CHAPTER 2 SOCIAL, ETHICAL, AND LEGAL

RESPONSIBILITIES OF SALES PERSONNEL 

CHAPTER OUTLINE 

MANAGEMENT'S SOCIAL RESPONSIBILITIES WHAT INFLUENCES

ETHICAL BEHAVIOR? MANAGEMENT'S ETHICAL RESPONSIBILITIES
ETHICS IN DEALING WITH SALESPEOPLE SALESPEOPLE's ETHICS IN DEALING
WITH THEIR EMPLOYERS ETHICS IN DEALING WITH CUSTOMERS MANAGING
SALES ETHICS 

LEARNING OBJECTIVES 

This chapter is one of the most important in this textbook. Understanding social, ethical,
and
legal issues helps build a solid foundation on which to base future decisions and to
manage sales personnel. After studying this chapter, you should be able to explain the
following: 

Management's social responsibilities. What influences ethical behavior.

Management's ethical responsibilities. 

Ethical dealings among salespeople, employers, and customers. The international side
of ethics. 
Managing sales ethics. 
Age discrimination in the workplace has been a major issue. One case of age dis
crimination deals with a man named Philip Haun, a senior area sales manager for
Ideal Industries. One year, Philip was credited with increasing sales in his division--
which sold wire-splicing machines and other industrial products-140 percent. The
next year, Haun was fired. His division's four-person team was about to merge with
the seven-man sales force that sold wire strippers. Four people had to be, let go, and
Haun was one of them. His boss told him that his discharge wasn't performance related and
that he was welcome to apply for other sales positions within the company. Haun, who
was 51 at the time, thought the company still wanted to keep him. So Haun started
combing the company for leads, but he had a tough time. Haun finally realized that Ideal didn't
want him to stay on. He came to suspect that Ideal fired him because of his age. After
he left Ideal, Haun filed suit against his former company, alleging age discrimination,
and a U.S. Court of Appeals recently affirmed an earlier court decision in Haun's
favor. Ideal executives deny the company fired Haun because of his age. 
Haun's story is a familiar one in the sales profession. He is one of hundreds of sales
people who have sued their employers for age discrimination and won. Legal experts predict
the number of workplace age-discrimination cases will skyrocket in the next five
years as Baby Boomers become older. Some legal experts also say that sales man
agers are more likely to have negative stereotypes about older reps, and hire and fire
based on those perceptions. Sales managers have a perception that older
workers can't be energetic and learn new things as well as younger workers.
Other sales ex ecutives get into trouble if it appears they simply don't want to pay
older salespeo ple the hefty wages and benefits they have earned after years of hard
work. Sales managers also tend to hold older workers to a different standard than
younger ones, and they sometimes don't give older workers the same training
opportunities, 
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CHAPTER 2 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

As this example shows, sales personnel constantly are confronted with social,
ethi cal, and legal issues. Yet if you think about it, everyone is—including yourself.
If you found a bag full of $100 bills lying on the side of the road, would you keep it?
Would you use the company car to run a personal errand? Have you ever broken the
speed limit? Have you ever gone home with one of your employer's pens in your
jacket pocket or purse? Would you cheat on a test? 
These sorts of questions may be difficult for the average person to answer. Some
people will respond with an unequivocal“yes” or “no." Others may mull it over
awhile. Still others may feel compelled to say "it depends” and qualify their
response with a “yes, but ..." or a “no, but...." 
Newspapers, radio, and television frequently have news stories of
individuals and organizations involved in both good and bad practices. This chapter
addresses many of the important social, ethical, and legal issues in selling. It begins by
discussing man agement's social responsibilities. Then it examines ethical
behavior, followed by the ethical issues involved in dealing with salespeople,
employers, and consumers. The chapter ends by presenting ways an organization
can help its sales personnel follow ethical selling practices. 
MANAGEMENT'S 
SOCIAL RESPONSIBILITIES 
In one sense, the concept of corporate social responsibility is easy to understand; it
means distinguishing right from wrong and doing right. It means being a good cor
porate citizen. The formal definition of social responsibility is management's ob
ligation to make choices and take actions that will contribute to the welfare and
interests of society as well as to those of the organization. 
As straightforward as this definition seems, social responsibility can be a difficult
concept to grasp because different people have different opinions on which actions
improve society's welfare. To make matters worse, social responsibility covers a
range of issues, and many of these issues have ambiguous boundaries between
right and wrong. 
ORGANIZATIONAL STAKEHOLDERS
One reason for the difficulty in understanding social responsibility is that
managers must confront the question “Responsibility to whom?” The
organization's environ ment consists of several sectors both inside and outside of
the organization. From a social responsibility perspective, enlightened
organizations view the internal and ex ternal environment as a variety of
stakeholders. 
A stakeholder is any group within or outside the organization that has a stake in the
organization's performance. Each stakeholder has a different interest in the or
ganization. As Figure 2.1 illustrates, eight important stakeholders exist. They are
easily remembered using the acronym CCC GOMES. The first C refers to
customers, and the last S refers to suppliers. Owners', creditors' and suppliers'
interests are served by managerial efficiency, that is, the use of resources to
achieve profits. Managers and employees expect work satisfaction, pay, and good
supervision. Customers are con cerned with decisions about the quality and
availability of goods and services. 
Other important stakeholders are the government and the community. Most cor
porations exist under the proper charter and licenses and operate within the limits
of the laws and regulations from the government sector, including safety laws and
environmental protection requirements. The community includes local
government, the natural and physical environments, and the quality of life provided
for residents. Socially responsible organizations pay attention to all stakeholders
affected by their actions. 
MANAGEMENT'S SOCIAL RESPONSIBILITIES 

FIGURE 2.1 

MAJOR STAKEHOLDERS IN 

THE ORGANIZATION'S PERFORMANCE 

Customers 

Suppliers 
Community 

Employees 
Organization 
* 
Creditors 

Managers 
Government 

Owners 

AN ORGANIZATION'S MAIN RESPONSIBILITIES 

Once a company is aware of its stakeholders, what are its main responsibilities to
them? Four exist: economic, legal, ethical, and discretionary. The responsibilities
are discussed based on the order and frequency with which managers deal with
each is sue. Managers most frequently deal with economic issues. 

ECONOMIC RESPONSIBILITIES A company or any other business institution is,

above all, a basic economic unit of society. Its responsibility is to produce the
goods and services that society wants and to maximize profits for its owners
and share holders. 
Quite often, corporations are said to operate solely to maximize profits.
Certainly, profits are important to a firm, just as a grade-point average is important to
a student. Profit provides the capital to stay in business, to expand, and to
compensate for the risks of conducting business. Companies have a
responsibility to make a profit in or der to serve society. Imagine what would
happen to our society if large corporations (for example, Wal-Mart, General
Motors) did not make a profit and went out of busi ness. Thousands of people
would be affected. 

LEGAL RESPONSIBILITIES All modern societies lay down ground rules, laws,
and regulations that organizations are expected to follow. Legal responsibility
defines what society deems as important with respect to appropriate corporate
behavior. Or ganizations are expected to fulfill their economic goals within the
legal framework. Legal requirements are imposed by local town councils, state
legislators, and federal regulatory agencies.? 

ETHICAL RESPONSIBILITIES Ethical responsibility includes behaviors

that are not necessarily codified into law and may not serve the corporation's
direct economic in terests. To be ethical, organizational decision makers should
act with equity, fairness, and impartiality; should respect the rights of
individuals; and should provide different 
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CHAPTER 2 
I 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

MANAGING THE SALES TEAM 

CATERPILLAR, INC. 

Caterpillar, Inc., published "A Code of Worldwide Business Conduct and Operating
Principles" that begins with a clear statement of corporate values. The code is 14
pages long and covers human relationships, disposal of waste, privacy of
information about employees, product quality, sharing of technology, public responsibility,
Ethics,"
observance of local laws, and inside information. The initial statement of “Business
quoted next, indicates that Caterpillar expects its employees to display
ethical behavior well above that re quired by law. 
The law is a floor. Ethical business conduct should normally exist at a level well
above the minimum required by law. 
One of a company's most valuable assets is a reputation for integrity. If that be
tarnished, customers, investors, suppliers, employees, and those who sell our product, will
seek affiliation with other, more attractive companies. We in tend to hold a single
high standard of integrity everywhere. We will keep our word. We won't
promise more than we can reasonably expect to deliver nor will we make commitments
we don't intend to keep 
The goal of corporate communication is the truth-well and persuasively told. In our
adver 
tising and other public communications, we will avoid not only untruths,
but also exaggera tion and overstatement. Caterpillar employees shall not accept costly
entertainment or gifts (excepting mementos and novelties of nominal value) from
dealers, suppliers, and others with whom we do business. And we don't tolerate cir
cumstances that produce, or reasonably appear to produce, conflict between personal
interests of an employee and interests of the company. 
We seek long-lasting relationships-based on integrity with all whose activities touch upon our
own. 
The ethical performance of the enterprise is the sum of the ethics of the men and women
who work bere. Thus, we are all expected to ad here to high standards of
personal integrity. For example, perjury or any other illegal act osten sibly taken
to "protect” the company is wrong. A sale made because of deception is wrong. A
pro duction quota achieved through questionable means or figures is
wrong. The end doesn't jus tify the means. 

Source: Based on Caterpillar Annual Report, 1995. 

treatment of individuals only when relevant to the organization's goals and

tasks. Un ethical behavior occurs when decisions enable an individual or company
to gain at the expense of society. 

DISCRETIONARY RESPONSIBILITIES Discretionary responsibility is purely

volun tary and guided by a company's desire to make social contributions not
mandated by economics, law, or ethics. Discretionary activities include
generous philanthropic contributions that offer no monetary return to the
company and that are not ex pected. Discretionary responsibility is the
highest criterion of social responsibility, be cause it goes beyond societal
expectations to contribute to the community's welfare. 

HOW TO DEMONSTRATE SOCIAL RESPONSIBILITY 

A corporation can demonstrate social responsibility in numerous ways.
Actions that can be taken by all organizations include the following: 
1. Taking corrective action before it is required. 2. Working with affected
constituents to resolve mutual problems. 3. Working to establish industry-wide
standards and self-regulation. 4. Publicly admitting mistakes. 
WHAT INFLUENCES ETHICAL BEHAVIOR? 
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29 

5. Getting involved in appropriate social programs. 6. Helping correct environmental

problems. 7. Monitoring the changing social environment. 8. Establishing and enforcing a
corporate code of conduct. 9. Taking needed public stands on social issues. 10. Striving
to make profits on an ongoing basis. 
Economic, legal, ethical, and discretionary responsibilities to stakeholders will be
important concerns organizations must face in the twenty-first century.
Society is de manding more responsible action out of organizations,
particularly regarding their ethical standards. 

Organizations are comprised of individuals. These individuals' morals and ethical

val- WHAT INFLUENCES ues help shape those of the organization. Critical to making
decisions in an ethical ETHICAL BEHAVIOR? manner is the individual integrity of the
organization's managers, especially those in top management positions. Thus, two major
influences on the ethical behavior of sales personnel are employees and the
organization itself. 

THE INDIVIDUAL'S ROLE All of us, employees and managers alike, bring
certain ethical values to a job. Person ality, religious background, family upbringing,
personal experiences, and the situation faced are examples of factors that influence people
in making decisions. Individuals usually can be placed into one of these levels of “moral
development": 
Level one: preconventional-An individual who acts in his or her own best
interests and thus follows rules to avoid punishment or receive re wards. Will break
moral and legal laws if they conflict with what this type of person perceives as his or
her best interests. Level two: conventional-An individual who conforms to the expecta
tions of others, such as family, friends, employer, boss, society. Upholds moral and
legal laws. Level three: principled-An individual lives by an internal set of morals,
values, and ethics. These are upheld regardless of punishments or major ity
opinion. The individual would disobey orders, laws, and conse 
quences in order to follow what he or she believes is right.3 The majority of managers,
as well as people in general, operate at the conven tional level. However, a
few individuals are at level one, and, it is estimated that less than 20 percent of
individuals reach the principled level. 

THE ORGANIZATION'S ROLE 

If the vast majority of people in our society are at the conventional level of moral de
velopment, it seems that most employees in an organization would feel they must “go
along to get along”; in other words, they go along with rules in order to keep
their jobs. At most, they will follow only formal policies and procedures. 
How will sales personnel handle ethical dilemmas? What if no policies and pro
cedures pertaining to some sales practices exist and a person is directed to do some thing
by a superior that appears unethical? It is no wonder that radio, television, and
newspaper reports frequently feature unethical business practices. Following the
"hear no evil, see no evil, speak no evil” philosophy can create a preconventional- or
conventional-level organizational climate. 4 
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CHAPTER 2 
1 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

MANAGEMENT'S 
ETHICAL RESPONSIBILITIES 
The concept of ethics is easy to understand but difficult to define in a precise
way. In a general sense, ethics is a set of moral principles and values that
governs the be havior of a person or group with respect to what is right or
wrong. Ethics set stan dards as to what is good or bad in conduct and decision making.
Principles are the rules or laws that make up a code of ethics. 
Many companies and their sales personnel get into trouble by making the as
sumption that “If it's not illegal, it must be ethical.” Ethics and moral values are a pow
erful force for good that can regulate behavior both inside and outside the
sales force. As principles of ethics and social responsibility are more widely
recognized, compa nies can use codes of ethics and their corporate cultures to
govern behavior, thereby eliminating the need for additional laws governing right
and wrong. 

WHAT IS ETHICAL BEHAVIOR? Sales personnel are frequently faced with

ethical dilemmas. Ethical behavior refers to treating others fairly. Specifically, it
refers to: 
Being honest. Maintaining confidence and trust. Following the rules.
Conducting yourself in the proper manner. Treating others fairly. Demonstrating
loyalty to company and associates. Carrying your share of the work and
responsibility with 100 percent 
effort. The definition of ethical behavior, although reasonably specific and
easy to under stand, is difficult to apply in every situation. In real life, conflicting
viewpoints, fuzzy circumstances, and unclear positions always exist. Though
difficult, it is critical to cut through the smoke screen that sometimes exists in such a
situation and to use “20/20 vision” to make an ethical choice. 
WHAT IS AN ETHICAL DILEMMA? 
Because ethical standards are not codified, disagreements and dilemmas about
proper behavior often occur. An ethical dilemma arises in a situation when each
alternative choice or behavior has some undesirable elements due to potentially negative
ethical or personal consequences. Right or wrong cannot be clearly identified.
Consider the following: 
Your boss says he cannot give you a raise this year because of budget
constraints, but he will look the other way if your expense accounts come in a little
high because of your good work this past year. Stationed at the corporate
headquarters in Chicago, you have 14 sales people in countries all over the world.
A sales rep living in another coun try calls to get approval to pay a government
official $10,000 to approve the equipment purchase of $5 million. Such payoffs
are part of common business practice in this part of the world. 
An industrial engineer, who is a good friend of yours, tells you three of your
competitors have submitted price bids on his company's proposed new
construction project. He suggests a price you should submit and mentions
certain construction specifications his boss is looking for on 
this job. These are kinds of dilemmas and issues that fall squarely in the domain of
ethics. Because of their importance, an ethical dilemma situation appears toward
the end of 
ETHICS IN DEALING WITH SALESPEOPLE 
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31 

MANAGING THE SALES TEAM 

QUESTIONS TO ASK YOURSELF IN ETHICAL DECISION MAKING 

Here is a list of questions to ask yourself in determining if your decision is ethical.

The questions will not guide you precisely on what to do but can help you evaluate a situa-
tion by examining your own values and those of your or ganization. The answers to these
questions will force you to give
serious thought to the social and ethical
consequences of your behavior. 1. Is the problem/dilemma really what it appears
to be? If 
you are not sure, find out. 2. Is the action you are considering legal? Ethical? If you 
are not sure, find out. 3. Do you understand the position of those who oppose 
the action you are considering? Is it reasonable? 4. Who does the action benefit? Harm?
How much? How 
long? 
5. Would you be willing to allow everyone to do what you 
are considering doing? 6. Have you sought the opinion of others who are knowl 
 edgeable on the subject and who would be objective? 7. Would your action be
embarrassing to you if it were 
made known to your family, friends, co-workers, or superiors? Would you be comfortable
defending your actions to an investigative reporter on the evening news? 
No correct answers to these questions exist in an ab solute sense. Yet, if you
determine that an action is poten tially harmful to someone or would be embarrassing
to you, or if you do not know the ethical or legal conse quences, these guidelines will help
you clarify whether the action is socially responsible. 

each chapter. In answering, refer both to this chapter and each ethical dilemma's
chapter. 
Now let's turn to the three main ethical areas most frequently faced by sales per
sonnel. These three areas involve salespeople, employers, and customers. Our
discus sion cannot be all inclusive but represents an attempt to give you a feel for
some of the difficult situations faced by sales personnel. 

Sales managers have both social and ethical responsibilities to their sales personnel.
ETHICS IN DEALING Salespeople are a valuable resource; they have been
recruited, carefully trained, and WITH SALESPEOPLE given important
responsibilities. They represent a large financial investment and should be treated in a
professional manner. Yet occasionally a company may place its managers or salespeople
in positions that force them to choose among compromis ing their personal ethics, not
doing what is required, or leaving the organization. Cer tainly the choice depends
on the magnitude of the situation. At times situations arise in which it is difficult to
say whether a sales practice is ethical or unethical. Many sales practices are in
the gray area between being completely ethical and completely unethical. Five
ethical considerations faced by the sales manager in dealing with sales 

a salesperson's territory; whether to be honest with the salesperson; what to do with

the salesperson who is ill; and employees' rights. 

LEVEL OF SALES PRESSURE What is an acceptable level of pressure to

place on salespeople? Should managers es tablish performance goals that
they know a salesperson has only a 50/50 chance of attaining? Should the
manager acknowledge that goals were set too high? If circum stances
change in the salesperson's territory-for example, a large customer goes out of
business-should the manager lower sales goals? 
32 
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CHAPTER 2 
1 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

These are questions all managers must consider. They have no right or wrong an
swers. Managers are responsible for their groups' goals and have a natural tendency
to place pressure on salespeople so these goals will be reached. Some
managers can motivate their people to produce at high levels without applying
pressure, while oth ers place tremendous pressure on their salespeople to attain
sales well beyond their quotas. However, managers should set realistic and
obtainable goals. They should con sider individual territory situations. If this is
done fairly and sales are still down, then pressure may be applied. 

DECISIONS AFFECTING TERRITORY 

Management makes decisions that affect sales territories and, in turn,
salespeople. For example, a company might increase the number of sales
territories, which often necessitates splitting up a single territory. A salesperson
spends years building up a territory to its current sales volume. If it is cut, customers
are taken away. If the sales person has worked on a commission basis, this would
mean a decrease in earnings. 
Consider the situation of reducing the number of sales territories. What proce
dures do you use? Several years ago a large manufacturer of health and beauty
aids (shaving cream, toothpaste, shampoo) reduced the number of its
territories to lower selling costs. So, for example, three territories became two.
Here is how one of its salespeople described it: 

I made my plane reservations to fly from Dallas to Florida to our annual na tional
meeting. Beforehand I was told to bring my records up-to-date and bring them to the
regional office in Dallas. Don't fly, drive to Dallas. I drove from Louisiana to Dallas with my
bags packed to go to the national meeting. I walked into the office with my records
under my arm. My district and regional man agers were there. They told me of the
reorganization and said I was fired. They asked for my car keys. I called my wife, told
her what happened, and then caught a bus back home. There were five of us in the
region that were called in that day. Oh, they gave us a good job recommendation—it's
just the way we were treated. Some people had been with the company for five years or
more. They didn't go by tenure but where territories were located. 

Companies must deal with the individual in a fair and straightforward

manner. It would have been better for the managers of these salespeople to go to
their home towns and personally explain the changes to them. Instead, they treated
the sales people in an unprofessional manner. 
One decision affecting a territory is what to do with extra-large
customers, some times called key accounts. Should they be taken away
from the salesperson and made house accounts? If so, responsibility for
contacting the customer can be given to someone from the home office (house)
or to a key account salesperson. The local salesperson may not get credit for
sales to this account even though the customer is located in the salesperson's
territory.A salesperson states the problem in this manner: 
I've been with the company 35 years. When I first began I called on these people who had one
grocery store. Today they have 208. The buyer knows me. He buys all of my regular and special
greeting cards. They do whatever I ask. I made $22,000 in commissions from their sales
last year. Now management wants to make it a house account. 

Here the salesperson loses money. It is difficult to treat the salesperson fairly in
this situation. The company does not want to pay these large commissions, and 90
percent of the 208 stores are located out of the salesperson's territory. Managers
should carefully explain this to the salesperson. Instead of taking the full $22,000
away from the salesperson, they could pay a 20 percent commission as a reward
for building up the account. 
ETHICS IN DEALING WITH SALESPEOPLE 
/ 
33 

To TELL THE TRUTH? Should salespeople be told they are not promotable,
they are marginal performers, or they are being transferred to the poorest
territory in the company in hopes that they will be forced to quit? Good judgment
must prevail. In general, sales managers prefer to tell the truth. 
Do you tell the truth when you fire a salesperson? If a fired employee has tried and has
been honest, many sales managers will tell prospective employers that the
person quit voluntarily rather than was fired. One manager put it this way: “I feel she can do
a good job for another company. I don't want to hurt her future.” 

THE ILL SALESPERSON 

How much help do you give the alcoholic, drug-addicted, AIDS-infected, or
physically or mentally ill salesperson? More and more companies require their
salespeople to seek professional help for alcohol or drug abuse. If the salespeople
honestly try to im prove, companies offer support and keep them in the field. Yet the
company can only go so far. The firm cannot have an intoxicated or “high”
salesperson calling on cus tomers. Once the illness begins having a negative
effect on business, the salesperson is taken out of the territory. Sick leave and
worker's compensation will cover expenses until the salesperson is cured. The manager
who shows a sincere, personal interest in helping the ill salesperson can greatly
increase the person's chances of recovery. 

EMPLOYEE RIGHTS 
Sales managers must be current on the ethics and laws regarding their
employees' rights and develop strategies for their organizations in
addressing employee rights. Here are several important questions to which all
managers should know the answers: 

1. Under what conditions can an organization fire sales personnel without 

committing a legal violation? 2. What rights do and should sales personnel have
regarding the privacy of, 
and access to, their employment records? 3. What can organizations do to prevent
sexual harassment in the workplace? 
Employee rights are rights desired by employees regarding the security of
their jobs and the treatment administered by their employer while on the job,
irrespective of whether such rights are currently protected by law or collective
bargaining agree ments of labor unions. Let us briefly examine these three
questions. 

TERMINATION AT WILL Early in this century many courts were adamant in their strict
application of this common-law rule to terminate at will. For example, the ter mination-at-
will rule was used in a 1903 case, Boyer v. Western Union Tel. Co., 124 F 246, CCED Mo.
(1903), in which the court upheld the company's right to discharge its employees for union
activities and indicated that the results would be the same if the company's employees
had been discharged for being Presbyterians. Later on, in Lewis v. Minnesota Mutual
Life Ins. Co., 37 NW 2d 316 (1949), the termination-at-will rule was used to uphold the
dismissal of the life insurance company's best sales person--even though no
apparent cause for dismissal was given, and the company had promised the
employee lifetime employment in return for an agreement to re main with the
company. 
Only recently have court decisions and legislative enactments moved the pen dulum
of protection away from the employer and toward the rights of the individual
employee through limitations on the termination-at-will rule. 
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SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

Although many employers claim that essentially all their rights have been
taken away, they still retain the right to terminate sales personnel for poor
performance, ex cessive absenteeism, unsafe conduct, and generally poor
organizational citizenship. However, employers must maintain accurate records of
these events for their employ ees and must inform the employees on where they
stand. To be safe, employers should also have a grievance process for
employees to ensure that due process is respected. 
PRIVACY Today it is more important than ever to keep objective and orderly per sonnel
files. They are critical evidence that employers have treated their employees fairly
and with respect and have not violated any laws. Without these, organizations
may get caught on the short end of a lawsuit. 
Although several federal laws influence record keeping, they are primarily di
rected at public employers. However, many private employers are moving on their
own initiative to give their employees the right to access their personnel files and to prohibit
the file information from being given to others without employee consent. In
addition, employers are casting out of their personnel files any nonjob-related in
formation and ending hiring practices that solicit that type of information. 

SEXUAL HARASSMENT Cooperative acceptance refers to the right of employees

to be treated fairly and with respect regardless of race, sex, national origin, physical
disability, age, or religion while on the job as well as when applying and regarding job
security. Not only does this mean that employees have the right not to be discrimi
nated against in employment practices and decisions, but it also means that
employ ees have the right to be free of sexual harassment. 
Today the right not to be discriminated against is generally protected under Title VII,
the Age Discrimination in Employment Act, the Rehabilitation Act, the Vietnam Era
Veteran's Readjustment Assistance Act, numerous court decisions, and state and
local government laws. Though the right to be free of sexual harassment is
addressed ex plicitly in fewer laws, it has been found in the 1980 Equal Employment
Opportunity Commission (EEOC) guidelines that state sexual harassment is a form
of sex discrim ination. Defining sexual harassment as a form of sex
discrimination under Title VII is also found in numerous court decisions. 
Employers must prevent sexual harassment and discrimination. This can be done
with top management support, grievance procedures, verification
procedures, train ing for all employees, and performance appraisal and
compensation policies that re ward those who practice antiharassment behavior
and punish those who do not. 

REASONS FOR RESPECTING EMPLOYEE RIGHTS Companies should recognize that

important strategic purposes are served by respecting employee rights. The main ones
are: 

Providing a high quality of work life. Attracting and retaining good sales
personnel; making recruitment and selection more effective and their need less
frequent. Avoiding costly back-pay awards and fines. Establishing a balance
between employee rights and obligations and em 
ployer rights and obligations. Both organizations and employees benefit from
respecting employee rights. Or ganizations benefit from reduced legal costs,
since not observing many employee rights is illegal. Their images as good
employers increase, resulting in enhanced orga nizational attractiveness. This in turn
makes it easier for the organization to recruit a pool of potentially qualified applicants.
Although expanded employee rights, espe cially job security, may reduce needed
management flexibility and thus profitability, they may be an impetus for
better planning, resulting in increased profitability. 
SALESPEOPLE'S ETHICS IN DEALING WITH THEIR EMPLOYERS 
/ 
35 

Increased profitability also may result from the benefits employees receive
when their rights are observed: Employees may experience the feelings of being
treated fairly and with respect, increased self-esteem, and a heightened sense of job security.
Employees who have job security may be more productive and committed to the
or ganization than those without job security. As employees begin to see the
benefit of job security guarantees, organizations also gain through reduced
wage-increase de mands and greater flexibility in job assignments. 

Salespeople, as well as sales managers, occasionally may be involved in some of

the following issues. 
SALESPEOPLE'S ETHICS IN DEALING WITH THEIR EMPLOYERS 
MISUSING COMPANY ASSETS The most often misused company assets are
automobiles, expense accounts, samples, and damaged-merchandise credits. All can
be used for personal gain or as bribes and kickbacks to customers. For example, a credit for
damaged merchandise when no damage has occurred or valuable product samples can be
given to customers. 
In addition, a salesperson can misuse company assets by taking trade secrets to a
future employer who is also the company's competitor.The salesperson also might
be violating a noncompetition or nonsolicitation agreement he or she has signed.
Many companies use these agreements to prevent employees from taking
trade secrets with them. To avoid any future legal problems, the prospective
employer should in vestigate whether or not the salesperson is subject to such a
clause. Famous Fixtures, a Milwaukee company, asks candidates for sales
positions what agreements they have signed with their current employers. It asks
these questions early in the interviewing process to prevent future problems. 8 

MOONLIGHTING 

Salespeople are not closely supervised; consequently, they may be tempted to

take a second job, perhaps on company time. Some salespeople attend college on
company time. For example, a salesperson may enroll in an evening master of business
admin istration (M.B.A.) program and take off in the early afternoon to prepare for class.
Em ployers find these practices unacceptable. 

CHEATING 
A salesperson may not play fair in sales contests. If a contest starts in July, the
sales person may not turn in sales orders for the end of June and then may lump them
with July sales. Some might arrange, with or without the customer's permission, to ship
unnecessary or unwanted merchandise that is held until payment is due and then re
turned to the company after the contest is over. The salesperson also may overload the
customer to win the contest. 

AFFECTING FELLOW SALESPEOPLE 

Often the unethical practices of one salesperson can affect fellow salespeople.
Some one who cheats in winning a contest is taking money and prizes from other
sales people. A salesperson also may fail to split commissions with fellow employees
or may take customers away from them. 
CHAPTER 2 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

MANAGING THE SALES TEAM ARE THESE SOCIALLY

RESPONSIBLE ACTIONS? 

Often it is difficult to determine whether actions taken by sales executives are for
profit or social motives. For exam ple, consider the following: 
Training and educational programs for salespeople. - A company heavily
dependent on government contracts 
hiring minority groups. Setting fair sales goals. 
Fairly rewarding salespeople's performance. 
• Paying salaries above industry averages. 
Providing extensive medical and life insurance coverage. Holding sales meetings
in resort areas. 
Some people argue these are responsible acts done un selfishly, while others say
these are good business practices that help maximize a firm's sales and profits.
The argument is simply rhetorical. These are examples of good business practices
carried out in a responsible manner. No longer can the sales function be carried out in a manner
other than one fair to salespeople, customers, and society. 

TECHNOLOGY THEFT 
Picture this: A salesperson or sales manager quits, or is fired, and takes the
organiza tion's customer records to use for his or her, or a future employer's,
benefit. How is that possible? Well, it's getting easier to do these days because
more and more companies provide their sales personnel with computers,
software, and data on their customers. 

ETHICS IN DEALING “We have formal, ethical policies called 'business

conduct guidelines,'” FMC's (an oil 
WITH CUSTOMERS supply company) Alan Killingsworth si 
supply company) Alan Killingsworth says. “These guidelines thoroughly discuss
busi ness conduct and clearly state what is proper conduct and how to report
improper conduct. All sales personnel review them and even sign a statement
that they under stand the guidelines.” 
Numerous ethical situations may arise in dealing with customers. All sales orga
nizations should create specific business conduct guidelines, such as FMC's.
Some of the more common problems faced by sales personnel include the
following. 

BRIBES OR GIFTS 
A salesperson may attempt to bribe a buyer. Money, gifts, entertainment, and travel
op portunities may be offered. At times a thin line exists between good business
and the misuse of a bribe or gift. A $10 gift to a $10,000 customer may be
merely a gift, but how do we define a $1,000 gift for a $1 million customer? Many
companies forbid their buyers to take gifts of any size from salespeople. However,
bribery does exist. The U.S. Chamber of Commerce estimates that, of the annual
$40 billion “white col lar crimes," bribes and kickbacks account for $7 billion. 
Buyers may ask for cash, merchandise, or travel payment in return for placing an
order with the salesperson. Imagine you are a salesperson working
on 5 percent straight commission. The buyer says, “I'm ready to place a $20,000
order for office supplies with you. However, another salesperson has offered to pay
my expenses for a weekend in Las Vegas in exchange for my business. You
know, $500 tax free is a lot of money. You quickly calculate that your commission is
$1,000.You still make $500. Would it be hard to pass up that $500?10 
ETHICS IN DEALING WITH CUSTOMERS 
/ 
37 

SELLING AND MANAGING GLOBALLY CUSTOMER GIFT GIVING IN

JAPAN 
honeydew melon he once presented to a client. “It was a $55 melon,” Matal says, “It
was an imported melon from possibly California-I don't know. But they sure don't
grow them in Japan. It came in a beautiful wooden crate. And then we gave them a
beautiful bottle of very nice cham pagne. Another $90. So we gave a $150 gift, easily, and that
was regular." 
The highly ritualized practice of exchanging presents is paramount to cultivating
long-lasting relationships in Japan. Gifts are exchanged with customers, between
com- panies doing business together, and between employees and superiors
within Japanese companies. As important as the gifts may be, so are the decorative
wrappings and even the stores where the items are purchased. 
As for presents, IBM's Vince Matal rules “the more lavish the better.” Matal claims that he
learned his lesson the hard way after returning from a few buying missions with totally
inappropriate items, such as books, which are generally deemed too practical or
unimpressive for the gift swap. Matal finds luxuries to be more on target, such as French
chocolates, fine wine, or hard-to-come-by treats, such as the 
Sources: Richard F. Beltramini,"Exploring the Effectiveness of Busi ness Gifts:A Controlled Field
Experiment," Journal of the Academy of Marketing Science (Winter 1992): 87-91; and Bristol Voss,
“Eat, Drink, and Be Wary," Sales & Marketing Management (January 1992): 49-54. 

MISREPRESENTATION 

Today, even casual misstatements by salespeople can put a company on the

wrong side of the law.11 Most salespeople are unaware that they assume legal
obligations with accompanying risks and responsibilities-every time they
approach a customer. However, we all know that salespeople sometimes
“oversell. They exaggerate the ca pabilities of their products or services and
sometimes make false statements just to close a sale. 
Often buyers depend heavily on the technical knowledge of salespeople, along
with their professional integrity. Yet both sales managers and staff find it difficult
to know just how far they can go with well-intentioned sales talk, personal
opinion, and promises. They do not realize that by using certain statements they can
embroil them selves and their companies in a lawsuit and ruin the very business
relationship they are trying to establish. 
When a customer relies on a salesperson's statements, purchases the product or
service, and then finds that it fails to perform as promised, the supplier can be sued
for misrepresentation and breach of warranty. Companies around the United States
have been liable for million-dollar judgments for making such mistakes, partic
ularly when their salespeople sold high-ticket, high-tech products or services. 
However, you can avoid such mistakes if you are aware of the law of misrepre sentation and
breaches of warranty relative to the selling function and follow strate gies that
keep you and your company out of trouble. Salespeople must understand the
difference between “sales puff” (opinions) and statements of fact and the legal
ramifications of each. Preventive steps exist for salespeople to follow, and they should
work closely with management so they can avoid time-consuming delays and
costly legal fees. 
WHAT THE LAW SAYS Misrepresentation and breach of warranty are two legal
causes of action; that is, they are theories on which an injured party seeks damages.
12 These two theories differ in the kind of proof required and the type of damages
that may be awarded by a judge or jury. However, both commonly occur in the sell
ing context and are treated similarly for our purposes. Both typically arise when a
salesperson makes erroneous statements or offers false promises regarding a prod
uct's characteristics and capabilities. 
Not all sales statements have legal consequences, however. When sales personnel
loosely describe their product in glowing terms (“Our service can't be beat; it's the
best around"), such statements are viewed as “opinions” and generally cannot be re
lied on by a customer, supplier, or wholesaler. Thus a standard defense used by
lawyers in misrepresentation and breach of warranty lawsuits is that a purchaser
cannot rely on a salesperson's puffery, because taking these remarks at face value
is unreasonable. 
However, when a salesperson makes claims or promises of a “factual nature” re
garding a product's inherent capabilities (for example, the results, profits, or
savings that will be achieved, what it will do for a customer, how it will perform,
and so on), the law treats these comments as statements of fact and warranties. 
The subtle difference between sales puffery and statements of fact is often diffi cult
to distinguish. No particular form of words is necessary, and each case is analyzed
according to its circumstances. Generally, the less knowledgeable the customer, the
greater the chances the court will interpret a statement as actionable. The
following 

An Example An independent sales rep sold heavy industrial equipment. He went

to a purchaser's construction site, observed his operations, and then told the
presi dent of the company that his proposed equipment would“keep up with
any other machine then being used and that it would work well in cooperation
with the cus tomer's other machines and equipment." 
The customer informed the rep that he was not personally knowledgeable
about the kind of equipment the rep was selling and that he needed time to study
the rep's report. Several weeks later, he bought the equipment based on the rep's
recommendations. 
After a few months he sued the rep's company, claiming that the
equipment did not perform according to the representations in sales literature
sent prior to the ex ecution of the contract and to statements made by the rep at
the time of the sale. The equipment manufacturer defended itself by arguing that
the statements made by the rep were nonactionable opinions made innocently by
the rep, in good faith, with no intent to deceive the purchaser. 
The court ruled in favor of the customer, finding that the rep's statements were
“predictions" of how the equipment would perform; this made them more than
mere sales talk. The rep was held responsible for knowing the capabilities of the
equipment he was selling, so his assertions were deemed to be statements
of fact, not opinions. Furthermore, the court stated that it was unfair that a
knowledgeable salesperson should take advantage of a naïve purchaser. 

PRICE DISCRIMINATION 
Some customers may be given price reductions and promotional allowances and
sup port, while others are not, even though under certain circumstances this is in
viola tion of the Robinson-Patman Act of 1936. The act does allow sellers to grant
what are called quantity discounts to large buyers based on savings in the cost of
manufactur ing, but individual salespeople or managers may not practice price
discrimination to improve sales. 
You need to be careful about charging different prices to customers who buy
similar quantities of a product. Once a customer finds out he or she paid a higher
price, you lose his or her business. The customer receiving the lower price may not
trust you. In addition, your company may be sued, and you could lose your job.
39 

TIE-IN SALES 
To purchase a particular line of merchandise, a buyer may be required to buy other
un wanted products. This is called a tie-in sale and is prohibited under the Clayton
Act when it substantially lessens competition. Yet the individual salesperson or
manager can do this. For example, the salesperson of a popular line of cosmetics
might tell a buyer, “I have a limited supply of the merchandise you want. If all of
your 27 stores will display, advertise, and push my total line, I may be able to
supply you.”That means the buyer will need to buy ten items never purchased
before. Is this good business? It's illegal! 
EXCLUSIVE DEALERSHIP 
When a contract requires a wholesaler or retailer to purchase products from one
manufacturer, it is an exclusive dealing. If it tends to lessen competition, it is
prohib ited under the Clayton Act. 

RECIPROCITY 
A salesperson says, “I can get my company to buy all of our office supplies from
your company if you buy lighting fixtures, supplies, and replacement parts from
us.” Is this a good business practice? 
Reciprocity refers to buying a product from someone if the person or organi zation
agrees to buy from you. The Federal Trade Commission and the U.S. Depart ment
of Justice will consider such a trade agreement illegal if it results in hurting or
eliminating competition. Most purchasing agents find this practice offensive.
Because reciprocal sales agreements may be illegal, if not unethical, buyers are
often afraid to even discuss this with sellers. 

SALES RESTRICTIONS 
To protect consumers against sometimes unethical sales activities of door-to-door
salespeople, legislation exists at the federal, state, and local levels. The Federal
Trade Commission and most states have adopted cooling-off laws.31 This provides
for a cooling-off period (usually three days) in which the buyer may cancel the
contract, return any merchandise, and obtain a full refund. The law covers sales of
$25 or more made door-to-door. It also states that the seller must give the buyer a
written, dated contract or receipt of the transaction and must tell the buyer about
the three-day can cellation period. 
Many cities require persons selling directly to consumers to be licensed by the city
in which they are doing business if they are not residents and to pay a license fee.
A bond also may be required. These city ordinances are often called Green River
ordinances because the first legislation of this kind was passed in Green River,
Wyoming, in 1933. This type of ordinance helps protect the consumer and aids
local companies by making it more difficult for outside competition to enter their
market. 
Both the cooling-off laws and the Green River Ordinance were passed to protect
consumers from salespeople using unethical, high-pressure sales tactics. These
statutes, and others, were necessary because a few salespeople used unethical prac
tices in sales transactions. 14 

Over the years a number of surveys have been undertaken to determine managers'
MANAGING SALES views of business ethics. In general, they found the following: 
ETHICS . All managers feel they face ethical problems. 
40 
CHAPTER 2 
1 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

Most managers feel they and their employers should be more ethical.
Managers are more ethical with their friends than with people they do not know.
Even though they want to be more ethical, some managers lower their ethical
standards in order to meet job goals.
Managers are aware of unethical practices in their industry and company ranging
from price discrimination to hiring discrimination.
Business ethics can be influenced by an employee's supervisor and by the company
environment. 
and ethical climate. Managers must take active steps to ensure the company stays
on ethical ground. Management methods to help organizations be more
responsive in clude (1) top management taking the lead, (2) carefully selecting
leaders, (3) estab lishing and following a code of ethics, (4) creating ethical
structures, (5) formally encouraging whistle-blowing, (6) creating an ethical
sales climate, and (7) establish ing control systems. 

FOLLOW THE LEADER 

The organization's chief executive officer, president, and vice presidents should
clearly champion efforts for ethical conduct. Others will follow their lead. Their
speeches, interviews, and actions need to constantly communicate the
organization's ethical values. The Business Roundtable, an association of chief
executives from 250 large corporations, issued a report on ethics policy and
practice in companies such as Boeing, Chemical Bank, General Mills, GTE,
Xerox, Johnson & Johnson, and Hewlett-Packard. 15 The report concluded that no
point emerged more clearly than the crucial role of top management in guiding the
social and ethical responsibilities of their organization. 

LEADER SELECTION IS IMPORTANT

Since so few individuals are at the principled level of moral development, it is
critical to carefully choose managers. Only people who have the highest level of
integrity, standards, and values should assume leadership positions. 

ESTABLISH A CODE OF ETHICS

A code of ethics is a formal statement of the company's values concerning ethics
and social issues. It states which values or behaviors are expected and which ones
will not be tolerated. These values and behaviors must be backed by management's
action. Top management support gives needed assurance the code will be
followed. 
Two types of codes of ethics exist: principle-based statements and policy-based
statements. Principle-based statements are designed to affect corporate culture, de
fine fundamental values, and contain general language about company responsibili
ties, quality of products, and treatment of employees. General statements of
principle are often called corporate credos. Examples are GTE's “Vision and
Values," Johnson & Johnson's “The Credo," and Hewlett-Packard's “The HP
Way."16 
Policy-based statements generally outline the procedures to be used in specific
ethical situations. These situations include marketing practice, conflicts of interest,
observance of laws, proprietary information, political gifts, and equal
opportunities. Examples of policy-based statements are Boeing's “Business
Conduct Guidelines," Chemical Bank's “Code of Ethics," GTE's "Code of Business
Ethics” and its “Anti-Trust and Conflict of Interest Guidelines,” and Norton's
"Norton Policy on Business Ethics."17 

CREATE ETHICAL STRUCTURES 

Ethical structures represent the various systems, positions, and programs a
company can undertake to implement ethical behavior. Nationwide Mutual
Insurance Co. of Columbus, Ohio, for example, created an office of ethics and
compliance to instill a system of values in its employees and sales agents. The first
phase of the office's work was to assess the ethics environment of the company.
Later, the company opened an ethics and compliance information resource center
to answer concerns over the telephone. 17 
Numerous firms have ethics committees or an ombudsperson. An ethical com
mittee is a group of executives appointed to oversee company ethics. The commit
tee assumes responsibility for disciplining wrongdoers. Taking this responsibility
is essential if the organization is to directly influence employee behavior. An
ethical ombudsperson is an official given the responsibility of corporate conscience
who hears and investigates ethical complaints and informs top management of
potential ethical issues. For example, companies like IBM, Xerox, and Proctor &
Gamble have ethics committees reporting directly to the CEO. 
ENCOURAGE WHISTLE-BLOWING 
Employee disclosure of illegal, immoral, or illegitimate practices on the employer's
part is called whistle-blowing. Companies can provide a mechanism for whistle
blowing as a matter of policy.All employees who observe or become aware of crim
inal practices or unethical behavior should be encouraged to report the incident(s)
to their supervisors, to a higher level of management, or to an appropriate unit of
the organization, such as an ethics committee. Formalized procedures for com
plaining can encourage honest employees to report questionable incidents. For ex
ample, a company could provide its employees with a toll-free number to report
unethical activities to top management. This "silent witness" program may be more
successful than other procedures because it allows employees to report incidents
without actually having to confront colleagues or supervisors. This program is es
pecially valuable if the employee's own manager is involved in unethical practices.
However, with programs such as these, careful verification is necessary to guard
against the use of the program as a means of retribution against managers or other
employees. 
CREATE AN ETHICAL SALES CLIMATE
The single most important factor to improve the climate for ethical behavior in a
sales force is the action taken by top-level managers. Sales managers must help
develop and support their codes of ethics. They should publicize the codes and
their opposition to unethical sales practices to their subordinate managers and their
salespeople. They can achieve a stronger level of ethical awareness during sales
meetings, in training sessions, and when contacting customers while working with
salespeople. 
ESTABLISH CONTROL SYSTEMS
Finally, control systems must be established. Methods should be employed to
deter mine whether salespeople give bribes, falsify reports, or pad expenses. For
example, sales made from low bids could be checked to determine whether
procedures were correctly followed. Dismissal, demotion, suspension, or
reprimand would be possible penalties (for example, commissions would not be
paid on a sale associated with un ethical sales practices). 
Overall, management must make a concerted effort to create an ethical climate
within the workplace in order to best serve customer and organizational goals. 
42 
/ 
CHAPTER 2 
I 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

MANAGEMENT IN ACTION: ETHICAL DILEMMA IT'S JUST WHAT I

NEED! 

Jim Baker, your neighbor, is a regional sales manager for a large firm that
manufactures consumer goods. Jim's com- pany is repeatedly written up as one of
the top ten sales forces in America in Sales & Marketing Management mag. azine. Jim's
firm, in fact, grosses more than $20 billion per year in sales. 
As a sales manager, you are always interested in what Jim is doing because it
frequently gives you good management ideas. Since your company is not a
competitor and is much smaller than Jim's, he freely shares ideas and sales training materials
with you. He also knows you don't tell anyone 
about his help. 
Tonight, Jim shows up at your door with a new piece of computer software
his salespeople will use for such things as customer leads, reports,
forecasting, callback reminders, and product and customer histories. You had
been looking for a program like this for months, but none had offered this wide range of
features together in one piece of soft ware. Though you had considered having someone
pro 
gram and create a customized software package that would include all of the
features your sales force needs, estimates for this customized software package
were well out of the range of your company's budget. However, Jim's package is similar
to what the customized package would have of fered you. It is exactly what you
need. Unfortunately, this cost is also too high for you to buy it. Jim says you can make
copies. He says, “Who cares about this stuff? No one gets caught anyway.
You're not hurting anyone. It will be a great help to you." 

WHAT Do You Do? 

1. Duplicate copies for each of your salespeople and your 
self. 2. Thank Jim, but decline his offer to copy or use the disk. 3. Ask Jim if
you can simply use the disk from time to time. 
Since you are not actually copying the software, you are not breaking the law, but you
can still use the software whenever you want. 

THE BOTTOM LINE 

Ethics and social responsibility are hot topics for managers. Ethical behavior
pertains to values of right and wrong. Ethical decisions and behavior are
typically guided by a value system. For an individual manager, the ability to make
correct ethical choices will depend on both personal and organizational
characteristics. An important per sonal characteristic is one's level of moral
development Corporate culture is an or ganizational characteristic that
influences ethical behavior. 
Corporate social responsibility concerns a company's values toward
society. How can organizations be good corporate citizens? The model for
evaluating social per formance uses four criteria: economic, legal, ethical, and
discretionary. 
Social responsibility in business means profitably serving employees and cus tomers in an
ethical and lawful manner. Extra costs can accrue because a firm takes a socially
responsible action, but this is a part of doing business in today's
society, and it pays in the long run. 
Salespeople and managers realize that their business practices, including inter
national dealings, should be carried out in an ethical manner. They must be ethical
in dealing with their salespeople, their employers, and their customers. Ethical
standards and guidelines for sales personnel must be developed, supported, and
policed. In the future, ethical selling practices will be even more important
to conducting business profitably. Techniques for improving social
responsiveness include leadership, codes of ethics, ethical structures, whistle-blowing,
and establishing control systems. Finally, research suggests that socially
responsible organizations perform as well as-and of ten better than-
organizations that are not socially responsible. 
THE BOTTOM LINE 

KEY TERMS FOR SALES MANAGERS 

Social responsibility, 26 Stakeholder, 26 CCC GOMES, 26 Discretionary
responsibility, 
28 Preconventional moral 
development level, 29 Conventional moral 
development level, 29 
Principled moral 
development level, 29 Ethics, 30 Ethical behavior, 30 Employee rights, 33 Termination-
at-will rule, 33 Cooperative acceptance, 34 Misrepresentation, 37 
Tie-in sale, 39 Reciprocity, 39 Cooling-off laws, 39 Green River ordinances, 39
Code of ethics, 40 Ethical committee, 41 Ethical ombudsperson, 41 

MANAGEMENT APPLICATION QUESTIONS 

1. 
Which of the following situations represents socially responsible actions by
firms? a. Creating recreation facilities for sales personnel. b. Paying for college
courses associated with an M.B.A. program. c. Allowing sales personnel to buy
company products at a discount. Do managers feel business ethics can be
improved? Describe ethical situations that sales managers may face in dealing with
salespeople. Imagine yourself in a situation of being encouraged to inflate your
expense ac count. Do you think your choice would be most affected by your individual
moral development or by the cultural values of the company for which you worked?
Explain. Have you ever experienced an ethical dilemma? Evaluate the dilemma
with re spect to its impact on other people. Discuss the difference between sales
puffery and misrepresentation and how to avoid making mistakes that may prove
costly to the firm. Lincoln Electric considers customers and employees to be more
important stake holders than shareholders. Is it appropriate for management to define
some stakeholders as more important than others? Should all stakeholders be
consid ered equal? Do you think a code of ethics combined with an ethics
committee would be more effective than only leadership for implementing ethical
behavior? Discuss. It is often hard for a manager to determine what is "right" and even
more diffi cult to put ethical behavior into practice. A manager's ethical orientation often
brings him or her into conflict with people, policies, customers, or bosses. Con
sider the following dilemmas. How would you handle them? a. A well-liked member of your
sales group with an excellent record confides 
to you that he has AIDS. Although his illness has not affected his perfor mance,
you're concerned about his future health and about the reactions of his coworkers. What
do you do? (1) Tell him to keep you informed about his health, and say nothing to his 
coworkers. (2) Arrange for him to transfer to an area of the organization where he can 
work alone. (3) Hold a staff meeting to inform his coworkers, and ask them how they 
feel about his continued presence on your team. (4) Consult your human
resources officer on how to proceed. b. During a reorganization, you're told to
reduce staff in the department you 
manage. After analyzing staffing requirements, you realize the job would be a lot
easier if two professionals, who are both over age 60, would retire. What do you
do? (1) Say nothing and determine layoffs based purely on performance and 
length of service. (2) Schedule a meeting with both employees, and ask if they'd
consider 
early retirement. (3) Schedule a meeting with all staff, and ask if anyone is
interested in sev 
erance or early retirement. 
'44 
CHAPTER 2 
I 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

c. 
(4) Lay off the older workers. One of your salespeople has recently experienced
two personal tragedies: Her husband filed for divorce, and her mother died. Although
you feel gen uine sympathy for her, her work is suffering. A report you
completed, based on inaccurate data she provided, has been criticized by your
boss. Your man ager asks you for an explanation. What do you do? (1) Apologize for
the inaccuracies, and correct the data. (2) Tell your boss that the data supplied by
your colleague was the source 
of the problem. (3) Say your colleague has a problem and needs support. (4)
Tell your boss that because of your workload, you didn't have time to 
check the figures in the report. Your firm recently hired a new sales manager who is
at the same level you are. You do not like the man personally and consider him a
rival profession ally. You run into a friend who knows your rival well. You discover from
the friend that your rival did not attend Harvard as he stated on his résumé and in
fact has not graduated from any college. You know his supposed Harvard
background was instrumental in getting him hired. What do you do? 
(1) Expose the lie to your superiors. (2) Without giving names, consult your human
resources officer on how to 
proceed. (3) Say nothing. The company obviously failed to check him out, and the
lie 
will probably surface on its own. (4) Confront the man with the information, and let him
decide what to do. During a changeover in the sales department, you discover your
company has been routinely overcharging customers for services provided
to them. Your supervisors say repayment of charges would wreak havoc on
company profits. Your company is federally regulated, and the oversight
commission has not noticed the mistake. Your bosses say the problem will never
come to light, and they will take steps to correct the program so it never
happens again. What do you do? (1) Contact the oversight commission. (2) Take
the matter public, anonymously or otherwise. (3) Say nothing. It is now in the
hands of the bosses. (4) Work with the bosses on a plan to recognize the
company's error, and 
set up a schedule of rebates that would not unduly penalize the com 
pany. In this morning's mail, you receive plans and samples for a promising new
product from a competitor's disgruntled employee. What do you do? (1) Throw the
plans away. (2) Send the samples to your research department for analysis. (3) Notify
your competitor about what is going on. (4) Call the FBI. 
e. 

f. 

FURTHER EXPLORING THE SALES WORLD 

3. 
Contact your local Better Business Bureau, and prepare a report on local laws
regulating the activities of salespeople. The Journal of Marketing has a section
titled “Legal Developments in Marketing.” Report on several legal cases found in this
section related to a firm's personal selling activities. Talk to a sales manager
about the social, ethical, and legal issues involved in the job. Does the manager's
firm have a. A code of ethics? b. An ethics committee? c. An ethical
ombudsperson? 
d. Procedures for whistle-blowing? Get a copy of any of the manager's
materials relating to topics discussed in this chapter. Report on your findings. 
THE BOTTOM LINE 

SALES MANAGEMENT EXPERIENTIAL EXERCISE 

ETHICAL WORK CLIMATES On a separate sheet of paper answer the following

questions by writing down the number that best describes an organization for which you
have worked: 

Agree 
5 
3 
4 
‫بر‬ 
4 
5 
3 
4 
Disagree 1. Whatever is best for everyone in the company is the 1 2 . major
consideration here. 
2. Our major concern is always what is best for the 
1 2 other person. 3. People are expected to comply with the law and 
1 2 professional standards above other considerations. 4. In this company, the first
consideration is whether a 
12 decision violates any law. 5. It is very important to follow company rules and 
1 2 procedures here. 6. People in this company strictly obey company 
1 2 policies. 7. In this company, people are mostly out for themselves.. 1 
‫س‬ 

3 3 
4 4 
5 
‫بر‬ 

8. People are expected to do anything to further the 

company's interests, regardless of the consequences. 9. In this company, people are
guided by their own 
personal ethics. 10. Each person in this company decides for himself or 
herself what is right and wrong. 
1 1 
2 2 
3 3 
4 4 
5 5 
1 
2 
3 
4 
5 

Total Score 

Add up your score. These questions measure the dimensions of an organization's

ethical cli mate. Questions 1 and 2 measure caring for people, questions 3 and 4 measure
lawfulness, questions 5 and 6 measure rules adherence, questions 7 and 8 measure emphasis
on financial and company performance, and questions 9 and 10 measure individual
independence. Ques tions 7 and 8 are reverse scored. (That is, if you answered 5, your actual score to write
down is 1;a 4 is really a 2, etc.) A total score above 40 indicates a very positive ethical climate. A
score from 30 to 40 indicates an above-average ethical climate. A score from 20 to 30 indicates a
be low-average ethical climate, and a score below 20 indicates a very poor ethical climate. 
Go back over the questions and think about changes you could have made to improve the
ethical climate in the organization. Discuss with other students what you could do as a man
ager to improve ethics in future companies you work for. 18 
46 
/ 
CHAPTER 2 
1 
SOCIAL, ETHICAL, AND LEGAL RESPONSIBILITIES OF SALES PERSONNEL 

CASE 2.1 

MISSISSIPPI LEASING, INC. 

Is This Legal? 
As the sales manager of a printing company in Oxford, vices. Since he is very
knowledgeable about printing ser Mississippi, you are about to invest in a car
leașing provices and prices, you ask him about ballpark prices gram that involves
18 company cars for your sales staff. charged by his existing supplier. You feel you
could pro With your comptroller, you have examined several leas- vide his company
with higher quality service at a better ing programs. You have narrowed down your
selection price. to two leasing companies that offer very similar terms. Since the
president of Equilease is in a good mood, You are meeting with the president of
Equilease, a com- you think about setting up a win/win situation. You are pany
with which you have never done business before. considering an offer like “Let's
make this a double win. You know from your own prospect files that one of your I'll
give you 100 percent of our leasing business if you'll sales representatives has
previously tried to call on the consider giving us 50 percent of your printing business.
purchasing manager of Equilease to get some of the Fair enough?” company's
printing business; however, he could not sell the account. 
QUESTION As you meet with the president for lunch, you gently As the sales manager,
what would you actually do? steer the conversation in the direction of printing ser 
ILLINOIS OFFICE MACHINES, INC. 
/ 
47 

CASE 2.2 

ILLINOIS OFFICE MACHINES, INC. How Should You

Handle Competition? 

You are in the very competitive business of selling office chine, but it says
nothing about longer lifetime. You re machines. You and one of your
salespeople have an ap- ply carefully: “That's the first time I have ever seen a let
pointment with the senior partner of a large medical ter praising a brand X
machine." center. This potential buyer already has studied several Next, she shows
you another piece of paper, a chart competitive products. Her “hot buttons” are low
operat- that graphically illustrates the operating costs of five dif ing costs and low
maintenance. You know that four com- ferent brands. The chart says on the
bottom “Marketing petitors have demonstrated their product to your Research-Brand X,
2000.” It shows your machine with prospect. After you have shown her the benefits of
your the highest operating costs over a five-year period, and product, she asks you:
“Tell me, what makes your ma- it shows brand X in the leading position with 50 percent
chine better than brand X?” You restate some of your lower operating costs. You
are stunned by this unfair obvious product benefits, and she comes back with “The
competitive comparison. You try to control your temper salesman with company X
told me that they use a spe- and think about saying “They always are much better cial
kind of toner that is far superior to what you are than we are on paper, but when it comes
to reality, we using for your machine and that it will increase the life outperform
them every time.” time of their machine by 20 percent." 
You know that this is an obvious lie, so you ask: “What evidence did this
salesperson give you to prove 1. Is an ethical conflict occurring here? Why or why not? his
claim?” She shows you a customer testimonial letter 2. Would you try to reverse your
prospect's decision? Why or that talks about how satisfied they were with their ma- why
not?