New Venture Creation 4

Module 3: Comply with organisational ethics

Module 3: Comply with organisational ethics

• After completing this outcome, you will be able to:– describe the code of conduct and ethical issues

– adhere to a code of conduct and ethical issues

1. DESCRIBE THE CODE OF CONDUCT AND ETHICAL ISSUES

At the end of this learning outcome you will be able to: • analyse personal strengths, weaknesses, abilities and

passions to compile a personal profile

• explain the purpose of the code of conduct

• identify and explain the principles of the code of conduct

• explain the relationship between the code of conduct and successful marketing

• understand The Code of Conduct for Marketing

• explain the implications that the code of conduct and ethics has on an organisation

1.1 Explain the purpose of a code of conduct

• The Code of Conduct is based on the organisation’s code of ethics, which briefly goes about doing the right thing – without having to be told to, or– without there being a law that says you must do

it– not because you are afraid of being caught out,

but …

• … because it is the right thing to do!

Code of conduct• A code of conduct:

– consists of a collection of principles, goals and required standards and actions

– sets out the key ethical values that guide the behaviour of owners, managers and workers in the performance of their day to day duties

– can not be expected to predict every situation that people could come across which might need ethics and conduct to be thought about. It is only guide – even though a guide meant to be taken very seriously

– can not be considered to contain everything. People are still needed to thing for themselves and to behave according to the spirit of the Code of Conduct

– is not intended to be exhaustive and employees are encouraged to conduct themselves both in accordance with the letter and the spirit of the code

– works together and does not replace, nor is replaced by other company rules and procedures

Code of conduct

• Codes of conduct also are a way for a business to:– present a positive image– provide a means for people from outside the

organisation to understand who they are doing business with, how they go about it, what is expected of them and how they can expect to be treated by the organisation

• In order for them truly to be effective, Codes of Conduct need to:– apply compulsorily to all members of an organisation– clearly set out rules and standards– clearly set out the consequences of breaking the rules– provide to be revised to keep them a living document

1.2 Identify and explain the principles of a code of conduct• A Code of Conduct is nothing more than the

policies and procedures that the business puts in place in so that:– Anyone will be able to understand what the

business’s vision is for dealing with people and events

– To make certain that its members and employees behave according to the company’s vision

Activity 1

• Some of the topics in the list above have had their principles left blank 1. Write out what you believe would be fair

principles for your family to adopt regarding these topics

2. Think of at least three other topics you would like to see added to the code of conduct for your educational institution, as well as also what you would be fair principles for it to adopt regarding these topics

1.3 Explain the relationship between the code of conduct and successful

marketing• The principle marketing functions are:– marketing information and research – product planning– advertising and promotion– sales and distribution

“Authentic marketing is not the art of selling what you make but knowing what to make. It is the art of

identifying and understanding customer needs and creating solutions that deliver satisfaction to the

customers, profits to the producers and benefits for the stakeholders.” - Philip Kotler

Criticisms of marketing

• Marketing encourages people to purchase what they do not need

• Marketers embellish product claims

• Marketing discriminates in customer selection

• Marketing contributes to environmental waste

• Marketing encroaches on customers’ right to privacy

• Marketing encourages corruption

Examples of corruption

• Taking unfair advantage of others through manipulation• Concealment• Abuse of privileged information• Misrepresentation of material facts• Offering Gifts to Clients• Receiving Gifts From Clients• Exaggeration• Colourful language, Encouraging guesswork• Unfounded legal conclusions• Derogatory remarks or characterizations of people and

other companies

Ethics in marketing

• Ethical marketing is an honest and factual representation of a product, delivered in a framework of cultural and social values for the consumer. It promotes qualitative benefits to its customers, which other similar companies, products or services fail to recognise

• The implication of this for a business is that research has shown that: – Corporate behaviour does influence perceived product value

and is therefore likely to influence market choices– Customers expect businesses to behave ethically and will

punish them for not doing so, by taking their business somewhere else

– After a firm has committed an unethical act, consumer's perceptions of that company and its products were positively influenced by ethical behaviour

1.4 The Code of Conduct for marketing

• A Code of Conduct is nothing more than the policies and procedures that the business puts in place in so that:– anyone will be able to understand what the

business’s vision is for dealing with people and events

– its members and employees behave according to the company’s vision

Activity 2• If you watched the SABC2 soapy “7de Laan” in April this year (2008) you

would have seen fashion designer Felicity Daniels, the owner of the Boutique “Eclectic E”, in difficulties because she was promoting a new range of clothes based on lace bought from a certain supplier. What she didn’t know was that this lace had been imported from a country notorious for making use of child labour.

• As a result of this being found out, her business faced negative publicity with a particular newspaper being most unpleasant. At the time of writing this book, the TV Guide for the next episode states, “Felicity is considering cancelling the new range”.

• Explain why Felicity’s deciding to make use of lace can be described as a marketing activity? (hint – thing product research).

• How do you think that having a formal Code of Conduct for her business would have helped her avoid this dilemma?

• Assuming Felicity decided as a result of her experience to create a Code of Conduct for Marketing for the first time. How could she use her new code to repair the damage to her reputation.

• Remember that a Code of Conduct should contain the following : – The purpose of the code; – A section that outlines ideals the organisation hopes to live up to;– A list of rules or principles which members of the organisation will be

expected to adhere to– A section that outlines enforcement

1.5 Explain the implications that the code of conduct and ethics has on

an organisation• Studies have shown that a relationship exists

between among ethics code awareness, perceived corporate ethical values, and organisational commitment. These are:– Those aware of the existence of an ethics code in

their organisations perceived their organisations as having more ethical values than those not aware of an ethics code in their organisations

– Employees exhibited higher levels of organisational commitment when they were aware of an ethics code in their companies

Activity 3• The implications set out above are indeed positive. There are however

other implications that may result in your having to rethink how you do business, and especially how you conduct the marketing function

• If you accept that ethics goes about doing the right thing…– without having to be told to, or– without there being a law that says you must do it, or – not because you are afraid of being caught out, but …

• … because it is the right thing to do!• How would you respond to someone who says the

implications of a Code of Conduct:– limit your scope for doing business? or– of reducing their job satisfaction?

2. ADHERE TO A CODE OF CONDUCT AND ETHICAL ISSUES

At the end of this subject outcome you will be able to: • obtain, read, study, apply and implement the code of

conduct and ethical issues in an organisation

• identify deviations from code of conduct and ethical issues and take remedial action

Activity 4• As a GROUP, purchase a number of newspapers and scour their

business sections for reports of two business that have been accused or identified as having engaged in doubtful business practices. These can be relating to marketing or any other business function. Try to obtain their code of conduct from them. [If they refuse, try some other organisation (not necessarily the ones you are investigating – but a similar organisation if possible) and pretend this Code of Conduct is actually the one for your target companies].

• Put together a presentation to your class in which you show what the problem was for each .

• (NB: You will need this material again for Learning Outcome 4 of Module 4 so don’t throw the papers away once you have finished the activity)

Activity 51. Put together another presentation showing:

– What were the ethical issues that were deviated from– How the Codes of Conduct were deviated from– Any weaknesses you can identify in the Codes of Conduct (i.e. what

you think they could have said…) – How the Codes of Conduct would have helped to prevent the

problem arising, if they had been complied with– What remedial action the companies should take:

• As per their codes of conduct• As well as what you think should be done

2. Keep an eye on the newspapers and at the end of the course do another presentation to the class on whether you saw three companies actually doing something about it