I.

Unit Title
Unit 3 – Ethical and Social Problems in Business and the Corporate World

II. Title of the Lesson:

Lesson1. Moral Choices Facing Employees

III. Duration: 6 hours, Week 5 and 6

IV. Introduction

Business ethics is the application of the general ethical rules to

business behavior. If society deems dishonesty to be unethical and immoral,
then anyone in business who is dishonest with employees, customers,
creditors, stockholders, or competition is acting unethically and immorally.

Acting ethically in business means more than simply obeying

applicable laws and regulations: It also means being honest, doing no harm to
others, competing fairly, and declining to put your own interests above those
of your company, its owners, and its workers. If you’re in business you
obviously need a strong sense of what’s right and wrong. You need the
personal conviction to do what’s right, even if it means doing something that’s
difficult or personally disadvantageous.

V. Objectives/Competencies
At the end of this lesson you will be able to learn:
1. To discuss the difference between ethical issues and ethical dilemmas.
2. To identify the moral choices facing employees.

VI. Pre-test
Read the situation and answer the question below:

Rumors
By: Gov. Jose B. Fernandez Jr.
A few months ago, Arielle Cruz, Head of the Sales and Marketing
Department of Mariposa Real Estate, formally announced to her staff that she
will be leaving the company in order to be able to concentrate on her family.
She emphasized that since she will be leaving, there is room for a promotion
and that she would nominate their two top performers, Mary and Jane, to the
HRMD. In an effort to give herself an upper hand, Mary closes deals with
three big clients two days right after Arielle's announcement. Two weeks after
Arielle's announcement, stories about Mary's promiscuity begin to make their
rounds and quickly become the mainstay headlines of office gossip. The most
scandalous rumor is that Mary offers sexual services to her clients – both
male and female – in order to close her sales. In the face of all these rumors,
Mary continues to deliver excellent work. The time has come to promote the
candidates.
Question: Based on performance, Mary is the better candidate, but both could
do the job. Should you consider the rumors? What should you do?
______________________________________________________________
______________________________________________________________
_____________________________________________________________

VII. Lesson Proper/Course Methodology

ACTIVITY
Kindly comment on this quote.
"The truth of the matter is that you always know the right thing to do. The hard
part is doing it."

– Gen. H. Norman Schwarzkopf

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ANALYSIS

Ethical Issues and Ethical Dilemmas

Ethical issues are the difficult social questions that involve some level
of controversy over what is the right thing to do. A problem or situation that
requires a person or organization to choose between alternatives that must be
evaluated as right (ethical) or wrong (unethical).
 Example of ethical issues in business are:

1. Conflicts of Interest
2. Sexual Harassment
3. Whistleblowing or Social Media Rants
4. Ethics in Accounting Practices
5. Technology and Privacy Practices

Ethical dilemmas are situations in which it is difficult for an individual to

make decisions either because the right course of action is unclear or carries
some potentially negative consequences for the person or people involved.
Make no mistake about it: when you enter the business world, you'll find
yourself in situations in which you'll have to choose the appropriate behavior.
How, for example, would you answer questions like the following?

1. Is it OK to accept a pair of sports tickets from a supplier?

2. Can I buy office supplies from my brother-in-law?
3. If I find out that a friend is about to be fired, can I warn her?

Moral Choices Facing Employees

 1. Conflicts of Interest

When you accept employment, you

generally agree to perform certain
tasks, usually during certain specified
hours, in exchange for financial
remuneration.

Whether it is oral or written, implicit,

or explicit, a contract governs your
employment relationship and provides the basic framework for understanding
the reciprocal obligations between you and your employer.

Your employment contract determines what you are supposed to do or

accomplish for your employer, and it may cover a variety of other matters from
parking privileges to your dress and deportment while carrying out your
responsibilities. The terms of your employment contract may be open-ended
and vague or specific and detailed.

Because you are hired to work for your employer, you have an obligation,
when acting on behalf of the organization, to promote your employer's
interest. Insofar as you are acting as an agent of your employer, the traditional
law of agency places you under a legal obligation to act loyally and in good
faith and to carry out all lawful instructions. But it would be morally benighted
to view employees simply as agents of their employers or to expect them to
subordinate their autonomy and private lives to the organization entirely.

Morality requires neither blind loyalty nor total submission to the

organization. However, the notion of company loyalty is commonplace, and
most people find it a coherent and legitimate concept.

For the many employees who willingly make sacrifices for the
organization above and beyond their job descriptions, loyalty is a real and
important value. Indeed, it is not clear how well any business or organization
could function without employee loyalty, and certainly, most companies want
more than minimal time and effort from their employees.

To be sure, many businesses demand more than this in the name of loyalty.
They may expect employees to defend the company if it is maligned, to work
overtime when the company needs it, to accept a transfer if necessary for the
good of the organization, or to demonstrate their loyalty in countless other
ways. Displaying loyalty in these ways certainly seems morally permissible,
even if it is not morally required. In addition, employees, like other individuals,
can come to identify with the groups they are part of, accepting group goals
and norms as their own

Of course, even the most loyal employees can find that their interests collide
with those of the organization. You want to dress one way, and the
organization requires you to dress another way; you'd prefer to show up for
work at noon, the company expects to be present at 8 a.m.; you'd like to
receive a P100,000 for your services, the organization pays you're a fraction
of that figure. The reward, autonomy, and self-fulfillment that workers seek
aren't always compatible with the worker productivity that the organization
desires. Whatever the matter in question, the perspectives of employees and
employers can differ.

Sometimes this clash of goals and desires can take the serious form of a
conflict of interest. In an organization, a conflict of interest arises when
employees at any level have private interests that are substantial enough to
interfere with their job duties; that is, when their private interest lead them, or
might reasonably be expected to lead them, to make a decision or act in ways
that are detrimental to their employer's interests. (Dumlao, 2005)

Conflicts of interest are a moral bother not only when an employee acts
to the disadvantage of the organization but also when the employee’s private
interests are significant enough that they could easily tempt the employee to
do so.

2. Financial Investment.
Conflicts of interest may exist
when employees have financial
investments in suppliers,
customers, or distributors with
whom their organizations do
business.
 It is impossible to say how much financial investment is
necessary for a serious conflict of interest to existing. Ordinarily, it is
acceptable to hold a small percentage of stock in a publicly held
supplier that is listed on the stock exchange. Some organizations state
what percentage of outstanding stock their members may own—
usually up to 10 percent.
Organizational policy goes a long way toward determining the
morally permissible limits of outside investments because it reflects the
firm’s specific needs and interests. Because such a policy can affect
the financial well-being of those who fall under it, however, it should be
subjected to the same kind of free and open negotiations that any form
of compensation is.

3. Use of Official Position

A serious are of conflict of interest involves the use of one's official

position for personal gain. Cases in this area range from using subordinates
for non-organization-related work to using an important position within an
organization to enhance one's own financial leverage and holdings.

Insider Trading. Many cases of abuse of

official positions arise from insider trading.
Insider trading refers to the use of significant
facts that have not yet been made public and
will likely affect stock prices. (Dumlao, 2005)

Increasingly in the world of big business, the

pervasive desire to make quick money takes
the form of illegally profiting from inside information. The business has been
brisk for the Securities and Exchange Commission (SEC), which is charged
with policing the stock market for insider-trading violations.

Insider traders ordinarily defend their actions by claiming they did not
injure anyone. It is true that trading by insiders on the basis of nonpublic
information seldom directly injures anyone, but moral concerns arise from
indirect injury, as well as from direct.

To be sure, insider dealings raise moral questions not easily resolved.

When can employees buy and sell securities in their own companies? How
much information must they disclose to stockholders about the firm's plans,
outlooks, and prospects? When must this information be disclosed? Also, if
people in business are to operate from a cultivated sense of moral
accountability, it is important for them to understand who is considered an
insider. In general, an insider could be anyone with access to inside
information. In practice, determining precisely who this is not always easy.

Bribery. Bribery involves an obvious conflict

of interest. A bribe is a remuneration for the
performance of an act that’s inconsistent with
the work contract or the nature of the work
one has been hired to perform. The
remuneration can be money, gifts,
entertainment, or preferential treatment. (Dumlao, 2005)

Bribery sometimes takes the form of kickbacks, a practice that involves

a percentage payment to a person able to influence or control a source of
income. Thus, when an account executive offers a percentage of a handsome
commission to a person representing a company she is selling a product to so
the latter will buy the product, the money they received for the preferred
consideration is a kickback.

Bribery is intended to induce people insider a business or other

organization to make a decision that would not be justifiable according to
normal business or other criteria. For example, by encouraging on nonmarket
grounds the purchase of inferior goods or the payment of an exorbitant price,
bribery can clearly injure a variety of legitimate interests—from stockholders
to consumers, from taxpayers to other businesses. It weakens market
competition by giving an advantage in a way that is not directly or indirectly
product related. There is nothing "relative" about the damage that such
corruption can do to a society. If we were to permit Philippine companies to
engage in bribery overseas, we would be encouraging in other countries
practices that we consider too harmful to tolerate at home.

Gifts and Entertainment. Business gifts

and entertainment of clients and business
associates are a familiar part of the
business world. Still, both practices can
raise conflict-of-interest problems, and
knowing where to draw the line is not
always easy. One this is clear: Those who cross that line, wittingly or not, can
end up in big trouble.

For people in the business world, the rules are not so cut-and-dried,
but a number of considerations can help one determine the morality of giving
and receiving gifts in a business situation.

1. What is the value of the gift?

2. What is the purpose of the gift?
3. What are the circumstances under which the gift was given or
received?
4. What are the positions and sensitivity to the influence of the person
receiving the gift?
5. What is the accepted business practice in the industry?
6. What is the company’s policy?
7. What is the law?
Related to gift-giving is the practice of entertaining. Some companies
distinguish entertainment from gifts as follows: If you can eat or drink it on the
spot, it's entertainment. In general, entertainment should be interpreted more
sympathetically than gifts because it usually occurs within the context of doing
business in a social situation. Still, the morality of entertainment should be
evaluated along the same lines as gifts—that is, with respect to values,
purpose, circumstances, positions, and sensitivity to influence of the recipient,
accepted business practice, company policy, and the law. In each case the
ultimate moral judgment hinges largely on whether an objective party could
reasonably suspect that the gift or entertainment might lead the recipient to
sacrifice the interest of the firm for his or her personal gain.

Sexual Harassment. A type

of harassment involving the use of explicit
or implicit sexual overtones, including the
unwelcome or inappropriate promise of
rewards in exchange for sexual favors. 
Sexual harassment includes a range of
actions from verbal transgressions
to sexual abuse or assault. Harassment can occur in many different social
settings such as the workplace, the home, school, churches, etc. Harassers or
victims may be of any gender. (Axelrod, 2004)
In the workplace, harassment may be considered illegal when it is
frequent or severe, thereby creating a hostile or offensive work environment
or when it results in an adverse employment decision (such as the victim's
demotion, firing or quitting). The legal and social understanding of sexual
harassment, however, varies by culture.
Sexual harassment, which has been declared unlawful in the
workplace, training and education environments, will not be tolerated as it
violates the dignity and human rights of a person.
R.A. 7877, an "Act Declaring Sexual Harassment Unlawful in the
Employment, Education or Training Environment, and for other purposes,"
was approved on February 14, 1995. It is known as “The Anti-Sexual
Harassment Act of 1995.”
Sexual harassment may take place:
 in the premises of the workplace or office or of the school or training
institution
 in any place where the parties were found, as a result of work or
education or training responsibilities or relations
 at work or education- or training-related social functions
  while on official business outside the office or school or training
institution or during work or school or training-related travel
 at official conferences, fora, symposia or training sessions
 by telephone, cellular phone, fax machine or electronic mail 
Forms of Sexual Harassment
 Physical, such as malicious touching, overt sexual advances, and
gestures with lewd insinuation.
 Verbal, such as but not limited to, requests or demands for sexual
favors, and lurid remarks.
 Use of objects, pictures or graphics, letters or written notes with sexual
underpinnings

Office Romance.
Romantic
relationships
between two people
employed by the
same employer. The
long hours' many
people spend at
work make for a situation in which those with
whom we work are for many not only colleagues
but our primary source of social contact.
Therefore, romantic relationships are bound to
develop.
For businesses, workplace romances carry with them the potential to
complicate the work environment and cause difficulties of various types—lost
productivity due to distraction; accusations of favoritism; jealousy among co-
workers; the potential for an antagonistic mood should the relationship end
poorly; and, in a worst-case scenario, allegations of sexual harassment in the
event that one of the parties asserts that he or she was coerced. Because of
these potential pitfalls, many firms have policies that were established to try
and discourage or even prohibit such liaisons from forming.
 One concern with a newly forming romance in the workplace is that it
will be accompanied by inappropriate displays of affection in the office. This,
in turn, can cause an uncomfortable environment for others and certainly
presents a less than professional image. A company may address this
concern by establishing an on-the-job code of conduct that specifically
addresses a professional work environment and prohibits "public displays of
affection."

Wages. From the employee’s point of view,

wages are the principal (perhaps the only)
means for satisfying the basic economic
needs of the worker and the worker’s family.
From the employer’s point of view, wages are
a cost of production that must be kept down
unless the product be priced out of the
market. Every employer, therefore, faces the dilemma of setting fair wages:
How can fair balance be struck between the employer’s interests in
minimizing costs and the workers’ interest in providing a decent living for
themselves and their families.

There is, unfortunately, no simple formula for determining a “fair wage.”

The fairness of wages depends in part on the public supports that society
provides the worker (social security, Phil Health, welfare, etc.) on the freedom
of labor markets, on the contribution of the worker, on the needs of the
worker, and on the competitive position of the firm.

Although there is no way of determining fair salaries with mathematical

exactitude, we can at least identify a number of factors that should be taken
into account in determining wages and salaries. (Dumlao, 2007)

1. The going wage in the industry and the area.

2. The firm’s capabilities.
3. The nature of the job.
4. Minimum wage laws.
5. Relations with other salaries.
 6. The fairness of wage negotiations.

Unions and the Right

to Organize.Workers
have the right to freely
associate with each
other to establish and
run unions for the
achievement of their
morally legitimate common ends. The same rights of free
association that justify the formation and existence of corporations
also underlie the worker organization we call “unions.”

The worker’s right to organize into a union also derives from the right of
the worker to be treated as a free and equal person. Corporate employers,
especially during periods of high unemployment or in regions where only one
or a very few firms are located, can exert an unequal pressure on an
employee by forcing the employee to accept their conditions or go without an
adequate job.

Unions have traditionally been justified as a legitimate "countervailing"

means for balancing the power of the large corporation so that the worker, in
solidarity with other workers, can achieve an equal negotiating power against
the corporation. Unions thus achieve and equality between worker and
employer that the isolated worker could not secure, and they thereby secure
the worker's right to be treated as a free and equal person in job negotiations
with powerful employers.

Not only do workers have a right to form unions, but their unions also have a
right to strike. The right of unions to call a strike derives from the right of each
worker to quit his or her job at will so long as doing so violates no prior
agreements or the rights of others. Union strikes are therefore morally justified
so long as the strike does not violate a prior legitimately negotiated agreement
not to strike, which the company might have negotiated agreement not to
strike (which the company might have negotiated with the union) and so long
as the strike does not violate the legitimate moral rights of others (such as
citizens whose right to protection and security might be violated by strikes of
public workers such as firefighters or police).

ABSTRACTION
Explain the illustration below:

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APPLICATION
Answer the question right after reading the article below:
Gifts from the Boss’s Friend
By Kirk O. Hanson

Kelly works for an auditor who sent her to a half-day of ethics training
where she learned to keep clients' information strictly confidential, to steer
clear of conflicts of interest with clients, and to refuse gifts of any value from
clients. Lately, she has noticed that her boss has joined clients at golf outings
at very luxurious golf resorts – and that he has not reported any expenses on
his expense reports. He has also received expensive bottles of wine from
other clients who say they are "old friends." Kelly has never seen him return
any of the bottles, which is what the company's ethics policies direct.
Question: Should Kelly do anything about this? If so, what?
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

VIII. Reflection/Learning Insights

Have you personally encountered any ethical issues and dilemmas in your job
or studies (present or previous)? Discuss the situation and tell us how it was
resolved.
______________________________________________________________
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II. Title of the Lesson:

Lesson 2. Moral Issues and Obligations to Third Parties

III. Duration: 3 hours, Week 6

IV. Introduction
Many of the difficult moral decisions that employees sometimes face
involve such conflicts. How are they resolved? According to the
recommended procedure, our moral decisions should take into account our
specific obligations, any important ideals that our actions would support or
undermine, and, finally, the effects or consequences of the different options
open to us.

What about the obligations of employees to other third parties or to

society in general? In particular, what obligations do employees have to
people with whom they have no relationship and for whom they have no
specific professional, organizational, or other role responsibility?

V. Objectives/Competencies
At the end of this lesson, you will be able to learn:
1. To know the different moral issues and obligations to third parties.

VI. Pre-test
What will you do?
1. A worker knows that a fellow worker occasionally uses prohibited drugs
on the job. Should she inform the boss?
______________________________________________________________
______________________________________________________________
______________________________________________________________
2. A dishwasher knows that the restaurant’s chef typically reheats three-
or four-day-old food and serves it as fresh. When he informs the
manager, he is told to forget it. What should the dishwasher do?
______________________________________________________________
______________________________________________________________
______________________________________________________________
3. On a regular basis, a secretary is asked by her boss to lie to his wife
about his whereabouts, “If my wife telephones,” the boss tells her,
“don’t forget that ‘I’m visiting a client.’” In fact, as the secretary well
knows, the boss is having an affair with another woman. What should
the secretary do?
______________________________________________________________
______________________________________________________________
______________________________________________________________

VII. Lesson Proper/Course Methodology

ACTIVITY
Kindly comment on this quote.
“A fool tells you what he will do; A boaster what he has done. The wise man
does it and says nothing”.
- Neil Gorsuch
______________________________________________________________
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______________________________________________________________

ANALYSIS

Moral Issues and Obligations to Third Parties

1. Whistle Blowing
Whistleblowing refers to an
employee's act of informing
the public about the illegal
or immoral behavior of an
employer or organization.
Professor of philosophy
Norman Bowie provides
the following detailed
definition:

A whistleblower is an employee or officer of any institution, profit

or nonprofit, private or public, who believes either that he/she has
been ordered to perform some act or he/she has obtained
knowledge that the institution is engaged in activities which (a)
are believed to cause unnecessary harm to third parties, (b) are
in violation of human rights, or (c) run counter to the defined
purpose of the institution and who informs the public of this fact.

This definition limits the scope of what constitutes whistleblowing. A worker

who publicizes in-house blunders and indiscretions is not a whistleblower but
a gossip-monger. Such persons abuse confidentiality and neglect their
obligation of loyalty to the firm. By contrast, "whistleblowing' is reserved
conceptually only for activities that are harmful to third parties, violations of
human rights, or contrary to the public purpose and legitimate goals of the
organization. Also, this definition limits whistleblowing in informing the public.
It does not encompass taking retaliatory action against the employer or firm,
as sabotaging operations.

Whistleblowing overrides loyalty to colleagues and to the organization

in order to serve the public interest. But whistleblowing presents dangers. The
whistle can be blown in error or malice, privacy invaded, and trust
undermined. Not least, publicly accusing others of wrongdoing can be very
destructive and brings with it an obligation to be fair to the persons accused.
In addition, internal prying and mutual suspicion make it difficult for any
organization to function.

2. The Question of Self-Interest

The concern with self-interest in cases that

put loyalty to the firm against obligations to
third parties is altogether understandable
and even warranted. After all, workers who
subordinate the organization's interests to
an outside party's expose themselves to
charges of disloyalty, disciplinary action,
freezes in job status, forced relocations,
and even dismissal. Furthermore, even when an employee successfully blows
the whistle, he or she can be blacklisted in an industry. Given the potential
harm to self and family that employees risk in honoring third-party obligations,
it is perfectly legitimate to inquire about the weight considerations of self-
interest should be given in resolving cases of conflicting obligations.

3. Product safety.
A dominant concern of consumers. No one
wants to be injured by the products he or she
uses. But safety is far from the only interest
of consumers. The last thirty years have seen
 a general increase in consumer awareness and an ever-stronger
consumer advocacy movement.

4. Product Quality.

The demand for high-quality products is

closely related to a number of themes
mentioned in the discussion of safety.
Most people would agree that business
bearer a general responsibility to ensure
that the quality of a product measures
up to the claims made about it and to reasonable consumer expectations.
They would undoubtedly see this responsibility as deriving primarily from
the consumer’s basic right to get what he or she pays for. Although high
product quality can also be in a company’s interest, sometimes business
avoids this responsibility.

One way that business assumes responsibilities to consumers for

product quality and reliability is through warranties, which are obligations to
purchasers that sellers assume. People generally speak of two kinds of
warranties, express and implied.

5. Product.
Have you
ever

wondered why a product sells at three for

 P100.00 or is priced at P99.95 rather than
simply P100.00? Or why a product that
retails for P38.00 on Monday is selling for
P41.00 on Friday?

The answer may have little to do with the conventional determinants of

product prices, such as overhead, operating expenses, and the costs of
materials and labor. More and more frequently, purely psychological factors
enter into the price-setting equation.

For example, why would a retailer price t-shirts at P275.00 rather than
P299.00? When people see P299, they say, that’s P300, explains the general
manager of one company. But P275 is not P300. It’s just psychological.
Similar psychological considerations are at work when airlines advertise one-
way fares that are available only with the purchase of a round-trip ticket for
twice the price.

For many consumers, higher prices mean better products, so

manufacturers arbitrarily raise the price of a product to give the impression of
superior quality or exclusivity. But as often as not, the price is higher than the
product’s extra quality.

6. Price Fixing.
Much more attention has been
devoted to price-fixing, which,
despite its prevalence, is widely
recognized as a violation of the
rules of the game in a market
system whose ideal is open and fair
price competition.

When a few companies gain control of a market, they are often in a

position to force consumers to pay artificially high prices. Of course,
controlling prices need not be done so blatantly. Firms in an oligopoly can
quietly agree to remain uncompetitive with one another, thereby avoiding
losses that might result from price-cutting competition. They can then play
“follow the leader”: Let the lead firm in the market raise its prices, and then the
rest follow suit. The result is a laundered form of price-fixing.

7. Labeling and Packaging.

Business's general responsibility to
provide clear, accurate and adequate
information undoubtedly applies to
product labeling and packaging.
The reason is that, despite the amount
of money spent annually on advertising,
a product’s label and package remain
the consumer’s primary source of
product information. Yet labels are often
difficult to understand or even misleading, and what they omit may be
more important than what they say.

In addition to misleading labels, package shape that exploits certain optical

illusions can trick consumers. Tall and narrow cereal boxes look larger than
short, squat ones that actually contain more cereal; shampoo bottles often
have pinched waists to give the illusion of quantity; fruits are packed in large
quantities of syrup, and dry foods often come in tins or cartons stuffed with
cardboard. Frequently shoppers are misled by such terms as large, extra-
large, and economy size and have difficulty comparing the net quantities of
the contents (ounces, pints, quarts, liters, grams). Without a pocket computer,
consumers find it difficult in many stores to calculate the relative prices of
items. Unit pricing is doing much to alleviate this problem, but it does not
address over-the-counter medicines, the recommended doses of which
manufacturers sometimes increase to disguise a reduction of the product’s
active ingredient.

APPLICATION
Answer the questions after reading the article below:

Whistleblowing & the Environment: the Case of Avco Environmental

By: Jerome Dumlao
 ChantaleLeroux works as a clerk for Avco Environmental Services, a small
toxic-waste disposal company.  The company has a contract to dispose of medical
waste from a local hospital. During the course of her work, Chantale comes across
documents that suggest that Avco has actually been disposing of some of this
medical waste in a local municipal landfill. Chantale is shocked. She knows this
practice is illegal. And even though only a small portion of the medical waste that
Avco handles is being disposed of this way, any amount at all seems a worrisome
threat to public health. 
Chantale gathers together the appropriate documents and takes them to her
immediate superior, Dave Lamb. Dave says, "Look, I don't think that sort of thing is
your concern or mine. We're in charge of record-keeping, not making decisions about
where this stuff gets dumped. I suggest you drop it."
The next day, Chantale decides to go one step further and talk to Angela van
Wilgenburg, the company's Operations Manager. Angela is clearly irritated. Angela
says, "This isn't your concern. Look, these are the sorts of cost-cutting moves that let
a little company like ours compete with our giant competitors. Besides, everyone
knows that the regulations in this area are overly cautious. There's no real danger to
anyone from the tiny amount of medical waste that 'slips' into the municipal dump. I
consider this matter closed." 
Chantale considers her situation. The message from her superiors was loud
and clear. She strongly suspects that making further noises about this issue could
jeopardize her job. Further, she generally has faith in the company's management.
They've always seemed like honest, trustworthy people. But she was troubled by this
apparent disregard for public safety. On the other hand, she asks herself whether
maybe Angela was right in arguing that the danger was minimal. Chantale looks up
the phone number of an old friend who worked for the local newspaper.
Questions:
1. What should Chantale do?
___________________________________________________________________
___________________________________________________________________
2. What are the reasonable limits on loyalty to one's employer?
___________________________________________________________________
___________________________________________________________________
3. Would it make a difference if Chantale had a position of greater authority?
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VIII. Reflection/Learning Insights
Write an essay about:
To tell or not to tell, is Whistle Blowing a good thing?
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______________________________________________________________
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______________________________________________________________
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II. Title of the Lesson:

Lesson 3. Deception and Unfairness in Advertising

III. Duration: 3 hours, Week 7

IV. Introduction
We intend to take advertising for granted, yet sociologically and
economically, it is enormously important. Ads dominate our environment.
Famous ones become part of our culture; their jingles dance in our heads and
their images haunt our dreams and shape our tastes. Advertising is also a big
business.

When people are asked what advertising does, their first thought is often that
it provides consumers with information about goods and services. In fact,
advertising conveys very little information. Or are most ads intended to do so?
Except for classified ads and newspaper ads reporting supermarket prices,
very few advertisements offer any information of genuine use to the
consumer. Instead, advertisements offer us jingles, rhymes, and attractive
images.

V. Objectives/Competencies
At the end of this lesson, you will be able to learn:
1. To know the different ways of how advertising can be deceiving and
unfair.

VI. Pre-test
Think of an advertisement that caught your attention.
1. What is the advertisement all about?
______________________________________________________________
______________________________________________________________
______________________________________________________________
2. What makes the advertisement different from other competitors?
______________________________________________________________
______________________________________________________________
______________________________________________________________
3. Is the ad good or bad?
______________________________________________________________
______________________________________________________________
______________________________________________________________

VII. Lesson Proper/Course Methodology

ACTIVITY
What does this quote tell you:
"A man who stops advertising from saving money is like a man who stops the
clock from saving time."
- Henry Ford
______________________________________________________________
______________________________________________________________
______________________________________________________________

ANALYSIS
Deception and Unfairness in Advertising
.

The goal of advertising, of course, is to persuade us to buy the

products that are being peddled. Providing objective and comparative product
information may be one way to do this.

Deceptive Techniques. Because advertisers are trying to persuade people to

buy their products and because straight product information is not necessarily
the best way to do this, there is a natural temptation to conceal, misrepresent,
or even lie. In an attempt to persuade, advertisers are prone to exploit
ambiguity, conceal facts, exaggerate, and use psychological appeals.

Ambiguity. When ads are ambiguous, they can be deceiving. In all

aspects of advertising, much potential moral danger lies in the interpretation.
Aiding and abetting ambiguity is the use of “weasel” words, words used to
evade or retreat from a direct or forthright statement. Consider the weasel
word help. "Help" means "aid" or "assist," and nothing else. Yet as one author
has observed, "'help' is the one single word which, in all the annals of
advertising, has done the most to say something that could not be said."
Because the word help is used to qualify, almost anything can be after it. Thus
we are exposed to ads for products that “help us keep young,” help prevent
cavities,” “help keep our houses germ-free.”
 Concealed Facts. When advertisers conceal facts, they suppress
information that is unflattering to their products. That is, they neglect to
mention or distract consumers' attention away from information, knowledge of
which would probably make their products less desirable. Concealment of
relevant facts and information can exploit people by misleading them; it also
undermines truth-telling. Unfortunately, the truth rarely seems foremost in the
minds of advertisers.

As one advertising-industry insider writes: "Inside the agency, the basic

approach is hardly conducive to truth-telling. The usual thinking is forming a
campaign is first what can we say, true or not, that will sell the product best?
The second consideration is, how can we say it effectively and get away with
it so that (1) people who buy will not feel let down by too big a promise that
does not come true, and (2) the ads will avoid quick and certain reprimand by
government agency overseeing advertisements. This observation shows the
common tendency to equate what is legal with what is moral. It is precisely
this outlook that leads to advertising behavior of doubtful morality.

If business has an obligation to provide clear, accurate, and adequate

information, we must wonder if it meets this charge when it hides facts
relevant to the consumer's purchase of a product. Concealing information
raises serious moral concerns relative to truth-telling and consumer
exploitation. When consumers are deprived of comprehensive knowledge
about a product, their choices are constricted and distorted.

Exaggeration. Advertisers can mislead through exaggeration—that is,

by making claims that a pain reliever provides "extra pain relief" or is "50
percent stronger than aspirin," that it "upsets the stomach less frequently" or
is "superior to any other nonprescription painkiller on the market" contradict
evidence that all analgesics are effective to the same degree. Manufacturers
of vitamins and other dietary supplements are notorious for exaggerating the
possible benefits of their products.

Clearly the line between deliberate deception and what an advertising

expert has termed puffery is not always clear. By “puffery” we mean the use of
“harmless” superlatives. Thus advertisers frequently boast of the merits of
their products by using words such as best, finest, or most, or phrases like
king of beers or breakfast of champions. In many instances the use of such
puffery is indeed harmless. Other times, however, it is downright misleading.

When moral importance in determining the line between puffery and

deliberate deception would seem to be the advertiser’s intention and the likely
interpretation of the ad. Are the claims intended as no more than verbal
posturing, rare they intended to sell through deceptive exaggeration? Even
when the intention is harmless, advertisers must consider how the ad is likely
to be interpreted. What conclusion is the general consuming public likely to
draw about the product? Is that conclusion contrary to likely performance?
Without raising questions like these about their ads, advertisers and
manufacturers risk warping the truth and injuring consumers, two significant
moral concerns.

Psychological Appeals. A psychological appeal is one that aims to

persuade by appealing primarily to human emotional needs and not to reason.
This is potentially the area of greatest moral concern in advertising. An
automobile ad that presents the product surrounded by people who look
wealthy and successful appeals to our need and desire for status. A life
insurance ad that portrays a destitute family woefully struggling in the
aftermath of a provider’s death tries to persuade through pity and fear.
Reliance on such devices, although not unethical per se, raises moral
concerns because rarely do such products fully deliver what the ads promise.

Ads that rely extensively on pitches on power, prestige, sex,

masculinity, femininity, acceptance, approval, and the like aim to sell more
than the product. They are peddling psychological satisfaction. Sex is one
area that has always been used to sell products. And it has never been used
as explicitly in advertising as it has today—as the scantily clad bodies used in
various advertisements exemplify. The sexual pitches are by no means
confined to products like clothes or perfume.

ABSTRACTION
Explain how the advertisement below become unethical:

______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________

APPLICATION
After reading the article answer the questions below:

The Nonuser Celebrity Endorser

By: Geoffrey P. Lantos

Annie, copywriter for Laird & Laird (L&L) Advertising, has just been
assigned the Bud’s Best (BB) bacon account. She is tickled pink, because she
knows that Bud’s Best has just signed a one-year contract to use Lance
Willard as a celebrity endorser. Lance is a well-known, well loved, young,
handsome, and vibrant Hollywood movie star who specializes in action drama
roles. Victor, President of L&L, tells Annie that she will be writing commercials
using Lance in the role of giving product testimonials. Victor explains to Annie
that this endorsement is a testimonial given by a celebrity rather than an
average consumer. He tells her that Lance has signed an affidavit swearing
that he is a bona fide user of the product, as is legally required. The TV
commercials featuring Lance, explains Victor, should feature Lance testifying
as to the quality, value, and tastiness of the bacon. Victor suggests that this
will take some good acting on Lance’s part, since he has just recently become
a vegetarian.
Annie wonders whether a testimonial by Lance might not be dishonest,
but she says nothing to Victor since she doesn’t want to blow her opportunity
to meet Lance in person. She figures she can get all of the details later from
Lance. Lance turns out to be as charming in person as he is on the silver
screen. After some small talk, Annie decides to query Lance about his
experience with Bud’s Best. Lance explains that he has had personal
experience with the product, as is legally required for a testimonial. In fact, he
says, it has been his favorite brand of bacon ever since he was a small child,
and bacon and eggs were his favorite and most frequently consumed
breakfast until about a month ago when he became a vegetarian for health
reasons. Lance tells Annie that a recent checkup by his physician revealed
that his cholesterol level was 200--in the danger zone. His doctor had warned
Lance to cut down on high cholesterol foods, such as bacon and eggs. Lance
decided to go even further and abstain from meat since so many meats are
high in cholesterol.
Annie asks Lance diplomatically whether he feels comfortable testifying
about how much he likes Bud’s Best bacon when he no longer uses the
product. Lance replies that his conscience is clean. He has discussed the
legalities with Victor, who told him that technically it was okay for him to
discuss his past enjoyment of the product. After all, Lance reminds Annie, the
selling points he would discuss in the commercials would be the bacon’s
quality, value, and good taste. Lance explains that in his view, as far as bacon
goes, Bud’s Best is second to none along these criteria. He tells Annie that
nothing regarding the bacon’s healthiness, or lack thereof, will be mentioned.
As long as people are going to eat bacon, Lance asserts, they might as well
eat Bud’s Best.
Question:
1. If you are Annie, are you going to pursue getting Lance as the endorser
of your product? Why or why not?
______________________________________________________________
______________________________________________________________
______________________________________________________________

VIII. Reflection/Learning Insights

Write an essay about:
“Advertising – An Advantage”
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
VIII. Post-test
Identify the following. Write your answer on the space provided below the
number.
________________1. Refers to an employee act of informing the public
about the illegal or immoral behavior of an employer or
organization.
________________2. A type of harassment involving the use of explicit
or implicit sexual overtones, including the unwelcome or
inappropriate promise of rewards in exchange for sexual
favors.
________________3. Romantic relationships between two people
employed by the same employer.
________________4. This refers to the use of significant facts that have
not yet been made public and will likely affect stock
prices.
________________5. Are the difficult social questions that involve some
level of controversy over what is the right thing to do.
________________6. Are situations in which it is difficult for an individual
to make decisions either because the right course of
action is unclear or carries some potential negative
consequences for the person or people involved.
________________7. Arises when employees at any level have private
interests that are substantial enough to interfere with their
job duties.
________________8. Is a remuneration for the performance of an act
that’s inconsistent with the work contract or the nature of
the work one has been hired to perform.
________________9. Are the principal means for satisfying the basic
economic needs of the worker and the worker’s family.
________________10.Is one that aims to persuade by appealing primarily to
human emotional needs and not to reason.

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