what's right is comparatively easy. It's doing what's right that's hard"[13]. In today's sophisticated marketplace, the salesperson must take the responsibility for educating the client and be trusted to give the consumer sound, fair advice. Caveat emptor or "let the buyer beware" may no longer justify the actions of the modern salesperson.

Often the products of today's market may be beyond the scope of the buyer's intellectual perception, and because of the increase in sophistication of products, a salesperson must consider the responsibility to educate and guide the prospective client. Salespeople have often been known to say, "Your clients are adults they can make their own decisions." However, physical maturity in no way equates to omniscience.

In an article by Ebejer and Morden, the authors examine the two possible extremes of a salesperson's ethical values[5]. One extreme is that the buyer always has the responsibility to be aware of what they purchase. The other extreme is a more altruistic approach, where the salesperson really wants to look out for what they perceive to be the interests of the buyer.

The two authors refer to this benevolent area as "Paternalism." Between the two defined extremes lies an area of "Limited Paternalism" -- the area where salespeople should ethically function. The authors believe the modern salesperson should explain the potential outcomes of the customer's choices without a built-in bias. The knowledgeable salesperson will not try to make the decision for their client, only protect them from a decision that may be detrimental to the client's interest.

The concept of "Limited Paternalism" may be an ideal solution to marketing/sales ethics; however, the applicability is questionable. Few salesperson may actually want to admit to an inferior product or recommend a competitor, because the salesperson perceives that the buyer will benefit directly from his competitor.

What do the salesperson of today think about their own ethical integrity? In the results of an informal survey conducted in Pittsburgh, 60 percent of the salespeople interviewed said they would not sell a product to anyone who did not need that specific item[14].

Conclusion

The problem of low ethical standards will not be an easy issue to resolve. There needs to be a joint effort of ethical reinforcement that starts early in the life of the potential salesperson and continues throughout his career. By establishing strong ethics in a young person and reinforcing those standards through higher education, there is potential for future change in the business world.

The educational system and the corporation must take responsibility to focus attention on every ethical action and scrutinize their behavior against acceptable ethics. With the example of actions taken against General Dynamics, perhaps other industrial giants will also become more stringent on ethical issues for fear of punitive consequences.

From past studies, the implementation of ethical policy seems best to start from top management and then filter down through the managerial ranks. Certainly, the ethical mood of the corporation must be internalized by the sales manager, who also must take care in demonstrating those types of behavior that the sales staff is to adopt.

The salespersons need to take responsibility for their own ethical action. However, putting the emphasis only on the individual will historically not cause reform in sales ethics. As one article states, a person may have good ethical values, but may simply have the benefit of gain outweigh any feelings of guilt or inner conflict[15]. Thus implications exist that unethical behavior may occur even when the person has not internalized values considered by society to be unethial[14].

References

[1]Berenbeim, Ronald E. "Ethical Codes and Educational Programs, Part 2." Security Management, October 1988, pp. 91-97. [2]Butcher, Willard C., Chairman, The Chase Manhattan Corporation. Speech to Freeman School of Business Commencement, New Orleans, Louisiana, May 15, 1987. Reprinted in Vital Speeches of the Day, pp. 679-681. [3]Dreyfack, Raymond. "The Selling Edge -- The Difference Between Failures and Success." American Salesmen, February 1986, pp. 11-13. [4]Dubinsky, Alan J. and Thomas N. Ingram. "Correlates of Salespeople's Ethical Conflict: An Explanatory Investigation." Journal of Business Ethics, November 1984, pp. 343-353. [5]Ebejer, James. M. and Michael J. Morden. "Paternalism in the Marketplace: Should a Salesmen Be His Buyer's Keeper?" Journal of Business, Vol. 7, Issue 5, May 1988, pp. 337-339. [6]Gandossy, Robert P. "The Tough Job of Shutting Down Corporate Fraud." Management Review, September 1988, pp. 39-43. [7]Gandz, J. and N. Hayes. "Teaching Business Ethics." Journal of Business Ethics, September 1988, pp. 657-669. [8]George, Richard J. "The Challenge of Preparing Ethically Responsible Managers: Closing the Rhetoric-Reality Gap." Journal of Business Ethics, September 1988, pp. 715-720. [9]_____. "Teaching Business Ethics: Is There a Gap Between Rhetoric and Reality?" Journal of Business Ethics, No. 6, 1987, pp. 513-518. [10]Lane, Michael S., Dietrich Schaupp, and Barbara Parsons. "Pygmalion Effect: An Issue for Business Education and Ethics." Journal of Business Ethics, No. 7, 1988, pp. 223-229. [11]McMurry, T. and J. Arnold. How to Build a Dynamic Sales Organization. McGraw-Hill Book Co., 1968, p. 3. [12]Murray, Thomas J. "Can Business Schools Teach Ethics?" Business Month, April 1987, pp. 24-26. [13]Noah, Timothy. "The Business Ethics Debate." Newsweek, May 25, 1987, p. 36. [14]Pringle, Pamela and Daniella Bellance. Unpublished survey results. School of Business and Administration, Duquesne University, Pittsburgh, Pennsylvania. [15]Skinner, S. J., O.C. Ferrell, and Alan J. Dubinsky. "Organizational Dimensions of Marketing-Research Ethics." Journal of Business Research, May 1988, pp. 209-223. [16]Stead, B. E. and J.J. Miller. "Can Social Awareness Be Increased Through Business School Curricula?" Journal of Business Ethics, July 1988, pp. 553-560. [17]Thurow, Lester C. "Ethics Doesn't Start in Business Schools.," New York Times, July 14, 1987, p. 25. [18]Vogel, David. "Could an Ethics Course Have Kept Ivan from Going Bad?" Wall Street Journal, April 27, 1987, p. 24. [19]Wagel, William H. "A New Focus on Business Ethics at General Dynamics." Personnel, Vol 64, Issue 8, August 1987, pp. 4-8.

David J. Burns is Assistant Professor of Consumer Sciences and Retailing at Purdue University in West Lafayette, Indiana. John M. Lanasa is Assistant Professor of Marketing and Management Information Systems at Duquesne University in Pittsburgh, Pennsylvania.
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Author:Burns, David J.; Lanasa, John M.
Publication:Review of Business
Date:Jun 22, 1990
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