A Model for Ethics in Marketing

ROBERT BARTELS

Is a given markefing ac-flon always ethical, neverethical, or ethical relative totime, place, and circum-stances? Upon what logicalbases can a marketer deter-mine what is "right" for himto do, not only in domesticbut also in internationalbusiness?

This article presents aschematic plan for analyzingthe variables Inherent in theethics of decision-making;and a framework for socialand personal ethics is pro-posed.

JournaJ of Marketing, Vol. 31 (January,1967). pp. 20-26.

I NTEREST expressed in business ethics has not always been iden-tified as a concern for ethics alone. Thus, demands for standards

of ethics have grown up in defense of various rights—of labor, ofcompetitors, of the community.

Emerging social consciousness in defense of rights was indi-cated in legislation such as the Sherman Anti-trust Act andthe Pure Food and Drug Act. Direct concern for business ethicsappeared strongly during the 1920s. The business literature ofthat period contains many titles dealing with ethics per se, such as"Adventures on the Borderlands of Ethics," "The Ancient Greeksand the Evolution of Standards in Business," "Book of BusinessStandards," "The Ethics of Business," and "Christian Ideals inIndustry."

Each recurrence of interest in ethics has raised the question:Have business practices become less ethical, or has business con-sciousness become more ethically sensitive?

Whichever it may be at this time, several aspects of the presentinterest are symptomatic of our times. First, tests of ethics areapplied to problems of our day: to price-fixing and to price-cutting,to deceptive labeling and to advertising, to coercive trade practices,and to conflicts of interest in a pluralistic society. Second, concernis shown for ethics in both operational and administrative market-ing problems. Third, responsibility for ethics in marketing isattributed increasingly to individuals on the higher managementlevels.

A review of what is currently said about business or marketingethics reveals it to have several distinguishing characteristics:

Emphasis has been given to subjective factors, action, and theperformer's viewpoint, more than to objective factors, interaction,and the relationships between individuals. In other words, emphasishas been given to lists of actions regarded as ethical or unethical,rather than to the determinants which place an action on the list.

Specific rather than general concepts of ethics usually have beenexpressed. The ethics of management-customer relations has notbeen integrated with the ethics of management-employee relations.The standards of one company have not been conceptually integratedwith those of other companies, except perhaps through agreements.

The absolute rather than the relative character of ethics has beenemphasized. Once determined, the universality of ethical standardshas been assumed. Exceptions have been dealt with as deviationsfrom a general principle, rather than as the conflict of actionsstemming from two perhaps valid principles.

Conflicts of this sort have increased as the growing volume ofinternational business has multiplied the frequency of cross-culturalmarketing situations.

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A Model for Ethics in Marketing 21

Inasmuch, therefore, as marketing ethics is partof general ethics in business, there is merit in anattempt to construct a model for ethics in market-ing. A model in this sense is a logical frameworkin terms of which two basic questions might beasked and answered: How are ethical standards set?How are ethical decisions made?

Elements of a ModelA model represents an attempt to explain the

nature and behavior of some phenomenon, to showcauses and effects in related variables. If a suffi-ciently credible theory- of behavior can be built, itmay serve as a basis for behavior in specific situa-tions. Preliminary to model-building, however,some basic premises must be laid down. The follow-ing assumptions, therefore, are made:

1. It is assumed that "ethics" means a standardby which business action may be judged "right" or"ivTong."

Where judgment is involved, there is always astandard. However, standards differ, and so actionsregarded "right" by one standard may be in confiictwith and judged unethical from the standpoint ofanother standard. Then an understanding of thestandard in terms of which action is made may bemore useful than a mere appraisal of the actionitself.

The ethics of another society, or of our own so-ciety at an earlier time, may differ from what weregard to be "right" today. If so, inasmuch as wecannot always change other people but must dealwith them as they are, we can at least understandthe reasons for their actions and view ethical con-flict objectively, in terms of its bases.

2. It is assumed that ethics is a standard forjudging the rightness not of action per se, but ofaction of one person relative to another.

Ethics is a basis for judgment in personal inter-action. It pertains to the fulfilment or violation ofexpectations. Simply to make an untrue statementabout a product is in itself not unethical, nor tomake a shoddy pi'oduct—that may be bad manage-ment, but it is not necessarily unethical.

Neither is it unethical to make the false statementto a person who does not expect to be told the truth—that may be the level of trade practice.

However, if a customer expects to receive truthfulinformation and a product of specified quality, andif he does not, and if his expectation is a generalexpectation sanctioned by society, failure of theother party to fulfill these expectations is an un-ethical act. Furthermore, if a particular customerexpects little or does not know what he is entitled toexpect, and if society makes this determination forhim, such a failure is also unethical. Ethics is aconcern for people, not just for acts or things.

3. It is assumed that business is primarily a socialprocess, within which it is an economic process, and

that, within the latter, marketing is a specializedprocess involving role relationships and interactions.

Marketing is something that people do as people,not merely as buyers and sellers, nor even just aseconomic men. Marketing is a process engagingwhole men, social entities, who have commitmentsboth within and without the marketing process, andwhose marketing behavior refiects their total insti-tutional involvement.

To grasp the full import of the social standard ofethics in marketing, one must recognize the orien-tation of marketing in society. Marketing is a func-tion of the economy, which is but one of seven iden-tified major social institutions: the family, thechurch, the school, the economy, the government, themilitary, and leisure. Each fulfills certain needs ofmankind, the economy providing for the material orconsumption needs of people, acquiring and creatingproducts, distributing them, and regulating con-sumption processes.

As a social institution consists of relationshipsamong participants in roles essential to the perform-ance of the needed function, each institution hasmyriad sets of expectations and obligations amongthese participants. Thus, in each institution areevolved ethics peculiar to the relationships and ac-tivities involved. In turn, the norms of behaviorin each or all institutions are the product of thegeneral cultural characteristics of the society, whichdiffer among societies, producing dissimilar stand-ards, codes, and patterns of behavior among menin their role relationships.

As marketing is part of the economic process,participants in this process occupy distinct role po-sitions; and their interactions constitute the per-sonal aspect of marketing—the part of marketing inwhich ethical considerations arise. Ten role posi-tions are identifiable—four may be thought of as in-side the technical organization of the business en-terprise; four are outside private participants; andtwo are outside public sectors of the marketingeconomy:

1. Managers2. Employees3. OT.\Tiers4. Other

financiers5. Consumers

6. Intermediatecustomers

7. Resources8. Competitors9. Government

10. Community

• ABOUT THE AUTHOR. Robert Bar-tels, Ph.D., is Professor of Business Or-ganliafion at The Ohio State University.Long a writer on marketing subjects, heis editor of ETHICS IN BUSINESS, pub-lished by Ohio State University's Bureauof Business Research in 1963. He is alsoauthor of a book. CREDIT MANAGE-MENT, to be published in 1967.

22 Journal of Marketing, January, 1967

4. It is assumed that the expectations of theparticipants in the respective marketing roles areknown.

The fact is that many of the marketing role expec-tations are known, but that they are subject tochange as society evolves. Actually, the number ofroles engaged in the marketing process has increasedover the years, and their expectations have becomemore clearly articulated.

In this connection, consider the monolithic andquite autonomous character of the business enter-prise from the time of the Industrial Revolutionthroughout most of the 19th century. The owner-manager was typically one individual, representinga single interest. Management-government rela-tionships were minimized by the philosophy of lais-sez-faire; management-consumer relationships, bythe philosophy of caveat emptor; management-em-ployee relationships, by the dominance of entre-preneurial interests; and management-competitorrelationships, by the philosophy of rugged individ-ualism.

Gradually, throughout the 19th century and there-after, the expectations of economic participants otherthan managers became more clearly formulated andsanctioned by society in general. Employees wereamong the first to achieve recognition of their de-mands for reasonable working hours, humane treat-ment, and safe working conditions. These demandswere voiced through the countervailing institutionof the labor union.

Expectations of competitors gave rise to traderegulation; and when competitors themselves werenot sufficiently vocal, the government, on behalf ofthe society's general interest in the economy, repre-sented the interests of competitors. The ShermanAct and the Federal Trade Commission Act andtheir amendments followed.

Expectations of the public in the role of consumerswere expressed, feebly at first in enactments pro-hibiting sale of harmful and adulterated products,later in the "Consumer Movement." and more re-cently in the entrepreneurial philosophy known asThe Marketing Concept.

5. It is assumed that ethics is a matter of socialsanction, not of mere technical appraisal.

Not every expectation has the social sanctionwhich makes it a matter of ethical significance.Many expectations are purely technical, expressingthe expectation of technical competence, conformityto job requirements, etc.

If a sales manager sets a high quota for a sales-man, that expectation may have no ethical implica-tions. Whether the salesman fails or succeeds inmeeting the quota may be of no ethical importance.However, if the sales manager puts such pressure onthe* salesman to meet a quota that the salesman mustresort to reprehensible practices to accomplish this,or must neglect personal obligations and health, then

TABLE 1Matrix # i

CULTURE CHARACTERISTIC CU^SSIFIED BY SOCIALINSTITUTIONS

SocialInstitutions

1. Family2. Church3. School4. Economy5. Government6. Military7. Leisure

Culture characteristicsA B C D E F

ethical implications of the sales manager's expecta-tions appear.

Likewise, to be expected to make a profit, even alarge profit, for owners is not an ethical expecta-tion; but if it is at the expense of other managerialobligations, the ethical considerations are involved.

The following concepts have now been incorpo-rated into the model:

1. Ethics as a standard of rightness in behavior.2. Social interaction as the realm in which ethi-

cal judgment is made.3. Noneconomic and economic institution influ-

ences upon personal behavior through roleparticipation.

4. Role expectations constituting ethical obliga-tions through social sanction.

5. Social sanction, rather than technical require-TYient, as the basis of ethical judgment.

Model MatricesThe model by which the above elements are re-

lated, as a means of explaining how ethical standardsare determined and how decisions are made in com-pliance with ethical standards, consists of a seriesof matrices relating sets of variables.

Three pertain to the influence upon ethical stand-ards of cultural values, noneconomic role expecta-tions, and expectations of roles involved in theeconomic processes. A fourth matrix provides an ex-planation of the manner in which decisions are madein compliance with ethical standards.

Culture Influences

Matrix # 1 in Table 1 illustrates the influence ofthe cultural characteristics of society upon all of itsmajor institutions. In it are related, along thehorizontal axis, the distinguishing culture character-istics of a society and, along the vertical axis, themajor institutions of the society.

This suggests the influence of such basic culturalfactors as law, respect for individuality, nature ofpower and authority, rights of property, concept ofdeity, relation of the individual to the state, nationalidentity and loyalty, values, customs, and mores,state of the arts, etc., upon each of the institutions.

A Model for Ethics in Marketing 23

TABLE 2

Matrix #^NoNECONOMic INFLUENCE UPON ECONOMIC BEHAVIOR

Economic roles ofparticipants

1. Manager2. Employees3. Owners4. Other financiers5. Consumers6. Intermediate

customers7. Resources8. Competitors9. Government

10. Community

Noneconomic social institutionsFamily Church School Government Military Leisure

Thus are found in the characteristics of our ownsociety sanctions for the following ethical expecta-tions, among others: that personal integrity shouldnot be destroyed or compromised; that checks andbalances are essential to general welfare in a plural-istic society; that the state is subordinate to per-sons; that preservation of competition is laudable;that freedom of initiative is essential; and that eco-nomic entrepreneurship is rewarded by profit.

From these generalizations, marketing actionsmay be judged unethical on the basis of fundamentalhumanistic social expectations. Competitors derivefrom this logic their expectations of fair play incompetition. Consumers derive their expectations ofhonest representation. Employees derive their ex-pectations of humane treatment.

Contrasting cultures of different societies producedifferent expectations and become expressed in thedissimilar ethical standards of those societies.

Noneconomic FactorsA second aspect of the model is shown in Matrix

#2 in Table 2, where the noneconomic influences up-on economic behavior are suggested.

The influence of culture characteristics upon busi-ness ethics is felt through their effects upon be-havior in both the economic and noneconomic ac-tivities. General concepts of rightness imbue anindividual with ethical standards which, if consist-ent, he applies in all of his role relationships. Atti-tudes nurtured in family relationships infiuence be-havior in business relationships, as between managerand employee. Religious concepts of brotherhood,individualism, and the dignity of man influencemanagement relations with customers, competitors,and resources.

Matrix 4^2 represents the possibility that stand-ards developed in each of the six noneconomic insti-tutional relationships determine ethical standardsfor behavior in each of the ten economic roles andinfiuence behavior among these economic role par-ticipants. In this matrix, six noneconomic institu-tions are shown along the horizontal axis and tenroles of economic participation along the vertical

axis. At each of the 60 resulting coordinate pointsis suggested the infiuence upon economic behavior ofthat participant's activities and relationships outsidethe economy.

For example, family organization and solidarityin some cultures result in exclusion or discrimina-tion against nonrelatives employed in business. Inchurch-dominated societies, numerous prescriptionsare set forth for consumption. Under socialisticgovernments, competitive interaction is highly re-stricted. Thus may be observed some of the in-fiuences upon managerial decisions that lie outsidethe realm of purely economic motivation. In otherwords, in matters of business ethics men do not actentirely as "economic men" but as social beings.

Role ExpectationsIn the two matrices previously shown, the in-

fiuence of general cultural factors and of noneco-nomic expectation is shown. In addition to that,ethical standards are created by the ex-pectationswhich arise ivithin the behavior patterns of theeconomy itself—among the ten types of economicparticipants.

This is suggested in Matrix #3 in Table 3, inwhich are related along both horizontal and verticalaxes ten economic role positions. Sets of interactionsare suggested by the 90 possible inter-role relation-ships. Thus, in the marketing process areas ofethical judgment arise in the relations of managersto consumers (often identified as seller-buyer rela-tions) ; of managers to intermediate customers(identified as channel relations) ; and of managersto competitors and to others indicated.

In trade relations arise expectations quite apartfrom those induced by other social institutions andby cultural factors, and which also have direct bear-ing upon the formation of ethical standards.

For example, consider the question of whether avendor, by failing to "stand behind" the quality ofhis products, is guilty of an unethical act. Culturalexpectations of integrity, disclosure, and honestyare involved. Moreover, circumstances of a mass-market economy produce expectations that individ-

24 Journal of Marketing, January, 1967

TABLE 3Matrix #3

SETS OF ECONOMIC RELATIONSHIPS THROUGH WHICH EXPECTATIONS AFFECT BEHAVIOR

Economicparticipants

123456789

10

Economic participants1 2 3 u 5 6 7 8 9 10

ual events be governed by policy, that personal rela-tions be handled impersonally, and that incidentalrisks be assumed by the party who stands to loseleast.

In addition to this, particularly in a buyers' mar-ket, vendors publicize their willingness to guaranteeperformance, to make refunds, and to assure satis-faction. Although these are obligations assumed byconsent, they are so general in some trades thatbuyers may take them for granted. Thus, by ex-perience, announced policy, and application of gen-eral social expectations, one may infer a sufficientlyclear standard of behavior to assume that the ethicsof responsibility in trade relations is definite.

Because of the diversity of trade policies and prac-tices, the certainty of such an ethical standard is notso assured as the illustration suggests, or as onemight hope.

Nevertheless, among the marketing participantsthere are highly specialized expectations that evolve,which have the character of ethical standards: ex-pectations of the integrity and protection of distrib-utive channels, of protection of customers againstdetrimental product and price changes, and of free-dom to innovate and to compete.

However, there are debatable areas of interestsand interactions where ethical behavior is less de-fined, and where courts and other authorities mayhave to interpret more fundamental values of thesociety relating to the economic process. Such areastoday are found in resale price maintenance, taxexemption of cooperative enterprises, time-price dif-ferentials in consumer sales-financing, and practicesthat have evoked controversy over truth-in-lendingand truth-in-packaging.

In Summary

An attempt has been made to identify and to illus-trate the manner in which ethical standards areformulated in a marketing economy. They derivefrom both general and technical expectations sanc-tioned by society, either in general or the society ofsmall groups. With an understanding of economicand noneconomic influences upon decision and be-

havior, it is presumed that "rightness" in interper-sonal action may be determined.

Knowledge of the problems of ethics, however,does not provide the solution to ethical problems.This poses a second requirement of a model forethics, namely, a guide to action, presuming thatthe standards of action are known.

Complexity of Ethical DecisionsAssuming that standards of ethics are determin-

able, managers faced with problems requiring ethi-cal decisions and actions have no simple, singlecourse of action.

First, not everyone is aware of or subscribes toa universal code of ethics. Therefore, decisions oftennecessitate superimposition of one's ovra standard,compromise of it, or surrender of it. These actionsare not without some conflict and adjustment withinone's frame of reference.

Second, in a pluralistic society not one but manyexpectations must be met. Therefore, resolution ofwhat is right to do produces a balance of obligationsand satisfactions. Ideally, full satisfaction of theexpectations of all parties would constitute the mostethical behavior. This is impossible, for expecta-tions are often contradictory and sometimes exceedsocial sanction. Therefore skill and judgment mustbe used to guide one in determining the point atwhich his own integrity can best be maintained.

Third, because marketing obligations are of botha noneconomic and economic nature, fulfilment ofsocial expectations cannot be divorced from the eco-nomic limitations within which business decisionsmust be made. Thus, the complexity of determiningwhat in a society are the standards of ethical be-havior is compounded by the multiplicity of factorsaffecting application of the standard.

Threshold of Ethical Sensitivity

Of prime importance in application of an ethicalstandard to relations among economic participantsis a manager's threshold of ethical sensitivity, thatis, his level of intei-action at which he finds withinhimself satisfaction in his actions toward others.

A Model for Ethics in Marketing 25

TABLE 4Matrix #U

DECISION BASES IN MANAGEMENT ROLE RELATIONSHIPS

Bases of decision

Qualitative factors:Self-interestLawSocial standardConviction

Balance of multipleclaims

Quantitative economiclimitations

Management relations with roles# 2 # 3 # 4 # 5 # 6 # 7 # 8 # 9 #10

Although these levels may be identified variously,a useful classification is suggested by the stagesthrough which the bases or standards of ethics haveevolved during the past century.

Self-interestPerhaps the lowest level of sensitivity to ethical

obligation is that on which little, if any, considera-tion is given to the expectations of others.

This is the basis upon which it is popularly be-lieved that most businessmen operate, seeking profitfor themselves to the exclusion of others' interests.Such a description was more true of the 19th cen-tury business manager than of today's. No obliga-tions to competitors, customers, employees, dealers,government, or the community was acknowledged."Laissez-faire," "caveat emptor," and "the publicbe damned" were expressions of the ethics of self-interest.

This is not to say that then no ethics existed;after all, the standards of that day that permittedsuch behavior were sanctioned by society of that day.Individual self-interest and collective collusioncharacterized the "ethics of collusion," in whichowner-manager interests were predominant andprofit was an end in itself, rather than a measure ofeconomic capacity to fulfill many ethical obligations.

Legal EthicsAs the social conscience rose, rejection of the

"ethics of collusion" took form in legislation com-pelling or prohibiting certain types of business be-havior.

Thus emerged a threshold of sensitivity whichmight be called the "ethics of compulsion." TheSherman Anti-Trust Act was an important waymarkin the formulation of legal standards—legal ethics.It illustrated the manner in which society, express-ing its cultural and noneconomic values, forces orcompels obligations upon business participants. Withsuch legal formulations, there is no justification fora lower standard of action. However, laws are oftena minimal standard, sometimes representing com-promise in their enactment and subject to judicialreview and interpretation. There are, therefore,higher bases upon which decisions may be made.

Voluntary CodesIn contrast to the forms of compulsion typified by

the Sherman Act, there appeared during early yearsof this century a movement of voluntary formula-tion of codes of ethics by businessmen.

Trade groups were the medium in which this com-monly occurred, although individual firms some-times stated their own ethical tenets. As these werevoluntary, they represented an "ethics of compli-ance," that is, compliance with acknowledged obliga-tions to various other parties in the economic proc-ess. They often presented standards where no lawsapplied, or elevated the legal minimum with a will-ingness for fuller discharge of responsibilities.

Such standards, however, being purely voluntaryand societal, were also relative, arbitrary, and rev-ocable. They represented the accepted standard ofthe social group, whether that group was society ingeneral or the small group of the business com-munity.

ConvictionStill another basis of ethical decision is that of

illumined personal convictions.One could not say that the self-interest of the

19th century was very il]umined. Neither did thelaws and codes of later years always evoke spon-taneous compliance. However, personal convictionsconcerning one's duties and obligations to others insociety, as they participate in the marketing proc-esses, probably furnish the greatest encouragementfor an evolving body of ethics.

Such ethics usually arise from an integrated sense,of social and personal values, and from respect forlaw, honesty, fairness, and the like. They oftenbring religious concepts to bear upon business-rela-tionship problems, interpreting men's obligation tomen from the basis of men's relation to God. Con-cepts of divine sonship, brotherhood, stewardship,forgiveness, mercy, and the like are applied to busi-ness relationships.

Thus, an "ethics of conviction"—even of spiritualconviction—is evolved. In recent years acknowl-edgment of the relevance of religious convictions tobusiness behavior has increased.

26 Journal of Marketing, January, 1967

In Matrix #4 in Table 4 are shown the relation-ships in which managers act, and the bases uponwhich their decisions as to what is ethical actionrest. One basis is not always equally useful, andthe decision-maker will move from one to another,depending upon the situation.

When in doubt concerning the adequacy of a deci-sion, gravitation is toward higher levels of socialexpectation and conviction.

Balance of ClaimsWith conscious awareness of all expectations and

of the extent of his corresponding obligations, onemay be forced to modify behavior in any one rela-tionship because of the interrelationship of manyclaims.

Priority of some claims over others for satisfac-tion may be decided on the basis of such principlesas rotation of claims, superiority of owner-interestsin a capitalistic economy, superiority of market-interests in a market economy, national interests,legal requirements, or the demands of power blocs.Most ethical decisions do require a balancing ofnumerous claims.

Economic CircumstancesA final basis of decision is the extent to which

economic circumstances permit doing what one mayfeel he is ethically obligated to do.

In a private economy, one is forced to act withineconomic limitations If there is no profit for a

period, the expectation of owners may be denied. Ifworking capital is low, creditors may be required towait for payment. If costs increase, changes maybe made in the product and service normally expectedby the customer.

In other words, ethical decision under privatecapitalis7n is a moral decision impelled by socialsanction but modified by economic exigency.

ImplicationsAn attempt has been made in this article to ex-

amine the anatomy of marketing decisions havingethical implications.

One is concerned, first, with the manner in which"rightness" of action is determined in a given so-ciety. Standards derive from the culture, fromvarious institutional processes and structures, andfrom the expectations nurtured among the economicparticipants. With determinable standards, one nextmust select a course of particular action. He isguided by the level of his ethical sensitivity, by thestrength of complementary and contrasting claims,and finally in some instances by economic capacityto act.

Employment of a model for ethics such as thatproposed will sharpen one's grasp of the factors in-volved ; but until that can be achieved, he will go along way in his ethical marketing decisions if hepossesses the basic qualities of unselfishness, hon-esty, fairness, and sincerity.

•MARKETING MEMO

Some Observations on Nature—Scientific Discovery , . .Nature is prodigal and random in her outpourings, but in the constant compe-

tition for the necessities of life, what works well is retained and what works lesswell is constantly discarded. The result is that there is a tendency toward constantimprovement. Life is made not only to endure but to prevail. This is the way organicdesign works. It is design by hindsight rather than by forethought. In that sense,it is just the opposite of technological design. Technological design works by con-tinuous selection among random variations. We are the products of editing ratherthan of authorship. The organic process at first sight seems slow and very wasteful,but we should think well of it, for it has given us the most intricate mechanisms weknow. The most complex computers are child's play compared to the simplest livingcell. We could never invent the form of Vitamin A that the retina uses for vision.This is the way that not only anatomy but also behavior develops. An organismcannot tolerate clumsy behavior any more than it can tolerate faulty anatomy. Butif the competitive pressures are not too intense, some strange behavior can betolerated, at least for a while.

—Quoted from: Interview with Dr.George Wald. discoverer of Vitamin A,Harvard University biochemist, NewYorker, {April 16, 1966), p. 44.