Question

Discuss corporate responsibility in the areas of advertising, product safety, and liability. What are potential ethical issues facing each of these?

Answer 1

Businesses have at least the following two general ethical duties to consumers, according to any theory of justice or morality that recognizes (a) that contractual relationships give us obligations and (b) that we have a right to non-injury:

Businesses must give us what we pay for. Whenever we trade, we are exchanging goods and services within an implicit or explicit contract. One person is obligated to give one thing in exchange for another. People should not be deceived about what they are buying. For example, when we buy a TV set we expect

(i) To get the TV set,

(ii) That the TV set will function,

(iii) That the TV set has minimally sufficient quality, and

(iv) That the TV set will not harm us when used in ordinary ways.

2. Businesses must not harm anyone, including consumers.

The facts that (1) consumers are no longer well-informed and (2) consumers are no longer self-sufficient both have bearing on the importance of business ethics regarding consumers

Product safety

Product safety is an ethical obligation insofar as companies have a duty to provide consumers with whatever it is they pay for and products are assumed to be safe for ordinary use. Nonetheless, “statistics indicate that the faith consumers must place in manufacturers is often misplaced. Every year millions of Americans require medical treatment from product-related accidents”. For example, drugs often have harmful side effects (including death) and many children’s toys contain harmful chemicals such as lead.

The legal liability of manufacturers

We originally had a legal doctrine of “caveat emptor”—let the buyer beware” because consumers were expected to know if the products they purchased were of sufficient quality (355). This doctrine was eventually phased out, which was clearly seen after the 1916 landmark court case MacPherson v. Buick Motor Car embraced the view that manufacturers could be sued rather than merely sellers, and it marked a change in law where manufacturers were seen as having a duty towards customers despite not always having a direct contractual relationship with them (ibid.). This duty is what can be described as being based on “due care,” the view that “consumer’s interests are particularly vulnerable to being harmed by the manufacturer, who has knowledge and expertise the consumer does not have”

Corporate responsibility includes being consistent with ethical principles and conduct such as honesty, integrity and respect for others.   By voluntarily accepting responsibility for its actions corporations earn their license to operate in society.

For example, companies earn a license to operate by creating products and services that their customers value, by creating jobs for employees whom they treat fairly and in accordance with the law, and by complying with other applicable laws.

In a case where a company’s products are discovered to be harmful to customers, or where their products or operations are deemed harmful to the general public, a company’s license to operate can become imperiled. This may result in penalties that enforce existing laws and regulations, or new laws and regulations that in extreme cases put a company out of business.

Advertising:

In today's competitive world, consumers are exposed to numerous commercial messages each day. They appear in the form of TV commercials, newspaper ads, billboards, coupons, event sponsorships, publicity, sales letters, emails, web ads or even telemarketing calls.

The primary interest in advertisement is in the ability to enhance business profitability and therefore many of these companies tend to ignore the social aspects in designing these advertisement campaigns.

Ethics means conduct that is right in the society's view. An ethical practice is that which receives a common consent of the society. Business ethics forms applied ethics informing ethical principles, morals or ethical issues arising in the business environment.

Advertising ethics is an applied philosophical analysis regarding the nature of advertisement and the ethical issues that arises from advertising.

Ethics in business advertisement demand that businesses have the responsibility of what they say, how they say it, their selection of whom they speak to, when and where they speak.

The businesses should pay close attention to responses and the feedback from the adverts. Advertising should reveal the facts, that is, they should restrain from inaccurate, false and misleading statements or claims.

Today, advertisements from business entities that do not incorporate ethics and social responsibilities in their operations are not as effective with their advertisements as before. Research reveals that ethical practices and social responsibilities by businesses have become a vital component of marketing strategy by businesses.

There is a growing pressure for the advertisement campaigns to be socially, culturally and morally ethical. As a result of consistent and seemingly unending string of ethical lapses across industries, businesses and in organizations, to greater extend has resulted in a crisis of trust in the market place. It is this numerous and highly publicized ethical breaches that have resulted into many firms and agents to be under constant public scrutiny (McKinney et al., 2010).

In attempts to improve their image and their ethical performance, many of these firms have defined their ethical codes of conduct. The advertisement industry has come under constant frequent criticism for exaggerating and publishing misleading claims on products and services advertised.

There is also an increasing perception on advertisements as being guilty of glorifying tendencies and habits regarded as undesirable and encouraging deviant culture in the society. However, as a result of increased consumer awareness concerning ethical and social responsibilities expected of the businesses entities, misleading or exaggerated advertisement claims tarnish the firm's credibility.

Product Safety:

In general, any nonconformity to corporate responsibility would lead to criminal prosecution, have to withdraw or recall products from the market and face legal action from consumers to recover damages for the harm caused.

Any products that are intended for consumers or reasonably likely to be used by them, even if not intended for them, are required to be safe. This applies whether the goods are new, reconditioned or second-hand.

A safe product is one that provides either no risk or a minimum acceptable level of risk, taking into account the normal or reasonably foreseeable use of the product and the need to maintain a high level of protection for consumers.

Responsibility for compliance

As stated above if you are involved in the supply of goods to consumers you are responsible for the safety of the goods you supply. The level of responsibility depends on whether you are involved in the actual production of the goods, where you are affecting the safety properties of the products ('producers') or merely involved with the supply ('distributors').

Companies, including retailers, have a legal obligation to report a consumer product to the CPSC when they obtain information indicating that a product may create a substantial risk of injury to consumers, may be unreasonably hazardous or dangerous for consumers, may have been involved in a choking or “near miss” incident, or does not comply with rules, regulations, standards, or bans under the statutes enforced by the CPSC. Learn more about the duty to report to the CPSC.

A manufacturer may be in the best position to have this type of information. However, a retailer with information that indicates a product may be a health or safety risk, as described above, is legally obligated to report that information immediately to the CPSC, unless they have actual knowledge that the CPSC has already been fully informed of the information.

Retailers may wish to contact the manufacturer, importer, distributor, private labeler, or others in a product’s supply chain to secure written assurances that they have fully reported a particular product to the CPSC. To protect yourself, a retailer may wish to provide a copy of the written assurances to the CPSC or they may wish to submit their own timely report to the CPSC.

Failure to report this type of information immediately and in full detail could lead to the imposition of substantial civil or criminal penalties.

Implementing policies, procedures and controls to reduce these risks is not only ethical - it is often a legal requirement.

Ethical businesses prioritize safety in the workplace. In a manufacturing environment, the presence of machines and raw materials make adequate safety procedures both legally mandatory and ethically necessary. In addition to basic safety rules, such as wearing protective gear and refraining from engaging in risky behavior, the main issues relate to a reasonable balance between inconvenience, productivity and safety. Applying too many rules creates compliance problems, while not addressing safety issues can lead to injury. If you give the employees a role in developing safety regulations for a production line, it helps in the implementation of effective rules that strike the right balance.

In addition to internal issues, manufacturing companies face liability once their products leave the factory. Product safety is governed by legislation, and ethical concerns mean you should only ship products that have been tested for safety. While knowingly shipping dangerous products is illegal and unethical, the use of your products also may have unintended and harmful effects. Going beyond legal requirements to thoroughly test all aspects of the use of your products reduces your exposure to possible law suits and fulfills your ethical duties.

Conclusion:

Businesses are responsible to their consumers based on the contract implied by trade and potential harm that can be done to the public. Advertising and product labeling are both very important because it is the potential customer’s primary source of information, and companies have responsibilities to everyone that could be harmed by their advertising. Although Shaw’s book is highly comprehensive, he neglects to discuss pollution and environmental considerations in detail here even though such issues are relevant to how companies treat their customers insofar as environmental damage can harm them. However, environmental issues are saved for Shaw’s final chapter and are discussed in more detail there.

It’s not entirely clear what all the moral obligations companies have towards their customers and potential customers. Companies must be honest with customers and sell products that are adequately safe or people will be cheated. Every theory of justice will forbid coercive and deceptive trade. However, there’s a lot of gray area. It’s not entirely clear when advertising is overly deceptive or how much harm manipulative advertising does to people. However, it seems reasonable to think that it is morally preferable for companies to be honest and reject manipulative practices whenever it’s unclear how much harm it could cause. It’s better to be safe than sorry when we are dealing with the well being of people.