Unethical behavior are likely to be observed in which of the following marketing environments?

Law classes may have given you fits in college, but as far as many instructors are concerned, it's ethics classes that are tougher to teach. Whereas the law is often a matter of black and white – right and wrong – ethics often encompass a fuzzy gray area, shaded by subjective judgments but informed by an “I know it when I see it” sensibility.

Examples of unethical behavior can helpfully define the gray areas, especially when it comes to unethical practices in marketing. When you're a small business owner, chances are good that at least one of two events will darken your doorstep over the lifespan of your business: a shady marketer will try to lure you into participating in unethical sales practices or you will be rendered apoplectic by a competitor who engages in them to undercut your business. For these reasons, it's wise to deepen your understanding of both ethical and unethical practices in marketing and cement this information by learning some common unethical marketing examples. You owe it to yourself and your small business to elevate ethics above the helpful notion that many instructors plant in the minds of their students on the first day of class – that ethics is sometimes best defined by the behavior people would engage in only if their mother were looking over their shoulder.

The American Marketing Association is more than a steward and advocate of marketing ethics in society; right from its preamble, you might assume that the people who outlined the association's ethics had some discerning mothers.

The AMA plunges into the ethics definition pool by invoking values, which it says “serve as the criteria for evaluating our own personal actions and the actions of others...”

“As marketers, we recognize that we not only serve our organizations but also act as stewards of society in creating, facilitating and executing the transactions that are part of the greater economy. In this role, marketers are expected to embrace the highest professional ethical norms and the ethical values implied by our responsibility toward multiple stakeholders (e.g., customers, employees, investors, peers, channel members, regulators and the host community).”

The AMA identifies the core values as honesty, responsibility, fairness, respect, transparency and citizenship. It's worth learning how the AMA explains how to achieve these ends. But in broad brushstrokes, it sets the stage for these values by defining them as:

• Honesty, or being forthright in dealings with customers and stakeholders. Responsibility, or accepting the consequences of marketing decisions and strategies. Fairness, or balancing justly the needs of the buyer with the interests of the seller.* Respect, or acknowledging the basic human dignity of all stakeholders.
• Transparency, or creating a spirit of openness in marketing operations.
• Citizenship, or fulfilling the economic, legal, philanthropic and societal responsibilities that serve stakeholders.

Profitable Venture compares the pursuit of these values to unethical practices in marketing, and weighs the consequences by saying that:

• “Ethical marketing entails making honest claims and satisfying the needs of potential and existing customers. It boosts credibility and trust, develops brand loyalty, increases customer retention and prompts customers to spread the word about the products or services you’re marketing.”* “Unethical marketing, on the other hand, can send wrong signals about your products and services, destroy your brand’s reputation and possibly lead to legal problems. This explains why you should avoid them like a plague.”

Avoiding unethical marketing practices can also help a business avoid other consequences, such as losing the good faith and loyalty of customers, and jeopardizing profitability. The worst practices of the bunch are:

• *Misleading statements, which can land a business in legal trouble with the Federal Trade Commission and its truth in advertising provision. The FTC expects advertising claims to be supported by evidence, which proved to be a tough standard for some cigarette manufacturers when they originally promoted their products as being “healthy.” Of course, not all claims are provable, and this is where some marketers deliberately try to blur the line with exaggerated claims and puffery, which are other forms of unethical marketing. Consumers may turn a deaf ear to a product that claims to be “the best,” and they're known to disdain marketing that promises to “transform their life” or “make them the envy of all their friends.” Distorting facts to intentionally confuse or mislead consumers. A classic example: stamping a product as sugar- or calorie-free when it does in fact contain some sugar and calories, or touting a product as “healthy” when it is loaded with carbohydrates and sodium.
• Making false or deceptive comparisons about a rival product. Much more prevalent 20 years ago among general consumer products, you still might see this crop up in the tech sector. (Think smartphones.) Competition tends to be fierce when rivals resort to side-by-side comparisons. And consumers may find such a technique helpful, as long as the information is accurate and truthful.
• *Inciting* fear or applying unnecessary pressure. “Limited time offers” are notorious for the latter, which is fine if a deadline really exists and the tone doesn't sound threatening.
• Exploiting emotions or a news event. Such instances pop up every once in a while, then make a quick exit when consumers complain about feeling manipulated. Such was the case after the September 11 terrorist attacks, when some advertisers tried to evoke sympathy – for New Yorkers, firefighters and survivors – while also selling their products.
• Stereotyping or depicting women as sex symbols merely to draw attention to a product. "While it might be intuitive to use models in adverts for beauty products and cosmetics, having half-naked models in adverts for generators, heavy machinery, smartphones and other products not strongly related to women is both nonsensical and unethical,” says Profitable Venture.

• *Disparaging references to age, gender, race or religion. Many professional comics have learned the hard way that the line between humor and bad taste can be painfully thin. It might be easier to see if the humor packs an insult or a put-down that makes you grimace. *Doctoring photos or using photos that are not authentic representations. Most people expect professional photographers and videographers to make the most of lighting and close-ups. But the finished products should be accurate depictions that are free of touch-ups and other enhancement techniques that are designed to mislead. *Plagiarizing* a competitor. For a small-business owner, discovering that a competitor has copied or impinged on a tagline, blog post or promotion can be painful –

  or infuriating. The reality is, plagiarism probably happens more often than most businesspeople will ever know, because of the internet. *Spamming, or sending unsolicited emails to potential customers. The FTC allows a business one such opportunity. After that, a business violates the CAN-SPAM act. In effect since 1993, the act also prohibits false or misleading header information and deceptive subject lines.

Today's enlightened consumers do more than register a disapproving “Tsk-tsk” over such unethical practices in marketing. Ninety percent of consumers in a 10,000-person survey conducted by Cone Communications said they would boycott a company if they learned it was engaging in unethical or irresponsible behavior. And about the same percentage said they expect companies to “operate responsibly” – perhaps much like their own mothers taught them.

The system of moral and ethical beliefs that guides the values, behaviors, and decisions of a business organization and the individuals within that organization is known as business ethics.

Some ethical requirements for businesses are codified into law. Environmental regulations, the minimum wage, and restrictions against insider trading and collusion are all examples of the government setting forth minimum standards for business ethics.

What qualifies as business ethics in history has changed over time and the different areas of ethics are important to every business.

• Business ethics involve a guiding standard for values, behaviors, and decision-making.
• Ethics for business have changed over time but they're important for every company.
• Running a business with ethics at its core from the top down is essential for company-wide integrity.
• Behaving in a consistently ethical manner can lock in a solid reputation and long-term financial rewards for companies.
• Employees tend to remain loyal to, and perform more effectively for, a company with a high standard of ethics.

A management team sets the tone for how an entire company runs on a day-to-day basis. When the prevailing management philosophy is based on ethical practices and behavior, leaders within an organization can direct employees by example. They can guide them in making decisions that are beneficial to them as individuals and to the organization as a whole.

Building on a foundation of ethical behavior helps create long-lasting positive effects for a company. One such effect is the ability to attract and retain highly talented individuals. Another is a positive reputation within the community.

Running a business in an ethical manner from the top down establishes stronger bonds between individuals on the management team. This, then, creates greater stability within the company.

When management leads an organization in an ethical manner, employees follow in those footsteps. Employees make better decisions in less time when business ethics are a guiding principle. This increases productivity and overall employee morale.

When employees work in a way that is based on honesty and integrity, the whole organization benefits. Employees who work for a corporation that demands a high standard of business ethics in all facets of operations are more likely to perform their job duties at a higher level. They're also more inclined to stay loyal to that organization.

Enron Corporation, an American energy and commodity services company, collapsed after the Securities and Exchange Commission (SEC) investigated its improper accounting practices and revealed that the company hid massive losses and liabilities while paying its executives millions. Thousands of employees suddenly were left jobless. Several executives were convicted of federal crimes. The company's unethical behavior also led to the downfall of one of the oldest and biggest accounting firms, Arthur Andersen.

Business ethics differ from industry to industry, and nation to nation. The nature of a business' operations has a major influence on the ethical issues with which it must contend.

For example, an ethical quandary can arise for an investment brokerage when the best decision for a client and their money runs counter to what pays the brokerage the highest commission. A media company that produces TV content aimed at children may feel an ethical obligation to promote good values and eschew off-color material in its programming.

A striking example of industry-specific business ethics is in the energy field. Companies that produce energy, particularly nonrenewable energy, face unrelenting scrutiny on how they treat the environment.

One misstep, whether it's a minor coal ash spill at a power plant or a major disaster such as the 2010 BP (BP) oil spill, can force a company to answer for its actions. Numerous regulatory bodies and society at large may pursue whether the company skirted its duty to protect the environment in an aggressive pursuit of higher profits.

A stringent, clearly defined system of environmental ethics is paramount for an energy company if it wants to thrive in a climate of increased regulations and public awareness on environmental issues.

Companies such as Amazon (AMZN) and Google (GOOGL), which conduct most of their operations online, are not scrutinized for their environmental impact the way energy companies such as BP and Exxon (XOM) are. When it comes to protecting their customers' privacy and security, however, their ethics are examined very closely.

A particular area in which technology companies must make tough ethical decisions is marketing. Advancements in data mining technology enable businesses to track their customers' movements online and sell that data to marketing companies or use it to match customers with advertising promotions.

Many people view this type of activity as a major invasion of privacy. However, such customer data is invaluable to businesses, as they can use it to increase profits substantially. Thus, an ethical dilemma is born. To what extent is it appropriate to spy on customers' online lives to gain a marketing advantage?

The importance of business ethics reaches far beyond employee loyalty and morale or the strength of a management team bond. As with all business initiatives, the ethical operation of a company is directly related to profitability in both the short and long term.

The reputation of a business in the surrounding community, among other businesses, and for individual investors is paramount in determining whether a company is a worthwhile investment. If a company is perceived to operate unethically, investors are less inclined to buy stock or otherwise support its operations.

Companies have more and more of an incentive to be ethical as the area of socially responsible and ethical investing keeps growing. The increasing number of investors seeking out ethically operating companies to invest in is driving more firms to take this issue more seriously.

Business ethics represents a standard of behavior, admired values, trustworthy methods of operation, and respect for customers that a company incorporates, and insists that all employees adhere to, as it functions from day to day.

By behaving according to a high ethical standard, companies can strengthen the drive to succeed internally among executives, management teams, and staff. Furthermore, companies can attract and keep investors who themselves are attracted to companies that align with their own standards of ethical behavior. In other words, business ethics can help companies build long-lasting, solid reputations and financial success.

That's a good question, especially when the financial advantages arising from a high degree of ethical behavior can be so great. A couple of reasons may be that some CEOs, management teams, or employees may feel it's just easier to work outside of an ethical standard. They may reach certain financial goals faster and not care about the long-term repercussions. It may seem to be less expensive to work without moral and ethical boundaries. Where money is concerned, good ethics can be forgotten.

With consistent ethical behavior comes an increasingly positive public image. There are few other considerations as important to potential investors and current shareholders. To retain a positive image, businesses must be committed to operating on an ethical foundation as it relates to the treatment of employees, respecting the surrounding environment, and fair market practices in terms of price and consumer treatment.