B2B Ethics, Crisis
Management & Legal
Considerations
A Poem by R.W. Grant
• You’re gouging on your prices if you
charge more than the rest.
• But it’s unfair competition if you think
you can charge less.
• A second point that we would make to
help avoid confusion:
• Don’t try to charge the same amount:
• That would be collusion!
Ethical Clashes
• Ethical standards among
stakeholders
• Ethical standards at different levels
of an organization
• Individual ethical standards vs.
organization’s performance
standards
• Facts vs. viewpoints
• Knowledge of consequences
The Societal Marketing Concept
• Generating customer satisfaction
based on:
– Being market sensitive (sensitive to
target customers’ needs), and
– Being considerate of societal well
being
• Goal: Improve life quality
– Includes company’s social
responsibility
Ethics vs. Social Responsibility
BUSINESS
SOCIAL
ETHICS
RESPONSIBILITY
Moral principles and
Obligations a business
standards that guide
assumes to have for
behavior in the world of society, including
business
economic, legal, ethical,
and philanthropic
Corporate Social Responsibilities
• Legal
– Play by the rules of the game
• Economic
– Be profitable
• Ethical
– Do what is right, just, and fair; avoid harm
• Philanthropic
– Contribute resources to community; improve
quality of life
The Role of Leadership
• To encourage subordinates’ ethical
behavior, good leaders:
o Ensure that the firm’s mission
statement encourages ethical behavior
& societal good as part of the mission
o Create reward structures that allow &
reinforce ethical behavior
o Behave ethically themselves (Do as I
do; not Do as I say)
Differing Moral Philosophies
• Deontology
– The action itself matters. No “gray” areas.
• Teleology
– The outcome matters. Level of harm caused.
• Egoism
– The outcome related to “ME” matters.
• Relativism
– Everything is relative. All actions are moral or
immoral within their own context.
Potential Ethical Problem Areas
Usually grow out of a need to:

do what is seen as necessary to compete, or

to achieve value for stockholders
May include:
 Paying brides
 Charging exorbitant prices (price gouging)
 Taking unearned marketing allowances
 Posing as a prospective customer to obtain
competitive information
 Creating an unfair advantage for one distributor
over another
 Padding orders & shipments
 Promising more than can be delivered
Myths about Business Ethics
• Ethics is a personal, individual affair.
– We do not operate in a vacuum.
• Business and ethics do not mix.
– Business is a human activity.
• Ethics in business is relative.
– Contradicts everyday experience.
– I.e., just because this society practiced slavery, did that
make it right?
• Good business means good ethics.
– Basically says that ethics do not provide solutions to
business problems.
Quick Ethical Tests
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Is it right / fair?
Who gets hurt?
What would you tell your child to do?
Do unto others as you would have them
do unto you.
• Use your intuition (gut-feel).
• Are the ends really worthwhile?
Crisis Management
• Ethical behavior intertwined with the
occurrence & the management of crises
• Problems arise from less than stellar
ethical choices or ethical conflicts
• A strong ethical theme in the company’s
culture
– Inoculates against crises
– Resolves issues regardless of cause
Crisis Preparation
• Some crises can be avoided through
careful preparation
• Some will still occur, but can be
contained with foresight & good
coping systems
• Some inevitably become crises, no
matter how much preparation
occurs
A Crisis Management Model
Layers of Pauchant and Mitroff’s Crisis Management Model
1. Character of the people in the organization
– willingness to take responsibility & take corrective action
2. Culture existing in the organization
– supports appropriate preparation & response actions
3. Organizational structure
– crisis management structure in which all stakeholders are
represented
4. Plans and mechanisms for dealing with crises
– crisis management team has fully prepared plans,
disseminated them, & trained people in key roles
Source: Thierry C. Pauchant and Ian I. Mitroff, Transforming the Crisis-Prone Organization: Preventing Individual, Organizational, and
Environmental Tragedies, (San Francisco: Jossey-Bass, 1992).
Crisis Preparation
1. Establish effective structures for
planning & handling crises
2. Assess the elements of company’s
operations that produce risks & reduce
these risks
3. Plan procedures to follow as events
occur
4. Inoculate (include or plan for)
negative public attention that will
occur during a crisis
Plan for Stages of a Crisis
• Organization goes through a
preparation period if early signals are
perceived
• If signals have not been picked up,
crisis will be triggered by some event
• A period of intense activity & public
scrutiny will ensue following the crisis
• The organization may take follow-up
actions & may go through a period of
serious learning
Media Relations During a Crisis
• Avoid wild speculation (by yourself & others)
• Give the media access
• Tell the truth
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•
•
•
Be proactive
Stay calm
Respond quickly, backed by effective action
Limit points of contact for consistent,
focused message
• Company may have to accept blame, make
apologies, and “fix” things
Crisis Aftermath
• Begin repair of the company’s image
(time consuming process)
• Thoroughly debrief & learn from
experience
• Maintain ethical approach (image can
be sustained/repaired if so)
• Reinforce management &/or
employees that have done the right
thing(s)
Federal Legislation to Protect
Competition
• Sherman Act 1890
– no monopolies
• Clayton Act 1914
– no price discrimination
• FTC Act 1914
– no unfair competition
• Wheeler-Lea 1938
– no false advertising
• Robinson-Patman Act 1936
– no price discrimination to resellers
To Protect the Consumer
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Meat Inspection Act 1906
Wool Products Labeling (1940): % of wool
Cigarette Labeling (1965)
Truth in Lending (1968)
Consumer Product Safety (1972)
Nutrition Labeling and Education Act (1990)
Regulatory Agencies
• FTC: no false/deceptive advertising
• FDA: no harmful drugs/products
• ICC: rates of interstate RR, trucking –
dissolved
• STB: regulates motor carriers, railroad
• EPA: pollution
• FCC: regulates wire, radio, TV broadcasts