Chapter 6 Applying Ethics to the

1. Chapter 6Applying Ethics to the Purchasing, Marketing, and Sales Functions

2. Two monetary inducementsfor unethical behavior • The temptation to enrich yourself at the expense of your organization • An employer, protecting its self-interest, pressures an employee to engage in unethical conduct

3. Case: A Trip to Las Vegas • The players: • Brent Wiggly, Purchasing Director, Commander Hotel chain (78 hotels) • Tom Penney, a top salesperson, Linens of Today Company • Another salesperson from Advantage Linen Supply Company

4. The issues • Mr. Penney offered Mr. Wiggly bed sheets at $8.00 apiece • The other salesperson offered the same bed sheets at $7.90 apiece • Minimum loss to Commander would be $1500 if Wiggly purchased from Penney only one sheet per room

5. Mr. Penney’s offer • Mr. Penney offered Mr. Wiggly an all expense paid vacation for two in Las Vegas • Mr. Wiggly thinks, “What’s an extra $1,500 to the Commander Hotel Chain anyway?”

6. Bribes and Kickbacks • Are always immoral • Another form – using influence inappropriately • The moral basis of any business relationship is trust

7. Act Utilitarianism • Which action brings the greatest good for the greatest number of people? • Look at the consequences for everyone who works at the company: what are all of the consequences of my actions? • Should all of the employees be subsidizing Mr. Wiggly’s vacation?

8. Costs • Long term costs – less efficient organization; leading to higher consumer costs • Shareholders would lose money • Lower morale among employees • “If he can get away with it, so can I”

9. Rule Utilitarianism • A rule utilitarian would ask, “What if everyone operated this way?” • If it is acceptable for one person to accept kickbacks, is it all right for everyone to accept kickbacks?

10. Society as a Whole What would your day be like if you had to bribe everyone from whom you asked something?

11. Kant and the Categorical Imperative • Remember: actions are moral or immoral based solely on their nature and not on the consequences • If someone takes an action out of a sense of duty, their motivation is a moral one

12. The vacation? • Kant would not find anything moral about accepting the vacation • What should Mr. Wiggly do in order to do the right thing? • Universalize the decision to accept vacations • If it would be ok for everyone to accept a vacation, then it is ok for him to accept the vacation

13. Second formulation of the Categorical Imperative • When you engage in deceptive business practices, you are treating others as means, not as ends; you are not giving them the same status as you give yourself – a person, not a thing • Deceiving others, along with other dishonest business practices is immoral, because you are denying others their humanity

14. The Ethic of Justice • John Rawls said that in order to decide what is fair, rational people had to decide what would be reasonable from all points of view • Also, people had to consider issues as if they did not know where they would alight in society

15. Consider Mr. Wiggly • To act justly, he would have to behave according to rules that would seem fair no matter what his position were within the hotel chain • Is it fair for Mr. Wiggly to take a vacation attained deceptively that will cost the hotel chain money it need not spend?

16. Bribery according to Rawls • Bribery is contrary to Rawls’ principle of equal liberty • Among other things, this principle states that it is wrong for a business or person to engage in bribery because it takes away the liberty of others

17. Is this the same thing? • If a purchasing agent accepts a case of liquor from a salesperson at Christmas time, could this be considered a bribe? • If an event coordinator is offered free services and hotel expenses so that he will select a hotel for his client’s convention, could that be considered a bribe?

18. Aristotle and theEthics of Virtue • With the ethics of virtue, we judge a person’s character • How will we judge Mr. Wiggly’s character if he takes the bribe? • Remember: Mr. Penney is also committing an injustice

19. Deceitfulness • Shows that both men have dishonest characters • Both men lack the virtue of honesty

20. Religion on Honesty • Judaism, Book of Leviticus: “You must not steal; you must not act deceitfully nor lie to one another.” • Christianity, Ephesians 4:25: “Put away falsehood; let everyone speak the truth with his neighbor, for we are members one of another.” • Islam, Koran: “And give full measure when you measure out, and weigh with a true balance; this is fair and better in the end.”

21. Additional World Scripture • Let your conduct be marked by truthfulness in word, deed, and thought. Hinduism. Taittiriya Upanishad 1.11.1 • Be honest like Heaven in conducting your affairs. Taoism. Tract of the Quiet Way • Straightforwardness and honesty in the activities of one's body, speech, and mind lead to an auspicious path. Jainism. Tattvarthasutra 6.23 • He who utters gentle, instructive, true words, who by his speech gives offense to none—him I call a brahmana. Buddhism. Dhammapada 406 • Master Tseng said, “Every day I examine myself... In intercourse with my friends, have I always been true to my word?” Confucianism. Analects 1.3

22. Case Study: Spilled Coffee The Players Andy, owner/manager, Global Coffee House John, Andy’s assistant Nancy, regular customer at Global

23. The issues • The lid popped off a very hot cup of coffee, burning Nancy so badly that she had to be taken to the hospital • Andy had recently changed cup purveyors in order to save money and now realizes that he made a poor decision • Andy purchased thousands of the new cups and lids; and Andy has a binding contract with the new purveyor

24. Case Questions • What would you do in Andy’s place? • What are the ethical issues involved in this case? • Would any of the philosophers tell Andy to keep the cups? • Would an act utilitarian’s decision regarding this case be different from a rule utilitarian’s decision? If so, how? Specify what those decisions would be.

25. Case: The Board of Directors Venue • Fairview Country Club • Private club • 265 affluent members • Initiation fees begin at $100,000 • 60 years of history in community • Recently fallen on hard times

26. The Players • Mr. Widga, Director of Golf • 10 members of Board of Directors • Mr. Smith, General Manager (25 Years) • Mr. Patrick, board member responsible for golf department • Ms. Nuñez, controller

27. The issues • Mr. Widga found several line items and expenses on his profit and loss statement • After reviewing back reports, Widga realized his department was not receiving proper income credit • He also noted several irregular expenses • After being denied access to financial statements, Widga approached Mr. Patrick

28. Issues continued • Patrick said he would bring it to the board • In following months, Widga felt Smith’s dissatisfaction even though his department was doing well • Widga told by Club President and Smith that if he wanted to keep his job, he would refrain from speaking about his budget irregularities • Also, he was to stop looking at the club’s financial status

29. Case questions • Why would Mr. Smith and Mr. Patrick insist on keeping their meeting a secret? • Two weeks later, Mr. Widga discovered that purchases from other departments had been attributed to his department and that revenue that his department generated had also been attributed to other departments. He knew the exact whereabouts of all of the money and reported it to Mr. Patrick. The next day he was fired for not following instructions. What are the issues to be considered? • If you were Mr. Widga, would you have done anything different? Why or why not? • What was Mr. Widga’s main responsibility in this case?

30. Policy Development Challenge Imagine that you are the General Manager of the Lighthouse Restaurant & Grill. Develop a list of policies that would ensure that your operation is run in an ethical and aboveboard manner. Include policies that cover the following functions: restaurant purchasing, restaurant sales, and restaurant marketing.

31. Case Study: The Ride to Paradise The Players • Charles and Hilda Erskind, cruise passengers • Lawrence Gonneff, Cruise Escort

32. The issues • Lawrence Gonneff sells van tickets to incoming cruise line passengers at the airport; he receives a commission • If passengers took a taxi to the cruise ship, it would cost them less than the van tickets • Gonneff mentions to passengers only the van service

33. Case Questions • Is Mr. Gonneff conforming to competitive business practices or is he “ripping off” the cruise passengers? • Has Mr. Gonneff made a sound business decision? Why or why not? • Would any of the ethical theories support his decision? If so, which ones? Explain your answer. • Would it change your evaluation if Mr. Gonneff told customers there was no other way to get to the port? Why or why not?