Lecture 12. Business Practices, Ethics, Corporate Governance, and Social
Responsibility
Consumer Protection
• Product Safety, SK-II
• Fake products (related to IPR)
• Truthful labeling
• Unclear pricing
• Promotional tactics
– Real estate marketing in China and Hong Kong – Medical products
Other Ethics Problems in Marketing
• Deceptive advertising, not telling the truth, implied,
• Bundled promotion;
• Impact on the environment: pollution , waste, the Great Wall
• Monopoly and unfair competition
– State monopoly, e.g., portable phone numbers
IPR: a uniquely China problem?
International comparison of the percent of U.S. software package sales that are illegal copies
0 20 40 60 80 100
Percentage China Taiwan Iberia Switzerland Korea Japan
Italy Germany
Rights of consumers
Safety Information Choice
Fairness
Redress
-class action?
(集体诉讼)
Assembly
Education Respect Monitor
Anti Unfair Competition Laws
1、Fake products (of another brand);Danone vs. Wahaha 2、Unauthorized use of others’ trademark, packaging, brand name , company name, certificate of quality, origin of product, and mislead the buyers
Anti monopoly laws
Once a judgment is passed, the offender is subject to 50k-200k RBM in fines – enough a deterrence?
Legal Frameworks in China
Anti corruption / graft laws
hidden commissions or kickbacks
Deceptive Advertising
Untruthful representation of quality, content, function, usage, maker, expiration date, and place of origin
Concerning commercial secrets and privileged information:
Such as technology and proprietary practices, through means such as theft, bribery, extortion, unauthorized use, breach of nondisclosure agreement
Sales with rewards: prize
Deception, rewards to promote defected products, lotteries
Bundling
to promote some products against the will of consumers
Dumping:
selling below cost to hurt the competition, not including
perishable products, products with close expiry dates, overstocks, seasonal price reduction, bankcrupcies, divestment, etc..
Defamation
Fabrication, dissemination of untrue information to hurt the competition Red paint
Collusion in bidding
Collusion in bidding to suppress prices, conspiracy with the bid issuer to hurt the competition
Bribery and extortion
Offer bribery for favor
Demand bribery such as kickbacks or withhold
Stealing state secrets:
the Rio Tinto case
Advertising:
1) cannot have any detrimental effect on the under-aged and other disadvantaged
2) cannot badmouth the others: comparative advertising 3) must clarify your information and commitment, e.g.,
functions, price, maker, expiry date, content of service, exact prize
Remember sex appeals in advertising?
Sometimes there are no clear guidelines but occasional government clampdowns.
Laws concerning medical products
1、unscientific promise of benefits and guarantees
2、unclear healing power or effects
3、compare with others in functions or safety 4、advertise in the name of research, academic, medical institutes or that of doctors, experts, patients,
Tobacco Products:
No advertising through broadcast, movie, TV, newspaper or magazines
No advertising in waiting rooms, theaters, meeting rooms, sports facilities
Must indicate the harm.
Very much up to the international standards.
Guanxi or Relationship: a review
• Social capital and networks:
– Lubrication, greasing – Mutual benefit
• Westerners often view Guanxi as related to unethical behavior
– Lead to corruption – Privileged treatment – Under-table dealing
It’s a special type of relationship which contains trust, favor, dependence, and adaptation and often leads to insider-based decision making in the business world.
Guanxi is perceived as an ethical efficient means to efficiently conduct business in China based on Confucian cultural values
The Dynamics of Guanxi and Ethics for Chinese Executives
R. Chan, L. Cheng, and Ricky Szeto, J. of Business Ethics,12/2002
Types of ethical philosophies:
1) self-interest, egoism, greed 2) Opportunistic, it depends
3) Principled, to abide by ethics criteria and rules One study uncovered 5 types of ethical views
• 1. Emphasize personal benefits rather than laws.
• 2. Explore Legal loopholes for profits.
• 3. Resist official governance and regulations.
• 4. Emphasize profits rather than friendship.
• 5. Giving favor and doing business within a Guanxi network.
Ethical Frameworks and Philosophies
Ethical Dilemma
Failure to take direct measures to offset and elude the effects of GuanXi and perform under ethical code of conduct in the business environment in China
Key Problem
Genuine dilemma
This refers to two or more valid ethic requirements or legitimate interests conflict and consensus do not exist as to how it should be resolved.
Moral laxity
This refers to one believe to do an important moral goal at some time, yet need not perform any particular action at the moment
Compliance problem
This refers to one knows undoubtedly what to do, but performance may be inhibited by pressures which run counter to morality
No-problem problem
This refers to one knows what the moral goal is and has the will and ability to pursue it
Typology
Legal (law) Legal
(law)
Ethics (Opinions) Gray
Area Gray Area
Ethics In Business
Corporate Culture :
– how well an individual’s or an organization’s marketing activities exhibit ethical values
– Does good ethics = good business?
Golden Rule of Ethics
• “Do unto others as you would have them do unto you.”
• Different people understand this rule in different ways
• The other person may be different from you and does not want to be treated as you want to be treated!”
• Marketing News. “Ethics can be gauged by three key rules.” Written by
Why rampant corruption?
• Reforms and opening: opportunities for some, but many others cannot access
• Incomplete laws and regulations: loopholes
• Concentration of power among a few
• Lax enforcement and oversight mechanism
• Separation of regulators and the regulated
• Ethics education and conduct:
– 100 steps vs. 50 steps
• Organizational culture and climate
• Things changing for the better, slowly!
• Many good businesses: www.motionpost.cn
Corporate Social Responsibility
• Labor issues: sweat labor, product safety, worker safety, human treatment, new laws
• Environment protection: the air-quality regulations in China were comparable to the 1950s in the United States.
• Transfer of polluting industries to developing countries:
including many HK firms,理工大学校董会主席罗仲荣任大 股东的GP超霸电池,上週爆出工人集体中毒事件,其在 惠州工厂百多名女工,怀疑因接触及吸入可致肺癌及生畸 胎的化学物质镉,纷纷中招,出现腰痛、呕吐等征状
•
惠州
超霸電池
廠是為美泰(Mattel Inc.)、玩具反斗城(Toys 'R' Us)和沃爾瑪(Wal-Mart Stores)等美國公司生產含鎘電池
的中國工廠
。 。• Use of sweatshop labor (血汗工厂)
• Young workers at Foxconn Factory plunge to their death:
Corporate Social Responsibility
• Sustainability: business models and consumption
• Scientific view of development:
– Raw materials, cheap labor, environmental crisis
• Charity:
– helping the poor, education,
• Privacy and human rights: Google.com
• Compliance: cost vs. benefit
TRADE SHOW -- As a sales person at a trade show, you have the opportunity to pick up an important document invariably left behind by a competitor.
GIFT Giving -- The purchasing agent of an important account wants an expensive gift; To provide it would violate company policy, while not providing it would lose the account.
What would you do?