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Jmmk290924.qxdNormative Perspectives for Ethical and Socially Responsible Marketing
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This article presents a normative set of recommendations outcomes evaluated in terms of fairness or rightness on all for elevating the practice of marketing ethics. The approach marketplace parties—the purview of normative marketing is grounded in seven essential perspectives involving multi- ethics (Martin 1985; Laczniak and Murphy 1985, 1993). In ple aspirational dimensions implicit in ethical marketing. this manner—through the evaluation of marketing’s social More important, each basic perspective (BP), while singu- influences—marketing practice and marketing ethics are larly useful, is also integrated with the other observations as inextricably connected (Smith and Quelch 1993). As N. Craig well as grounded in the extant ethics literature. This combi- Smith (1993) insightfully observed, “Every marketing deci- nation of BPs, adhering to the tenets of normative theory sion implicitly if not explicitly, has ethical dimensions.
postulation, generates a connective, holistic approach that Accordingly, acting on values requires marketing managers addresses some of the major factors marketing managers to have a keen grasp of ethical considerations within a mar- should consider if they desire to conduct their marketing keting decision” (p. 14). This article is foremost about the campaigns with the highest levels of ethics and social ethical considerations that marketers should understand, aspire to, and consider in order to improve the ethics of theiroperations within their firm and in society.
Keywords: marketing ethics; ethical marketing; normative
marketing theory; marketing norms and values;socially responsible marketing THE ETHICAL INFLUENCE OF MARKETING
Kotler and Armstrong (2003), in their influential text- Marketing culminates when people decide to satisfy their book, captured this communitarian aspect extremely well needs and wants by engaging in an exchange transaction with their description of the societal marketing concept.
(Bagozzi 1975; Buzzell 1999). In this sense, much of mar- Originally delineated in the 1970s (Kotler 1972), this idea keting activity can be viewed as systematic sales outreach holds that “organizations determine the needs, wants, and by organizations to various members of the consumption interests of target markets and then strive to deliver superior community and by extension, to society (Preston 1968; value to customers in a way that maintains or improves the Webster 1974; Robin and Reidenbach 1987). When exchange customers’ and the society’s well being” (Kotler and occurs, there are its effects on the primary transacting Armstrong 2003). Indeed, there can be little debate that the parties, but also a residual shaping force on society often marketing system operates in a broad social context. Basic having ethical ramifications (Adler, Robinson, and Carlson marketing textbooks (e.g., Perreault and McCarthy 2000) 1981; Jacobsen and Mazur 1995; Davidson 2003). We have often represented this context as a set of “external envi- believe this is equally true when the marketing process is ronments” usually including the political, ecological, eco- dynamically conceived as the “cocreation” of knowledge nomic, social-cultural, and technological sectors, each of about services between sellers and customers (Vargo and which influences the actions of all business organizations in some way. As illustrated in Figure 1, the aggregate market- Regardless of exactly how exchange happens, every ing system is shaped by society even as the marketing sys- transaction has an impact, major to imperceptible, on soci- tem also has an impact on society itself. From an external, ety. The most common outcome measures of market trans- analytic perspective, the main effects of transactions are actions involve economic impacts such as the macro economic but not exclusively so. At the firm or micro level, measures of GDP and aggregate consumer spending, as well Journal of Macromarketing, Vol. 26 No. 2, December 2006 154-177 as micro measures of sales and revenues at the company level. But exchange, because it is social, also must have its JOURNAL OF MACROMARKETING
B. Analysis ofthe micro / macroethicalness ofmarketingpractices The Marketing
effectiveness andefficiency ofmarketing practices TWO TYPES OF ANALYSIS IN THE MARKETING AND SOCIETY NEXUS
marketing managers (and other interested parties, such as societal analysis, including a long-standing effort of ethical academics) mostly engineer the effectiveness and efficiency inquiry (Walton 1961; Alderson 1964; Patterson 1966; Bartels of individual marketing practices and approaches. This 1967), but this approach has seemingly fallen out of the “economic concern” is represented in Figure 1 by the larger mainstream in recent years. Therefore, the “social-ethical thought bubble, labeled “the analysis of the economic effi- impact” dimension of marketing practice is represented in ciency and effectiveness of marketing practices.” It is in this Figure 1 by the decidedly smaller thought bubble, labeled context marketers focus on the managerial appropriateness “the analysis of ethics in marketing practices.” of what they do and not so much on the degree of an action’s In the tradition of the dichotomy popularized in the mar- moral rightness. Academic and professional associations of keting literature by Hunt (1976), ethical questions about marketing practitioners refer to such analysis as refining the marketing practices can be examined at the level of the indi- science of marketing (Academy of Marketing Science vidual firm (micro questions) or as they influence society in 2005). These economic-impact considerations, appropri- a collective way (macro questions). Professional organiza- ately so, are the ones particularly central to the pedagogy of tions such as the American Marketing Association (AMA) MBA programs when addressing marketing strategy.
likewise document ethical considerations as instrumental to But consistent with the idea of marketing also influenc- their purposes. Specifically, the AMA mission statement ing societal well-being, it is also imperative to thoughtfully (2004) includes as one of its central tenets, “To advance the analyze the ethics of marketing practices. Even the most thought, application and ethical practice [emphasis added] cautious and traditional business theorists and practitioners of marketing.” The Academy of Marketing Science (2005) are willing to grant that business practice is both judged and also commits its membership to “the highest of ethical stan- constrained by social norms of behavior, and therefore, the dards” in the pursuit of its mission to create and disseminate considerable influence of social outcomes always weighs marketing knowledge and further marketing practice.
heavily on business decisions (Elias and Dees 1997). For Not surprisingly, the pragmatics of company goals, as example, at the Harvard Business School, all MBAs now well as the defined job responsibilities of individual man- take a class titled, “Leadership and Corporate Accountability.” agers, directs the majority of marketing outcome evaluation The course premise (Badaracco 2005) reads in part: toward various micro (firm-level) practices even as consult- “Business leaders are responsible for efficiently allocating ants and marketing academics further refine the theories that resources and creating wealth. On the other hand, business justify particular strategic approaches to marketing prob- leaders are responsible for carrying out this task in ways that lems. It is not so much that the consideration of ethics is are legally, ethically and socially desirable. In every thing actively opposed in organizations; rather, it is somewhat for- they do . . . leaders must be attentive to both these objec- gotten in the understandable quest to achieve economic and tives. Neglecting either one can be perilous” (p. 1).
financial goals. Focus on various micro-level aspects of As documented by Wilkie and Moore (2003), the mar- marketing is predictable; one only needs to look at the cor- keting literature has shown a rich and insightful tradition of porate emblems on the employment contracts of managers DECEMBER 2006
to understand this concentration (Aaker 2005; Day 1986).
article is to highlight many of the enduring moral questions This preoccupation with the pragmatics of practice should not preempt the importance of ethical and social evaluations • What general dimensions do managers and academics need to (i.e., the societal marketing concept) and the need for mar- consider when challenged with issues regarding whether their keting managers to also be attuned keenly to these moral particular marketing practices are good or bad for society? issues. As Day and Montgomery (1999) wrote of the mar- • How can marketing managers begin to assess whether their keting and society interface in assessing some of the funda- products are sold, priced, distributed, and promoted in a mental issues likely to challenge the marketing discipline in fashion that can be designated as morally right and fair? • What are the fundamental predispositions necessary for ren- the early twenty-first century, “Unfortunately, some of the dering judgments about whether various marketing prac- consequences [of marketing] have not been positive for con- tices, policies, and strategies are ethical or unethical? sumers or for society at large. We hope that academic mar- • What do marketing organizations aspiring to operate at the keting will direct theoretical and empirical research toward these issues . . . to inform public debate” (p. 12).
In providing the normative commentaries that address thesequestions, it is our intention to suggest elements for improvingethical practice as well as to challenge academics to further NORMATIVE APPROACHES
test and refine these concepts. Along the way, various exam- TO MARKETING ETHICS
ples of presumably unethical marketing practice are featured, To this purpose, the set of basic perspectives (BPs) but this utilization is intended more to illustrate these perspec- offered below address the broader moral dimensions that tives than to provide a detailed analysis of specific issues.
should ideally characterize the marketing and society inter-face even as firms each operate autonomously to serve their THE NATURE OF THE ESSENTIAL BPS
outcomes. In that sense, ethical commentary in this articleapplies to the practices of all marketing organizations even With an eye to the above purposes, seven BPs are described as certain observations may be especially relevant to a par- and explained. These are summarized in Figure 2. Together, the ticular few companies or industries. Continuing the dichotomy perspectives create a figurative and aspirational “star” for the language of Hunt (1976), the approach taken here is inten- analysis and improvement of marketing ethics. The BPs put tionally “normative.” In other words, our perspective about forward are interactive and integrative. Each BP is intended to marketing ethics in this article is not mainly concerned with be helpful taken by itself, but each approach also further the positive details of what is, such as percentage of market- nuances and informs the other BPs (as will be discussed below) ing firms that currently have ethics codes or their extant in order to create a gestalt of the elements useful for compre- policies about honest reimbursement in sales rep expense hending and bettering ethical behavior in marketing. The BPs accounts. Rather, it is about the normative what can be, that can assist committed marketers in evaluating the relationship is, what marketing organizations ought to consider to better of their marketing practices to society. Again, the approach evaluate and improve their ethical behavior. The normative pursued here is unapologetically normative; that is, the per- tradition of marketing ethics has had numerous manifesta- spectives delineated are prescriptive and inspirational in order tions in the trade literature, especially in the form of assorted to help interested managers and macro analysts sharpen their “thou shalts” or “shalt nots” concerning various tactics in thinking about the nature of ethical marketing practices and marketing. But comprehensive theorizing that offers more about how ethics might be better nurtured in the organization.
universal guidance has been conspicuously lacking in the Appendix A delineates how the BPs discussed below conform literature. In surveying such writing, Dunfee, Smith, and to the elemental requirements of normative ethical theory pos- Ross (1999) found only four frameworks in marketing ethics tulation in business ethics (Bishop 2000).
research with a distinctly normative orientation. Those are The individual BPs discussed below are not unique and the following: Laczniak (1983), Williams and Murphy represent a synthesis of the ethics literature. However, this (1990), Reidenbach and Robin (1990), and N. Craig Smith particular set of recommendations, applied to marketing and (1995). These works will be linked to our formulations, as linked together in the integrative manner described below, appropriate, in the narrative below. True to the conception of constitute a dynamic, comprehensive, connected perspective normative ethical theory (Bishop 2000), our observations that will enlighten and empower marketing executives com- are intended “to advocate and establish guidelines” for better mitted to ethical decision making. The BPs are grounded in ethical marketing practice rather than attempting to report theory where possible and are intended to provide insight what practitioners say these presently are.
not only about the propriety of various marketing practices At its core, this commentary lays out a set of BPs essen- from an ethics standpoint but also about what highly ethical tial for better understanding and improving the ethical role marketing ideally can be. Our hope is that each perspective of marketing in society, especially from the managerial will stimulate commentary and, where appropriate, empiri- standpoint of individual firms. The explicit purpose of the cal validation as to its effectiveness when organizations try JOURNAL OF MACROMARKETING
A SUMMARY OF THE ESSENTIAL BASIC PERSPECTIVES (BPS) FOR EVALUATING AND IMPROVING MARKETING ETHICS
to live these ideals. In this way, normative marketing ethics should seek to fully comprehend their societal influence and connects back to positive marketing ethics, which describes to ensure their marketing operations create a perceived and the current state of affairs concerning the prevailing moral real social benefit. People should never be treated merely as practices of marketers. Positive marketing ethics has devel- cogs in the marketing system, whether they are customers, oped a rich tradition represented by tests of the now classic employees, suppliers, distributors, or some other stake- Hunt-Vitell model (1986) demarcating how marketing man- holder. Marketers who ignore critical public opinion—the agers actually make their ethical decisions. And, it is only in articulated attitudes of the populous—or whose practices knowing how managers approach ethical problems that one overtly or covertly damage society place their firms in sub- can begin to assess the gap between current practices and the stantial ethical and financial jeopardy. Managers ought to postulated ideals of normative marketing ethics. Therefore, begin their deliberations about the ethical impact of market- for the express purpose of animating the highest standards of ing activities on society with this fundamental dictum of ethical practice and drawing on fifty years of relevant litera- “people first” as their guide if they hope to prosper in the ture, the normative BPs (articulated below) have been for- mulated. They are anchored in moral philosophy, business At a casual level, that marketers should serve people ethics research, corporate social responsibility frameworks, seems a straightforward observation intuitively consistent public policy thinking, religious values, legal guidelines, with the revered marketing concept (Keith 1960; Levitt 1960, and a modicum of utopian idealism about how marketing 1975). Yet this primary and complex BP requires some elab- practices might be ethically improved from both an organi- oration. Most marketing managers properly believe that the zational and societal standpoint. It is with the crucial social market is well served when business operations are structured perspective in mind that we begin our discourse.
to cater to the customer (Drucker 1954; McKitterick 1957).
As the erudite Professor Drucker (1954) observed, “Thereis only one valid definition of business purpose: to create BP1—Societal Benefit: Ethical
a customer” (p. 37). In general, this orientation is also highly Marketing Puts People First
useful to society and consistent with classical economic The marketing system should always be of service to theory because a system of mutually agreed-to exchanges people. To make this happen, ethically concerned marketers among producers and consumers leads to subsequent benefits DECEMBER 2006
for many by allowing for the division of labor in our eco- affirmation is essential to ethical marketing, the context of nomic system (A. Smith 1776/1976). Indeed, perhaps the marketing operations in the broader society is worth briefly fundamental tenet underlying recommended marketing prac- tice is to subscribe to the marketing concept, that is, to accept In the aggregate, marketing firms collective foster the the notion that most of marketing planning is driven by the transactions necessary to maintain a system of complex discovered needs and desires of consumers, and then to align change in the economy. Individual firms possess the right to organizational resources in a manner that creates sustainable, participate in that socially beneficial commercial network competitive advantage for the firm (Anderson 1982; Hunt (i.e., to cocreate with consumers a service opportunity whose value is realized through a mutual exchange process).
More important, however, consumer satisfaction is only a From a U.S. perspective, the relegation of commerce to the first-order understanding of what ethical marketing is about private sector is rooted in the U.S. Constitution, article 1, (Deshpande 1999). Substantial satisfaction for a particular section 8. This is the so-called commerce clause, and it also segment of consumers does not necessarily translate into net gives the U.S. Congress the explicit power “to regulate benefits for society. Clearly, the satisfaction of some con- Commerce with foreign nations, and among several states, sumers sometimes allows for dysfunctional second-order and with Indian tribes” (Steiner 1975). Marketers encounter effects or beyond. Tobacco marketing is the most obvious similar regulatory potential when operating in global mar- example. Smokers willingly pay for this product and are kets as well (Schlegelmilch 1998). Therefore, when business presumably satisfied in the short term. But recent social his- firms each engage in their selected markets, they assume tory has made clear the horrific long-term effects of this par- economic risk in exchange for the possibility of proportion- ticular product (e.g., Scheraga and Calfee 1996). From a ate reward (i.e., profit). But the license to potentially profit societal standpoint, it is at this second-order or even third- comes with an obligation, implicit in commercial undertak- order effect of marketing practice that ethical questions ings, that marketing managers may not consider. Like Adam Smith’s invisible hand, there exists an additional group of Consider the following examples. The availability of easy- unforeseen factors that weighs into business decisions.
to-get and aggressively marketed financial credit (a mostly Kenneth Arrow (1973), Nobel laureate in economics, wrote desirable characteristic in developed economies) can cause about the economic system and captured this perspective major problems among some in a college population not sufficiently mature to handle debt or discerning enough toavoid the temptations of the attractive purchases that are eas- There is still another set of institutions, if that is the right ily obtained with a readily accessible credit card (Palmer, word, I want to call to your attention and make much of.
Pinto, and Parente 2001). Similarly, consider the unintended These are invisible institutions: the principles of ethics and spillover of alcohol advertising to underage markets. Various morality. Certainly one way of looking at ethics and moral-ity, a way that is compatible with this attempt at rational ad campaigns, although legal, may plant images in young- analysis, is that these principles are agreements, conscious, sters that underscore a dysfunctional message of enhanced or, in many cases, unconscious, to supply mutual bene- sociability and personal attractiveness resulting from alco- fits . . . the fact that we cannot mediate all our responsibili- holic beverage consumption (Leiber 1997). In light of such ties to others through prices, through paying for them, possibilities, extant rules presently restricting alcohol adver- makes it essential in the running of society that we have tisements to programming with more than 50 percent adult what might be called “conscience,” a feeling of responsibil- audiences might seem arbitrary and not nearly restrictive ity for the effect of one’s actions on others. (p. 309) enough. And, many customers of all backgrounds respond toInternet spam solicitations and are matched with products The major upshot of BP1 and our related commentary is that deliver (more or less) what they promise. Yet the satis- that marketing managers have an undeniable responsibility faction of this minority does not eliminate the reality of most to society for their decisions along with their employing consumers being highly agitated by the growing presence of organizations. For instance, Donaldson and Dunfee (1999) spam advertising. Granting some (first-order) satisfied seg- would connect social responsibility in marketing to an ments of consumers, the second-order effects (or beyond) of understood social contract between business and society that certain debatable marketing practices, such as spam solicita- implicitly ought to inform decision making. Because the tions, can be socially troubling and disturbing to many and license to engage in commerce constitutes a social contract, has resulted in “can spam” legislation (Chang 2004). This there is a social responsibility to see to it that the marketing particular “fix” has thus far been ineffective.
decisions made by managers serving their employers do not Marketing strategies work best and most ethically when disadvantage society. Consistent with this view, society, via they enjoy the support of society. Typically, marketers will the law and evolving public opinion, is the final judge as to earn that long-run support when most people feel (including whether particular marketing activities, like those discussed noncustomers) served by the implemented marketing prac- above, individually and/or collectively, serve broader com- tice (Lazer and Kelly 1973). Given our stipulation that societal JOURNAL OF MACROMARKETING
According to BP1, the market system primarily is to be at suppression of the telemarketing industry with state and fed- the service of people. Hence, this proposition strongly sug- eral “do not call” lists and the temperance of online market- gests that persons (especially the consumers in a marketing ing research with children through the Children’s Online transaction) should never be viewed as merely a means to a Privacy Protection Act [COPPA] regulations motivated by profitable end. Those familiar with moral philosophy will several unfortunate abuses of children’s privacy on the recognize this decision rule as a marketing-oriented version Internet (Lans-Retsky 2004). This discussion of legislation of Immanuel Kant’s well-known categorical imperative, as the solution to marketing excesses at the expense of all second formulation (Kant 1785/1981; Bowie 1999). Marketing parties leads to a necessary articulation of the distinction practices violating this means-versus-ends proposition are, between marketing ethics and marketing law.
at minimum, ethically suspect. Selling tactics that treat con-sumers as mostly means rather than ends likely include the BP2—Two Realms: Ethical Expectations for
Marketing Must Exceed Legal Requirements
• High-pressure selling tactics such as those in certain sectors Ethical marketers must achieve a behavioral standard in of the financial services or real estate industries (e.g., junk excess of the obligations embedded in the law. Typically, the bonds peddled by “boiler room” investment firms, sales of law represents the lowest common denominator of expected variable rate annuities to the older elderly, or various hardsell time-share condominium presentations) behavior for marketing and business practice (Westing 1967; • Coercion in the channel distribution, such as demands for Carroll 1991). Ethical marketing organizations always price concessions, by the channel partner having significant should strive to exceed the legal minimums of social compli- economic leverage (e.g., the periodic dealings of big box ance. Thus, the law and ethics represent two-tiered layers of retailers with their suppliers concerning slotting fees and constraint impeding socially troubling marketing practices. It • Over-the-top psychological approaches, such as the use of is worth distinguishing more formally between these two fear appeals in the sale of home security systems or elective concepts—law and ethics—and their interconnected realms.
• The sexual exploitation of women (or other demographic • Marketing law constitutes the baseline expectations upon stereotyping) in magazine advertising for attention-etting marketing by society. It is a black letter set of rules and regu- lations that are codified over time to address the dynamics of Price gouging in times of product shortage, such as in the business practice that deals with the marketing function aftermath of hurricanes or other natural disasters (Welch 1980; Stern and Eovaldi 1984; Oswald 2002). Theformalization of restrictions by law typically lags public opin- When marketers treat their stakeholders mainly as ion and therein lays one danger of only relying on the law to means, they flunk the test of placing people first (e.g., guide the boundaries of behavior. Obvious examples of mar- Karpatkin 1999). The inability of marketers to adhere to the keting laws and related regulatory oversight include antitrustlegislation, which modulates competition; the Federal Trade dictum of never treating their consumer (and other stake- Commission (FTC), which oversees sales and trading prac- holders) as merely a means to an end, if sustained, will usu- tices in the United States; the Consumer Product Safety ally result in the invocation of the “iron law of social Commission (CPSC), which specifies the safety standards for responsibility”—an exercise by regulators that, from a cost various products and dictates the removal of harmful products standpoint, is often detrimental to the violating marketer or from the marketplace; and the Food and Drug Administration
(FDA). There has been a slow but steady increase in the reg-
perhaps all marketers. The iron law of social responsibility ulation of marketing activities over the years (see Sprott and posits that when entities, such as marketing organizations, Miyazaki 2002). Even granting the existence of several ill- have great economic power and do not exhibit proportion- conceived business laws and regulations, when firms inten- ate social responsibility, they will have their power propor- tionally break the law, they are quite likely to be in ethical tionately diminished (adapted from Davis, Frederick, and jeopardy as well (Cohen 1995; N. Smith 1993).
• Marketing ethics encompasses the societal and professional Blomstrom 1980). Usually, the diminishment of business standards of right and fair practices that are expected of mar- freedom takes the form of additional regulations.
keting managers in their oversight of strategy formulation, A recent and powerful example of the exercise of this implementation, and control. The most basic ethical stan- “iron law” in the business environment is the promulgation dards are often articulated in professional codes of market- of the Sarbanes-Oxley Act (2002) to deal with the spate of ing conduct. The Norms and Values statement of the AMA,revised in 2004, is presented in Appendix B. It represents a business ethics scandals involving companies such as Enron, useful, duty-based specification of marketer responsibilities WorldCom, Adelphia, and Tyco (PricewaterhouseCoopers that exceed those codified in law. It is illustrative of the 2003). Because a few CEOs, CFOs, and auditors did not dis- expectations incumbent in the practice of marketing not cap- charge their imputed social and ethical responsibilities, a tured by law. While basic theories of ethics do not change sweeping new set of costly regulations was enacted that over time, the norms and values that are clearly embraced bysociety, or by a profession at any period in time, are subject restricted the latitude of governance actions corporate officials to slow shift. For example, in the early to mid-twentieth cen- might take. Sectors of the marketing community have recently tury, the operation of retail stores on Sundays in the United experienced similar legislative backlash, as witnessed by the States would have been perceived by many as unethical.
may impose their singular solution upon marketers (Jennings2006). For instance, numerous ethical questions were raisedabout telemarketing practices prior to the institutionaliza-tion of do-not-call lists in various states’ legislation andeventually in federal law (Vence 2002). Similarly, sellers ofalcoholic beverages and tobacco products were asked totemper their advertising use of cartoon characters and “lovable”animals appealing to children, before the enactment of for- mal regulations severely restricting such approaches on TVshows directed at children.
• Ethics implies assuming more duties than law. Normally, ethics bestows a greater obligation of moral duty upon mar- Responsibility
keting managers than merely conforming to the law. The Professional and Moral
AMA Norms and Values statement (Appendix B), for exam-ple, delineates the basic moral standards expected of mar-keting professionals by society, but most of these are notinstitutionalized in laws. The Integrated Social Contractstheory approach to business ethics would characterize such Baseline Expectations
guiding norms as creating moral free space for members of of Society
a professional group (i.e., marketers), who then use thoseprecepts as a motivating behavioral cue (Dunfee, Smith, andRoss 1999). In contrast, marketing managers, who are pri- FIGURE 3 THE RELATIONSHIP OF ETHICS AND THE LAW:
marily legal minimalists and thus seek to exclusively con-form only to the law, will likely exhibit a lower behavioralstandard. This lowered standard could easily jeopardizetheir company’s reputation and subject the organizations to Clearly ethics and the law are connected, but they are not negative consequences if society’s higher expectations are the same (Halbert and Ingulli 1997). Understandably, many not met by marketers who appear to be lax in their ethicaldischarge (see BP4).
questionable marketing practices are both illegal and uneth-ical. Examples would be price fixing as well as bait and Adhering mainly to the law as the dominant guideline for switch advertising. However, many other marketing tech- judging the propriety of a marketing practice is often moti- niques and strategies may not be illegal but could raise eth- vated by the agency theory perspective of management ical questions. For example, “ambush marketing”—creating (DeGeorge 2006). According to the agency approach, man- an ad campaign that mimics a competitor’s special event agement acts solely as an agent of the stockholder and is promotions for which they have paid sponsorship fees—is responsible for maximizing investor return—the presump- not illegal per se but generates spirited debate among ethi- tive primary concern of shareholder groups. Shareholder cists and practitioners concerning its inherent fairness goals are conceived as predominantly financial, although the (O’Sullivan and Murphy 1998). Finally, a few practices are rapid growth of socially responsible investing (and other illegal but not necessarily unethical. For instance, providing developments such as the sustainable-economics move- small “grease payments” in certain foreign markets, while ment) seems to belie this viewpoint (Thompson 2004).
technically legislated against in these countries, may consti- Consistent with agency theory, ethical actions are often per- tute a business practice that is both commonplace and ceived as discretionary if not required by law; ethics is seen widely expected (Kaikati and Label 1980; Carroll and as costly because it often requires expenditure of supple- mentary organizational resources in order to achieve confor- Figure 3 provides a useful way to envision the relation- mance with social norms. This view was captured by Milton ship of ethics and the law as it often applies to marketing Friedman’s (1970) famous analysis of corporate social practice. In this instance, the Y, or vertical, axis represents responsibility: the social responsibility of business is to moral and professional responsibility and the X, or horizon- increase profits. In his classic work, Capitalism and tal axis, represents societal expectations. An examination of Freedom (1962), Friedman characterized social responsibil- Figure 3 underscores the following two points: ity as a subversive doctrine and wrote, “There is one and only one social responsibility of business—to use its Ethics embodies higher standards than law. Ethics is typi- resources and engage in activities designed to increase prof- cally the leading edge of regulation, thereby implying ahigher standard of professional/moral responsibility than its so long as it stays within the rules of the game, which is law and incorporating wider latitude of societal expecta- to say, engages in open and free competition without decep- tions. In this sense, ethics anticipates the dynamics of soci- etal attitudes and opinions concerning marketplace fairness In contrast to agency theory, adherence to an ethical per- that eventually may be proscribed and embodied in the law.
spective in marketing management is most commonly driven When an ethical issue is first called to the attention of mar-keters, there are likely to be several possible solutions to the by stakeholder theory (Freeman 1984). This approach posits problem. But as negative public opinion grows, regulators that a firm has important responsibilities to other parties JOURNAL OF MACROMARKETING
(e.g., employees, suppliers, distributors, the host commu- formulator from responsibility for a dubious marketing nity). These responsibilities extend beyond contractual strategy. For example, the creators of a TV advertisement obligations and, with some regularity, can supersede the imme- that depicts an overweight child as a “pathetic loser” in a diate objectives of investors and/or stockholders. Stakeholder competitive contest or portrays a Hispanic man as a “work theory is a normative theory of corporate responsibility for food” gardener might claim that they did not intend to because it asserts that ownership rights are not always pri- perpetuate social stereotypes and thereby offend certain mary and exclusive because business operates under an audience segments. When receiving unexpected criticism, implied social contract (see BP1) that grants certain rights to creators of debatable marketing tactics commonly claim other parties. The addition of these other stakeholders to the ignorance of the offense or deny any intended slight, what- calculation of required managerial responsibilities automat- ever their true and original intention. Nevertheless, intent ically restores a greater societal orientation into the debate sometimes can be deduced with reasonable confidence by about the propriety of marketing (and business) practices, examining circumstance. For example, when me-too mar- because it formalizes the consideration of their viewpoint as keters attempt to closely emulate the colors or trademark of a matter of expected protocol (Goodpaster 1991; Donaldson a market leading brand, causing consumer confusion in the and Preston 1995). The acceptance of stakeholder claims as marketplace, the calculated intent seems to be relatively central to an organization’s purpose has the effect of elevat- clear-cut and logical. Similarly, if marketers of highly vio- ing ethical examinations to a level of expectations that goes lent video games consistently advertise on TV programs significantly beyond legalistic minimums. Additional dis- with the highest attainable number of young adolescent boys cussion about the essential and enduring effects of recogniz- as audience members (even when following industry guide- ing stakeholders’ claims and the ethical posture of firms is lines in only promoting these products on programs watched by a majority of adults), the motivation behind such prac-tices seems arguably clear. In these instances of stereotypingin advertising, trademark caricature, and willfully targeting BP3—Intent, Means, and End: Three Essential
a vulnerable market segment, probable marketer intent can Components of Ethical Analysis
shed considerable light on the likely ethicalness of a partic- When formulating marketing campaigns, marketers are responsible for their intent, as well as the means and end of The means (or method) of executing a marketing strategy a particular marketing action. This essential perspective is the second component of a marketing action that requires requires some deliberate explanation. As analysts adjudicate scrutiny to judge its ethical nature. Obviously, certain prac- the ethical dimensions of a questionable marketing practice, tices (e.g., predatory pricing) are explicitly forbidden by that practice can, and usually should, be divided into three law. However, an analysis of the specific means used in the distinct components—the intent of the action, the means or execution of a particular marketing strategy can provide use- method by which the practice is implemented, and the end ful insight into the ethical propriety of a debated marketing or consequences of the strategy or tactic. The intention is action. For instance, widely promoted product rebates, what marketers want to happen, the means is how they carry which then require multiple documentation (i.e., proof of out the action, and the consequences are what actually hap- purchase, Universal Product Code [UPC], retail seller veri- pens. The quality of ethical analysis that is conducted, fication, etc.) as well as an overly detailed set of confor- whether internal or external to the firm, is improved by such mance steps by the consumer to successfully execute that a separate consideration because it allows marketing ana- redemption, seem by their very method of administration to lysts to sharpen their insight about how a particular market- be ethically questionable (Grow 2005). Similarly, the por- ing situation might be perceived. This approach forces trayal in TV ads of pliant and submissive women easily managers to focus not only on the outcomes of their deci- available to those who drink a particular brand of beer (witness sions (something that typically has their attention) but also the numerous depictions of beer bimbos in past light-beer ad on the process of how they make decisions (see also BP7).
campaigns) seems a means of promotional campaigning that From the viewpoint of an outside party, there is little at least raises ethical questions solely because of its method doubt that the intent of a particular marketing action, in of thematic execution (Lawton 2003).
terms of its ethical purity, is the most difficult element to The third component to be addressed in assessing the eth- judge because it requires evaluating the internal motivation icalness of a questioned marketing action is its outcome.
behind a company’s particular actions or policy. From a Because many outcomes have considerable overt visibility legal standpoint, intention often involves judging what a associated with them, the consequences of marketing party could reasonably foresee might happen when taking actions are probably the easiest components for outsiders to a particular action or set of actions. Because many seller judge when analyzing the acceptability of particular market- motivations are hidden, the intent behind marketing strate- ing actions and should always be considered.
gies or tactics can be rationalized ex post facto by the One especially useful framework for judging the ethics of decision maker in a manner that obscures or shields the business practices based on this approach was advanced by DECEMBER 2006
Garrett (1966), and it provides the theoretical basis for BP3.
proportion of an audience watching television might view The straightforward pragmatism of his particular method of ads for Viagra or other erectile dysfunction products and analysis—the proportionality framework—holds consider- could be offended by such advertising. However, such unin- able appeal for decision-oriented marketing managers inter- tended, negative side effects of marketing actions, if minor, ested in applied ethics. Garrett’s principle of proportionality are parts of the complexities of an advanced marketing combines all the essential elements into one ethical decision- system and can be tolerated from an ethical standpoint.
making rule that encompasses and refines BP3: marketers In the last analysis, Garrett’s (1966) proportionality are responsible for whatever they intend as a means or an framework is still highly judgmental. For example, what end. If both are good, they may act accepting a certain (i.e., constitutes a major negative outcome versus a minor nega- minor) risk of side effects.
tive outcome from an ethical standpoint? Which side effects According to Garrett (1966), with regard to side effect are intended versus unintended? This entire approach rests outcomes, marketers should avoid actions that result in a on marketing decision makers being fairly sophisticated and direct major negative outcome for another stakeholder. For reflective in their ethical perceptions and moral intuitions.
example, a seller who rigs a bidding process in order to Mascarenhas (1995) developed a diagnostic framework, tai- secure a supply contract has caused a major negative harm to lored to marketing settings that can provide some additional other economic parties competing for the same business.
guidance for making precisely these types of judgments.
That is, others lose the chance at the contract because of a While this three-component framework of intention, means, patently unfair competitive practice. Shareholders lose the and outcome is not a perfect system for judging the ethics of opportunities presumptive in the profit margin of a lower bid.
a particular situation, when used in combination with other The fact that the bid-selected product might well meet the basic perspectives (see BP5), it can serve as a helpful, initial buyer’s specifications and be perfectly instrumental for its analytic, inherently recognizing that marketing decisions are intended purposes does not negate the unethical outcomes to multifaceted and complex and demand evaluation from dif- other bidders caused by bid rigging the purchase process. ferent standpoints to validate their propriety. The propor- Marketing practices that intentionally cause (or are likely tionality approach is also particularly useful in balancing the to cause) a major negative outcome for stakeholders affected claims of various stakeholders affected by marketing actions by the transaction at focus should always be scrutinized for their ethical propriety. Sometimes there are unintended sideeffects from marketing actions that are taken by sellers that BP4—Marketing Managers Differ in Moral
also cause major or minor negative outcomes. If these side Imagination and Development: Four Types
effects can be designated as major negative outcomes andthey are foreseeable, the action must always be subject to Marketing organizations striving to improve their ethical careful ethical evaluation. For example, suppose a marketing aptitude should cultivate better moral imagination in their firm has been successfully selling personal watercraft (jet managers by hiring and training those who will likely under- skis) to an increasing number of satisfied consumers when it stand and appropriately apply moral reasoning. In most comes to their attention that there has been an alarmingly firms, the managers making marketing decisions will differ high rate of injury among younger adolescents when they in their ability to evaluate and resolve ethical issues. This is operate the watercraft without parental supervision. This because managers will possess varying levels of moral outcome occurs despite the fact that the product has passed development. Some marketing executives will have little all industry safety standards and there is a warning label on ethical sensitivity, while others will have the capacity for the watercraft prohibiting the operation of the personal significant moral imagination—that is, the character and watercraft by drivers under 12 years old. In this instance, it ability to morally reason to creative ethical solutions when is probably unethical for the firm to go forward with further encountering an ethical question (Werhane 1999). In other sales without some further intervention (e.g., a mandatory words, managerial quotients of moral sensitivity and capa- water safety class for family buyers) because the major side bility will not be the same, owing to different life experi- effects of the product (a high rate of injury to minor opera- ences and core values, as well as their basic human character tors) is generating a significant or negative consequence for (Hosmer 1994). Given this realistic state of affairs about some stakeholders (family members of personal watercraft critical ethical evaluations, organizations should seek to understand the nature of these different personal moral apti- It is true that almost any marketing action can have unin- tudes and strive to instill an improved ethical reasoning tended side effects. And, on occasion, win-lose situations are inevitable such as when, for instance, a large retailer receives Theoretically, this natural variance among managers is a favorable zoning ruling to establish a new distribution cen- best recognized by Kohlberg’s (1969) framework of moral ter but environmental groups (technically secondary stake- development. Business firms have the potential to use such holders) continue to protest or call for company boycotts thinking throughout their executive development programs despite a ruling that favors the retailer. Similarly, some small when seeking improved social responsiveness (James 2000).
JOURNAL OF MACROMARKETING
While Kohlberg’s framework was formulated by studying 3. Moral strivers, our third type, are those marketing managers the cognitive moral development of children, not managers, who have progressed in their moral thinking and develop- research evidence shows that training and instruction can ment to the point where they are capable of considering and improve the moral development of managers (Pennino balancing multiple stakeholder claims when adjudicating 2002). Similarly, empirical evidence exists that managerial what constitutes an ethical imperative. The empathy-for-others capacity is what distinguishes these moral strivers moral styles vary greatly across organizations as well (Srnka from egoistic managers since their ethical reasoning often 1999). The importance of perspectives such as Kohlberg’s will be tempered by additional relevant factors such as orga- depends on realizing that, in many instances, a firm’s ability nizational loyalty (e.g., to coworkers and suppliers) and to handle ethical issues is only as good as the capability of other basic duties to society (e.g., written guidelines embod- its managers. Case histories of how organizations handle ied in industry or professional codes). Nevertheless, strivers ethical challenges support the face validity of this approach are still heavily dependent on company rules and policies in (Pastin 1986; Boatright 1995). Recognizing managerial dif- their assessment of moral situations. Some moral striver ferences in moral imagination implies that, given directed managers are susceptible to falling back on minimalist training, managers can enhance their ethical skills. At the expectations and reverting to an egoistic or legalistic most basic level, inspired directly by Kohlberg, we would approach in the absence of readily available guidance. Other posit four broad types of marketing managers.
strivers really want to do the right thing, but prevailing orga-nizational concerns, such as signals from upper manage-ment, demands to meet financial objectives, or an uncertainty 1. Egoistic marketing managers are the least morally devel- about proper norms, sometimes lead them to avoid the time- oped and have a strong tendency to resolve moral situations consuming work of ethical reasoning. Put another way, based on their own immediate interests and consequences.
unless provided with some form of codified ethical guid- Individuals at this comparatively undeveloped stage of ance, strivers often lack the moral imagination to creatively moral thinking give strong weighting to the incentives and reason through the more complex ethical problems. This sanctions that will affect only them. The language that char- state of affairs helps provide an answer to the often asked acterizes this managerial approach includes rationalizing question, Why do seemingly good marketing managers phrases such as the following: “everybody else does it”; “the sometimes make unethical marketing decisions? lawyers haven’t told us this is wrong”; “we were only fol- 4. Principled marketing managers, our fourth type, have lowing orders” (Jennings 2003). Such managers respond reached a high level of moral development. Managers who mostly to organizational rewards and punishments, and their attain this sophisticated state address their ethical problems personal moral resolve is relatively immature because of by regularly applying both prevailing ethical norms and their preoccupation with personal or company gain. Marketers applicable laws to the specific situation. Principled man- at this unrefined stage of moral development will include agers also have substantial moral imagination and therefore individual egoists who will choose actions that benefit are better able to foresee the ethical impacts of their market- mostly themselves, given this sort of option. And unfortu- ing decisions on others; they have developed the moral nately, at the extremes, there may also be some “crooks” in capacity to incorporate basic stakeholder claims, industry this category—managers who know the actions being taken norms, and legal constraints into their moral calculations; are wrong, but who will choose to do them anyway because they can creatively apply universal ethical principles—ones of the probable personal payoffs involved. Surely, the pirate they believe all fair-minded managers should follow given a CEOs and CFOs who raided Enron, WorldCom, Tyco, and similar set of facts or situations. One study found this group Adelphia are of this corrupt category of manager (Murphy to be in the minority (Drumwright and Murphy 2004). BP5 provides specific illustrations of such guiding principles.
2. Legalist marketing managers are the second type. They overtly espouse the law as their guide in adjudicating thepropriety of any marketing action. As explained in BP2, they Our executive training and development experience has embrace predominately an agency approach to their mana- shown that in a typical marketing organization, the moral gerial duties. Legalists often perceive business as a game, development of managers will vary, with most managers with profits and return on investment (ROI)-type measures being of the moral-striver type. This view is consistent with the winning criteria; all tactics not expressly prohibited by opinion polls of executives conducted over the years, where law as “in play” regardless of consequences. Carr (1968) the vast majority of executives assert that they try to do the succinctly captured the essence of this perspective in his right thing most of the time (Laczniak et al. 1995). Thus, a famous article, “Is Business Bluffing Ethical?” He wrote: common situation involves morally striving managers, who “Our customs encourage a high degree of aggression in the when facing an ethical question are guided by relevant laws individual’s striving for success. Business is our main area along with the specifically articulated ethical norms of their of competition, and it has been ritualized into a game of particular organization. In these cases, when ethical norms strategy. But as long as a company does not transgress therules of the game as set by law, it has the legal right to shape and values are well-defined, striver marketing managers will its strategy without reference to anything but its profit” be in a better position to apply company and industry guide- (p. 149). This law-equals-morality approach certainly undercuts lines to the ethical question at hand and then reason to an the obligation of ethical reasoning for such managers.
Many morally striving managers also might be described corporate “good guy” leads to greater customer loyalty (e.g., as “seekers” because they are looking to do the ethical thing Ben & Jerry’s ice cream), greater employee retention (e.g., but need training and organizational guidance to do so.
NML Financial Services), and better access to equity capital When faced with difficult ethical questions, some marketing (e.g., Google). But whether being the moral exemplar managers, failing the availability or clarity of specific guide- directly corresponds with economic reward is the subject of lines from the organization, quickly revert back to the posi- much debate (Cochran and Wood 1984; McWilliams and tion of egoists or legalists constrained only by the limits Siegal 2001). Good companies do not necessarily do best of law in seeking personal or organizational advantage.
financially. But, avoiding major ethics scandals certainly Accepting such easier approaches basically allows sidestep- seems to mitigate major corporate punishments and their ping the challenge of ethical analysis by adhering to mini- associated costs (Johnson 2003). In other words, unethical mal legal requirements or personal hubris. The strategic companies seldom finish first, and often they do not survive, implication of this discussion for organizations is that, if as Enron and Arthur Andersen attest.
firms are trying to achieve better ethics, they should attempt Commonly, one motivation for principled managers to to articulate, communicate, and reinforce all those ethical live out high ethical ideals comes from a highly developed norms and values considered to be essential for their com- ethical culture (Ottoson 1982). Such an ethical culture may pany and industry sector (Murphy 1989). This will allow be the result of the values of the company founder, or it may managers who are strivers to have the necessary ethical come from a longtime CEO who expects fair play and hon- guidance and will decrease the tendency of some marketing esty in all operations (George 2003). Corporate cultures that managers to retreat back exclusively to legalistic or egoistic are ethical do not just happen by chance; rather, they are the thinking. A protocol useful for channeling the ethical decision- result of a premeditated effort on the part of a corporation to making process for managers is discussed in BP7.
explore their values, articulate them, and then train all employ- The task of organizations serious about their ethical oper- ees in the details and importance of living these company ations is to try to minimize the number of egoistic managers (sadly, the plain crooks [see Murphy et al. 2005] may bebeyond help with regard to ethics training) and to move BP5—Five Essential Ethical Precepts
them at least to the striver level of moral thinking via ethics for Enlightened Marketing
education. Furthermore, given the propensity of egoist man-agers to respond mainly to rewards and punishments, organ- Marketers who aspire to operate on a high ethical plane izations must strive to significantly reduce managerial should articulate and embrace a core set of ethical princi- opportunities to capture illicit rewards that might be gained ples. A definitive distillation of the essential moral precepts by engaging in unethical actions (Ferrell and Gresham for evaluating marketing practice is as illusive as ranking 1985). Such opportunities are usually minimized through business schools or creating the perfect Graduate Management strong internal company compliance programs and a system Admission Test (GMAT) exam. All marketing firms need to of corporate governance with plenty of checks and balances.
reflect on the core values referenced in their company ethics Incentives for organizations to reduce legal penalties if or statements and then work to derive an appropriate list of when they do transgress are provided by the Federal sacrosanct ethical guidelines. However, five ethical princi- Sentencing Guidelines for Organizations (FSGO) regula- ples for assessing the propriety of marketing practice are tions (LeClair, Ferrell, and Fraedrich 1998; Laczniak and offered to stimulate debate and further the dialogue about enhancing marketing ethics. An honest review and attempt Principled managers, that is, those who have developed to use these normative principles will go far in generating ethical value systems and the capacity for consistently the ethics conversation among managers and/or policy mak- applying them, are also in the minority in most organiza- ers necessary to improve marketing practices. Articulating tions. Cultivating ethical managers, who are such moral such an idealistic and normative set of principles is in con- exemplars and who will always try to pursue what is morally formance with the deontological (or duty-based) approach right in their marketing decisions, is the ideal for those firms to ethics that often characterizes professional codes of con- aspiring to operate at a highest ethical plane. In confor- mance with BP2, companies should insist that simply com- These principles also might be considered a preliminary plying with the law is not sufficient to achieve meritorious answer to a question implied by BP4 and address ethical corporate citizenship and ethical responsibility. It is often issues concerning the rightness or fairness of various mar- postulated that virtue is its own reward, but the pragmatic keting tactics. Since marketing managers with moral imagi- benefit of having principled managers—those who know the nation are essential to ethical organizations, several principles core values of the firm and always try to apply it in their should be regularly integrated into their moral reasoning.
decisions—is that such leaders can embody essential moral Ethical questions about marketing could be raised by imagination and propel their organizations to the forefront managers (e.g., Can I pad my expense account to recover of enlightened social responsibility. Some argue that being a gratuities incurred as part of my business travel?), customers JOURNAL OF MACROMARKETING
(e.g., Is this price fair?), regulators (e.g., Should direct mail particularly focusing on the integrity of marketing com- sellers incur the cost of collecting the appropriate state sales munications. Case law, as well as regulation concerning tax?), the media, competitors (e.g., Should all material prod- deceptive practices like those overseen by the FTC, is a use- uct claims contained in advertising be substantiated on the ful minimum for understanding the scope of this often com- company Web site?), as well as other stakeholders. Just rais- plex principle (Murphy and Wilkie 1990). This involves ing an ethics question does not presuppose a practice is considerations such as articulating the specific type of prod- unethical. For example, many questions have been asked uct claims that might mislead reasonable consumers.
about the practice of product “puffery,” that is, vigorously However, the ethical rationale behind the principle of non- exaggerating a product attribute for dramatic effect (Preston deception is grounded more thoroughly in the theory of 1994). As an illustration, stating that a new model sports virtue ethics (MacIntyre 1984; Williams and Murphy 1990).
coupe has an engine that “purrs like a kitten” would be a The importance of nondeception is built on the supposition product puff. Many analysts find most puffing tactics to be that trust is the foundation of an efficient marketplace and ethically defensible even though they usually raise some that this characteristic is nurtured largely by ongoing mar- keter honesty. Specifically, over time, consumers will not be Of the five ethical precepts to be discussed, two of them able to trust sellers or their brands if they are intentionally (nonmalfeasance and nondeception) are regularly included manipulated or deceived (Brenkert 1997). Deceptions such in business codes of conduct. The other three principles as the overselling of extended warranties that very likely are (protection of vulnerable markets, distributive justice, and not needed by consumers, “channel stuffing” by sales reps stewardship) advocate an elevated level of ethical responsi- in order to meet monthly sales quotas or quarterly division bility that is likely to stimulate greater debate and challenge revenue projections, overpromising the capabilities or deliv- among marketing practitioners because they demand a much ery of anticipated new products (e.g., vaporware), and the higher threshold of required moral obligation.
abuse of word-of-mouth marketing (e.g., creating false or The first essential ethical standard is the principle of non- exaggerated buzz marketing) illustrate violations of this malfeasance. This is a basic rule of professional ethics, and it states that marketers should knowingly do no major harm The third moral precept for marketing is the principle of when discharging their marketing duties. This principle also
protecting vulnerable market segments. Such uniquely vul- helps operationalize the ethical concern regarding possible nerable market segments would include children, the elderly, negative outcomes of marketing actions discussed as part of the mentally feeble, and the economically disadvantaged.
BP3. This precept finds its historical roots in the Hippocratic Marketers must always take extraordinary care when engag- Oath of physicians and serves as a fundamental expecta- ing in exchanges with vulnerable segments (Brenkert 1998).
tion of responsible, professional business practice as well The rationale undergirding this particular principle stems (Drucker 1974). It has been embodied in various marketing from the basic tenets of human dignity and is anchored in codes of conduct. Similar to the legal concept of implied the doctrines of all major religions (Murphy et al. 2005). For product warranties, it underscores the unstated guarantee by example, in 1965, a key document of the Roman Catholic sellers to buyers that products and services offered are safe, Church, currently being publicized on its fortieth anniver- to the best knowledge of the marketer, if used as intended by sary, contains the following admonition: “In the economic the consumer. Thus, this principle demonstrates its value by and social realms . . . the dignity and complete vocation of enshrining the assurance of product safety into the practice the human person and the welfare of society as a whole are of ethical marketing. While the legal doctrine of strict lia- to be respected and promoted. For the person is the source, bility may, in some cases, result in financial liability for sell- the center, the purpose of all economic and social life” ers even when a marketer did not know that a product was (Catechism of the Catholic Church 1994, 582). The impor- harmful (Morgan 1989), the motivation behind the non- tance of human dignity in U.S. culture is widely grounded in malfeasance principle is to explicitly codify the ethical duty a multiplicity of America’s Judeo-Christian religious tradi- of marketers not to take premeditative action that could tions (Camenish 1998; Pava 1998), and this concept persist- cause customers a serious dysfunction (i.e., harm). Under ently calls upon all members of society to be particularly this principle, it seems that marketers of herbal health sup- mindful of the most disadvantaged, exploited, or marginal- plements, whose possible side effects have been widely ized. Eastern religions have similar ethical precepts at their questioned by the medical community, might be judged as core (e.g., Rice 1999). In a marketing context, this principle ethically delinquent for continuing to promote the sale and compels providing special protections to those parties with usage of such products. Dubious weight loss regimens and depleted bargaining power in the marketplace (Alford and artifacts would be subject to a similar charge.
Our second essential moral precept is the principle of The most obvious differentiating characteristic of vulner- nondeception. This principle states that marketers ought to able segments might be low economic resources or leverage never intentionally mislead or unfairly manipulate consumers.
(i.e., poverty), although vulnerability might also stem from It is consistent with BP1’s notion of respecting people, information deficits (e.g., the lack of appropriate consumer DECEMBER 2006
education, financial literacy, or emotional maturity) or even Following the thinking of Rawls, the difference principle the lack of meaningful product choice (N. Smith 1990). The calls upon marketers to refrain from engaging in marketing moral force behind the vulnerable market principle is that practices and strategies that further harm those market seg- these market segments might be easily susceptible to ments already in a vulnerable position. To be ethical under exploitation by unscrupulous sellers who are in a position to this corollary requires marketing approaches that improve or manipulate the transaction. Marketers, understanding this, are at least neutral to those consumers who are least well- have the duty to avoid the potential exploitation of the weak.
off, that is, to those at the bottom of the marketplace pyra- For example, the high interest rates charged by the rent- to-own home furnishings sector are a poster child illustra- A practical marketing manifestation of vulnerable mar- tion of such abuse in the marketplace (Lacko, McKernan, kets might stem from the so-called “digital divide” (Gordon and Hastak 2002). Also firms that exploit the marketplace 2002). In this instance, various social commentators have illiteracy of children (e.g., junk food in primary schools), the suggested that the lack of computer access, training, and depressed information-processing capability of the mentally broadband Internet capability among low-income con- feeble, or the economic desperation of the poor (e.g., payday sumers has reduced their ability to avail themselves to vari- loan stores) are likely violators of this principle regardless of ous product options and price discounts made possible the legality of these marketing practices.
through e-commerce. If one accepts the reality of the digital A fourth essential moral precept for marketing is the prin- divide, then market access of a significantly disadvantaged ciple of distributive justice. This principle is closely related to group (e.g., the poor) has been further reduced even though the preceding one in the sense that it is focused on the macro no single marketer may have acted unethically. This exam- and systemic marketing effects directed at certain at-risk seg- ple offers a further classic illustration of how the earlier dis- ments of consumers (Laczniak 1999). It further addresses the cussed second- or third-order effects of marketing can raise issue of outcomes raised in the discussion of BP3. Specifically, ethical questions from a societal standpoint (BP1). This spe- the principle of distributive justice suggests that there is an cific situation also implies a “collective” ethical responsibil- obligation on the part of all marketing organizations to assess ity among all marketers to help rectify the overall state of the fairness of marketplace consequences flowing from their affairs for these consumers. Precisely how that responsibil- collective marketing practices. While individual firms may ity is apportioned among various marketing firms is prob- practice ethical marketing, differences among consumer seg- lematic but not unsolvable. Proponents of distributive ments affect their access to reliable information. Thus, some justice, in the example at hand, would contend that the segments of the market might be regularly left out or short- greater the reliance of particular marketers on e-marketing changed because of their lack of economic leverage due to and e-commerce, the greater their ethical responsibility.
financial circumstances or the inequities caused by controls Similar to the vulnerable markets principle, issues of dis- over the channel of distribution. For instance, the principle of tributive justice imply superordinate obligations for mar- distributive justice likely would come into play if it turns out keters who target consumer segments that may have already that a supermarket chain allocates better cuts of meat, fresher experienced negative marketplace outcomes because of the produce, and newer health-oriented food items to outlets secondary effects (or beyond) of marketing practices located in more affluent areas. In such a situation, distributors (Mascarenhas 1995). For example, the alcoholic beverage controlling multiunit stores in various markets are contribut- and distilling industries have special obligations to promote ing to marketing injustices if that practice generates unequal the moderate consumption of alcohol because of the social purchase opportunities for certain segments on a systemic, costs of alcoholism; similarly, the casino and gaming indus- try has unique ethical obligations because of the societal The theoretical foundation of the principle of distributive consequences attributable to the dysfunctions of gambling justice is sourced in theories such as that of philosopher John Rawls (1971). Central to this discussion is the differ- Finally, a fifth moral precept of enlightened marketing is ence principle of Rawls, which can be usefully thought of as the principle of stewardship. This principle reminds market- a corollary to the previously discussed vulnerable market ing managers of their social duties to the common good.
segment principle, as well as to justice in distribution. The This principle also connects back to BP1 and its theme of difference corollary would find marketing practices are societal benefit because it reminds marketing managers of unethical if, over time, they contribute to the further disad- their responsibility to act for the betterment of their host vantage of those segments of the market that are least well environments and community. Specifically, following the off in terms of information, economic resources, access to principles of stewardship, marketers are obligated to ensure supply, market literacy, and other factors essential to mar- that their marketing operations will not impose external ketplace transactions. This ethical dictum is likely to be highly costs on society, especially the physical environment, that controversial with many marketers because it represents a result from their internal marketing operations. Employing sort of affirmative action program for impoverished con- illegal immigrants at reduced wages in order to control retail sumer segments in the marketing system (Laczniak 1983).
store costs, knowing that incremental social cost accrues to JOURNAL OF MACROMARKETING
the community (e.g., additional health care, education, and of whom may have a contractual relationship with the mar- law enforcement), is an example of this principle’s violation.
keting organization and are essential partners in the well- The aesthetic pollution caused by the overuse of billboard being of the firm. Host communities and the general public advertising and other electronic signage in outdoor settings are two additional and important secondary stakeholders.
is another clear example of such a marketing-imposed exter- These latter two stakeholder groups have a vested interest in nality. The stewardship principle particularly addresses the social outcomes influenced by marketing operations.
environmental/ecological responsibilities incumbent on The media, while sometimes included as a stakeholder, organizations. It suggests that marketers have a moral obli- might best be conceived as the “eyes and ears” of the host gation to protect the environment via a socially sustainable community and the general public. Continuing this physio- pattern of consumption such that damages are not imposed logical analogy, legal and political institutions that oversee on the ecological system in a way that penalizes future gen- competitive fairness and market regulations (and other con- erations (Ottman 1993; Wasik 1996; Murphy forthcoming).
straints over business organizations) might be usefully char- Such environmental imperatives are well established in var- acterized as the mind-set of public sentiment (see BP1).
ious “model codes” of business operations such as the global In theory, a stakeholder orientation is well accepted by Caux Round Table (1992) and CERES (1989) operating portions of the business community and, nominally at least, guidelines. Such ideals are embodied in the sustainable deemed to be extremely important. An examination of vari- development movement that led Starbucks to purchase more ous exemplary corporate values statements and codes of coffee from local cooperatives in Latin America, and they ethics gives prominent play to the role of stakeholders in underlie the goals of the Kyoto (environmental) accords, business operations (Murphy 1998). Certainly the discipline although the United States is not a signatory to this latter of marketing ascribes a great voice to customers as the focal agreement. The principle of stewardship also suggests obli- point of market planning and, via the marketing concept, gations help their host communities when the opportunity gives credence to the belief that the customer is the core allows. Positive examples of organizations embracing the concern of savvy marketing organizations. And in many stewardship principle involve McDonald’s Corporation, in companies, employees also are elevated to a first-level posi- the early 1990s, eliminating nonbiodegradable polystyrene tion as the experience at Southwest Airlines testifies. Sadly, containers for many of its menu items and returning to more it also happens that upper management sometimes extols ecologically compatible (and higher cost) paper packaging employees as being the company’s most important asset, and General Electric’s current Eco-Imagination campaign to even when they are not treated as such.
improve the environmental posture of the company. The Actual business and marketing practice diverges from AMA Statement of Norms and Values (2004) addresses fur- stakeholder theory because, in a pragmatic world, share- ther activities related to this principle under the rubric of the holders are sometimes viewed as the only primary stake- marketer’s duty of citizenship (see Appendix B).
holders that really matter (Carroll 1995). If a genuinestakeholder orientation is not truly central to marketingoperations, a long-term habit of ethical behavior becomes BP 6—Six Basic Stakeholders:
Embracing the Stakeholder Concept
The agency approach, defined previously, embodies the The adoption of a stakeholder orientation is essential to alternative perspective and suggests that management pri- the advancement and maintenance of ethical decision mak- marily serves in the interests of maximizing shareholder ing in all marketing operations. A stakeholder orientation
value. Following this perspective of “investor return always embodies the notion that marketing organizations operate in comes first,” regularly advocated and embraced by financial and on behalf of society. Failing the acceptance of a stake- analysts, employees are not necessarily primary stakehold- holder approach results in the default position that market- ers but merely another element of production (i.e., human ing activities exist mainly to maximize shareholder return, capital) to be mixed and matched along with physical mate- subject only to obeying the law (see BP2).
rials and capital assets. Neither are customers always pri- In its broadest conception, a stakeholder is any group or mary stakeholders, although they may help cocreate value; individual who can affect, or is affected by, the achievement instead, they can be perceived only as the means to a prof- of the organization’s objectives (Laczniak and Murphy itable end—the ethical miscalculation discussed in BP1.
1993). There are typically at least six basic stakeholder Since the agency approach stipulates shareholders as the groups for most organizations. Primary stakeholders are exclusive stakeholder group of concern, suppliers and dis- three groups in number: investors (or owners) along with tributors are also open to financial pressure for concessions customers and employees. These groups are primary when economic leverage makes this possible. Employees because they are typically necessary to the completion of are downsized when they are perceived to be substitutable successful exchange transactions in a complex marketplace, for lesser cost technology, and the work of loyal, long-standing and their claims normally trump those of other stakeholders.
employees is automatically outsourced if a better cost Secondary stakeholders include suppliers/distributors, many alternative for production or supply becomes available.
According to this maximum-returns view, customers are not (e.g., strenuous employment screening for the home health viewed so much as “king” but rather as the subjects of ABC care companies to protect the vulnerabilities of their ill ranking—where less valuable “C” customers are ignored or and/or elderly clients; special safety-testing procedures inthe toy manufacturing industry) intentionally driven away because spreadsheet projections • Supporting host communities (a secondary stakeholder) indicate their future projected patronage will never be par- with philanthropy and corporate volunteerism as company ticularly profitable (Brady 2000). Recent marketing strategy recommendations suggest that even loyal, easy-to-retain • Taking the organizational steps necessary to build an ethical customers are best ignored if the forecast future value of marketing culture; that is, developing ethics codes, ethicstraining programs, ethical audits, and the commitment of top their purchases is not likely to be sufficiently high (Nunes, management to operate the firm with an abiding respect for Johnson, and Breene 2004). When only shareholders and/or owners matter, this approach inherently raises major ethicalquestions because it excludes societal concerns when man- Ignoring a stakeholder orientation can be measurably agers formulate marketing strategy. Therefore, investor-centric damaging to the brand equity of company products, the abil- mania can inhibit the organization’s ethical development.
ity of the organization to attract future managerial talent and At times even owners, who are always defined to be among equity funding, and even the survival of the corporation primary stakeholders, are not well served by management.
itself. For example, Firestone’s failure to give proper atten- This occurs when top officials hijack the organization by tion to customer safety and to recall faulty brands of its tires making it a tool of upper-level managers and/or administra- on a timely basis led to the marked diminishment of the once tors, such as when CEOs and CFOs pad their personal finan- great Firestone brand and its financial control by Bridgestone cial accounts in the form of kingly compensation, delivered during the late 1980s. Remarkably, Firestone revisited such via stock options, bonuses, deferred compensation pack- mistakes a decade later (Ferrell, Fraedrich, and Ferrell 2005).
ages, or outright embezzlement. One need only to look at Similarly, widespread sexual harassment of middle-level the recent history of Sunbeam, Ahold, Parmalat, Health employees by Astra Zeneca managers at U.S. facilities in the South, and the New York Stock Exchange to find uncon- mid-1990s created an understandable suspicion among future scionable examples of organizations where the primary female managers who might have considered developing a stakeholders and/or owners were not well served by their career at that organization (Maremont 1996). And the failed executive leaders and Boards of Directors (Peterson and self-understanding by public accounting house Arthur Andersen that it needed to serve its primary stakeholders—investors Implementation of a workable stakeholder concept is one and the public—rather than the client managers, who dan- of the greatest challenges facing organizations that desire to gled lucrative consulting contracts, helped speed the demise operate on a high ethical plane. It requires the thorny effort of this historically distinguished accounting firm (Toffler and of determining who exactly stakeholders are in particular situations, what duty is owed them, and what power they Establishing the delicate balance of stakeholder claims hold to affect the future direction of the organization involved in complex decisions is a subjective and judgmen- (Mitchell, Agle, and Wood 1997). Implementing a true tal weighting process that necessarily results in some win- stakeholder orientation also depends on a decision-making ners and some losers. The status of primary stakeholders system that is flexible and adaptive. It must allow for the (owners, employees, and customers) means exactly that; systematic weighting and due consideration of likely out- their claims and interests normally have primacy over those comes on various stakeholder groups that result from partic- of secondary stakeholders. Consistent with BP3, as long as ular marketing decisions. Often the most effective stakeholder only minor harms are involved and as long as burden is not approaches (Clarkson 1998) involve using a specified borne by the least advantaged (BP5), stakeholder trade-offs decision-making regimen (see BP7), based on strong ethical in favor of primary stakeholders—especially owners and/or values (BP5) that minimize the likelihood of disadvantaging investors—are to be expected. For example, the decision to (i.e., causing major harm) relevant stakeholder groups place a food distribution center in an outlying suburban area (BP3). Also useful to such approaches is the specification of may satisfy most primary stakeholders (such as sharehold- core values that the organization stipulates will never be ers, customers, employees) and yet alienate some in the host violated in its operations anywhere. For example, such core community, as the particular municipality might be trying to restrict economic development to mostly residential estab-lishments. So be it. When marketing strategies are complex, • Only pursuing marketing opportunities where the organiza- seldom is every stakeholder a winner. But the ultimate point tion has demonstrated technical competence is that acceptance of the stakeholder approach internalizes • Always adhering to the rule of law in all markets where the into the fabric of the organization a moral sensitivity about corporation operates and assuming this to be “the floor” of the multipronged influences of marketing decisions on dis- the more elevated and enlightened behavior that is expected • Developing specific policies that address special ethical parate groups—an essential point of examining marketing questions peculiar to particular industry sectors of operation JOURNAL OF MACROMARKETING
Assuming that managers have a reasonable degree of moral awareness, ethical reasoning is next aided by the Cultivated ethical awareness and sensitivity application of an ethical protocol, that is, a process thathelps managers render an ethical judgment. Our suggestedapproach next unfolds with the framing of an ethical issue (step 2). Specification of the particular ethical question isnecessary to effective moral reasoning whether a firm is inter-nally assessing its own marketing programs (i.e., microanaly- Articulation of stakeholders in the decision sis) or whether outside parties (e.g., public policy makers)are evaluating broader industry practices (i.e., macroanaly-sis). An illustration of ethical microanalysis in framing an Selection of an ethical standard or standards issue might be a petroleum services firm that questionswhether its proposed advertising campaign depicting a racially diverse workforce should be implemented when, infact, the racial base of its employee group is quite homoge-nous. An example of macroanalysis in framing an ethical Decision about the ethical issue or question issue might involve a state regulatory agency questioningwhether quick-loan financial service outlets might be judgedas unfair in a U.S. economy where the annual prime rate has been hovering around 4 percent but such organizations’monthly interest charge might approach 20 percent. It shouldbe understood that the formulation of an ethical question A PROTOCOL FOR FORMULATING THE ETHI-
does not imply that the questionable practice will necessar- CAL EVALUATION PROCESS IN MARKETING
ily be deemed unethical. For example, the macro issue of ORGANIZATIONS
whether all advertising is inherently unfair, because it nor-mally presents only positive attributes of a product or serv-ice, has been raised many times (Rotzell, Haefner, and BP7—The Seven Steps of Moral
Sandage 1990). The vast majority of analysis finds the prac- Reasoning for Marketing Managers
tice of advertising as a social institution to be ethically Marketing organizations striving for exemplary ethical con- defensible (Arrington 1982; Phillips 1997). But clearly, the duct ought to delineate an ethical analysis protocol and train beginning of an ethical reasoning process is the specification their managers to follow it. The ability of managers to “ethi- of the ethical question(s) to be evaluated.
cally” reason is the sine qua non of organizations seeking to The third step in ethical analysis involves the articulation operate on an elevated ethical plane (Moberg and Seabright of stakeholders affected by a particular marketing practice 2000). One such protocol is charted in Figure 4. Moral rea- (see BP6). For example, in the instance of the oil services soning, of course, presupposes as its first step the ability of company ad campaign, the stakeholder evaluations might managers to be ethically aware. Such ethical perceptivity is include the following queries: Is diverse employee represen- important because moral questions in marketing cannot be tation in the proposed ad campaign misleading to customers addressed unless they are first recognized. For example, when the actual employee base is quite homogeneous? Is despite numerous governmental challenges to their aggressive this campaign deceptive to future current and future share- accounting practices in the years preceding the Enron collapse, holders? Is it disrespectful to existing employees? Each Arthur Andersen leadership did not seem to recognize that stakeholder group is a separate constituency with potentially they were sliding into an unethical abyss, lubricated by legal different effects if the campaign is approved. Alternatively, settlements via consent degree (nonadmission of guilt), when- perhaps the advertising campaign simply captures meaning- ever their client audits were questioned by the federal govern- less “puffing” that mostly depicts a corporation that is hon- ment (Byrne 2002). As discussed in BP4, the ethical sensitivity estly desirous of being racially inclusive, at least in the ideal.
of managers is deeply affected by their personal moral devel- The fourth step in the ethical reasoning process involves opment. In addition, a manager’s ethical awareness and moral the selection of an ethical standard or standards. Several eth- imagination is a function of environmental factors such as the ical theories or perspectives (or perhaps just one) will be cho- corporate culture of the organization (see BP5), the extent to
sen for application to the pertinent ethical issue. Possible which explicit ethical values have been articulated in a corpo- standards include but are not limited to those already dis- rate mission statement (see BP6), the level of commitment by cussed. In the case of the short-term loan financial services top executives to company integrity, as well as the presence of industry, perhaps the initial evaluation standard selected will ethical training opportunities for a firm’s employees. More be minimalist—a legal one (i.e., are any existing laws being will be said about some of these conditions later.
violated by the industries lending practices?); or alternatively, DECEMBER 2006
a utilitarian standard might be applied (i.e., are the high rates In the end, despite the many factors and complications in of interest being charged by these short-term loan providers, conducting ethical analysis, a decision needs to be made embodying a high user cost, offset by the benefit to a segment about the situation. This is the next to last step of the ethical of consumers who otherwise would not have fast access to reasoning process. The generic alternatives available are credit?); or perhaps a justice standard is invoked (i.e., is a vul- typically the following: the particular marketing practice is nerable market segment being exploited for company profit?).
(1) acceptable and allowed to go forward, (2) the challenged Ethical analysis comes next in our protocol, and it strategy is amended in some fashion to make it ethical, or involves applying the ethical standards to whatever ques- (3) the practice is abandoned. For instance, in the case of the tions have been framed (above) both regarding the ethical earlier mentioned oil services firm, assuming that good-faith issue and the foreseeable outcomes on stakeholder groups.
efforts are underway that aggressively seek to hire a more The quality of this analysis, as noted previously, is likely to diverse workforce, then the depiction of the multiracial work be influenced by the moral thinking of the manager/evaluator group in the ad campaign might fall into the realm of “puff- and the applicable ethical standard. Also, the specific stake- ing” and be ethically acceptable because the ads depict what holder groups considered will have an important bearing on the company soon hopes to become. In the situation of the the process (BP6). The likely sophistication of ethical rea-
fast-loan financial services sector, policy makers may decide soning provided by different types of managers has already that the prevailing, compounded interest rates constitute an been discussed in BP4. For firms seeking to have a strong exploitation of consumers that is usurious, and therefore ethical posture in the marketplace, such organizations likely new industry regulations are required. To use the language would desire principled managers conducting their ethical of BP1, the “iron law of social responsibility” will be exer- analysis. This advice is consistent with the dictum that cised, and the quick-loan vendors will now be further legally corporations always want seasoned executives with insight- ful judgments at the heads of their units. In other words, As a final step in the ethical reasoning process, market- because good ethics should be important to an organization, ing managers have the responsibility to monitor the out- managers who are capable of sophisticated ethical reasoning comes of their ethical decisions. By overseeing what has ought to be making the judgments about relevant ethical transpired in the marketplace resulting from an ethics- issues. The engagement of principled managers will mini- related policy, changes then can be made that shape future mize the possibility of the organization making a costly decision-making protocols. For example, an outcome that ethical miscalculation because (1) they will recognize the results in major unanticipated negative consumer experi- ethical complexity of certain decisions, and (2) their presence ences (e.g., a growing percentage of consumers perish from in the company will contribute to a more ethical culture.
side impact auto accidents when driving without side In general, we postulate that the greater the number of eth- airbags) would necessitate future explorations of similar ical standards applied to a given situation, the higher the ethical questions. This follow-up might involve adjustments probability of discovering an ethical concern. Furthermore, such as a greater weighting of an affected stakeholder group, the more stakeholder groups evaluated, the higher the likeli- a change in the type of ethical standards applied to the situ- hood of perceiving possible negative outcomes that require ation, or possibly a deepened ethical analysis. Exactly how further investigation (see again BP6). It is again imperative to this entire calculus of adjusting the decision-making proto- recognize that just because ethical concerns are voiced col fits together is the realm of moral imagination (see and/or potential negative outcomes from marketing practices are uncovered, the proposed strategy will not necessarily bejudged to be unethical. Minor negative outcomes for somestakeholders, as well as unintended ones, regularly should be ETHICAL LESSONS FROM THE BASIC
expected whenever marketing organizations make complex PERSPECTIVE SET
marketing decisions (recall BP3). For instance, consider thehypothetical case of an automobile company deliberating When addressed in isolation, the descriptions of the BPs whether it has the ethical responsibility to install side airbags discussed above raise many challenging questions. For on every vehicle in its product line. A utilitarian analysis, for example, with regard to BP1, if marketing should strive to example, might indicate that the inclusion of side impact serve society, how does one possibly establish society’s best airbags will save a few additional lives, especially if the com- interests? With regard to BP2, if ethical marketing requires pany’s autos are involved in collisions with large SUVs. But more than conformance to the law, from where does this the decision to voluntarily install side airbags in all company supplemental guidance derive? Concerning BP4, what values
models would also substantially increase consumer costs, are likely to characterize highly principled marketing man- thereby disadvantaging many price-sensitive consumers and agers? From where do they originate? If stakeholder orienta- perhaps causing them to switch to competitors whose current tion of BP6 is to have pragmatic meaning, how should the vehicles (also without side airbags) might afford them an necessary balancing among stakeholder groups be conducted? Within BP7, if an ethical reasoning process is essential to JOURNAL OF MACROMARKETING
“good” marketing, how does an organization find and moti- business practice (BP1 et al.). Jeffery Garten, former dean of vate managers who can adhere to this rigorous process of the Yale School of Management, has been an articulate spokesperson for this viewpoint. Garten (2002) contended Our point is that many of these questions can be that while the current system of business education effec- answered by considering the BPs as an integrative whole.
tively addresses best practices for operations at the firm Philosophers sometimes refer to this process as moral level, it does not sufficiently cover what society requires of reflection. Illustrative of the insights such an exercise might business leaders including questions of environmental pro- tection, globalization, and public policy.
Students should be made increasingly aware of the • The “best interests of society” so essential to BP1 can be dimensions and provisions of various professional codes of more systematically taken into account by adopting the business conduct. The role of relativism and the attitude that stakeholder orientation described in BP6.
• The fabric of higher ethical duties called for in BP2 can be all marketing practices are flexible depending on circum- addressed, we hope, by embracing the AMA Norms and stance and personal opinion—views often expressed by
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