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SDM/U3 Topic 8 Ethical and legal issues in sales and distribution Management

Everyone, at some time or the other, must surely have been sold a product that he or she did not need. Selling is a profession that has been widely criticized for the unethical dimensions associated with it. Ethics is the set of rules or standards that govern the conduct of a person or members of a profession. Ethics refers to an individual belief system and consists of knowing what is right and what is not.

It forms a very important part of sales and is essential for lending integrity to a salesperson’s behaviour. No discussion on ethics is complete without a reference being made to social responsibility. Social responsibility exemplifies ethical behaviour and is defined as an individual’s or institution’s concern for the consequences of his/its actions as these might affect the interests of others in the society.

Companies doing business with no regard to social responsibility run the risk of attracting the attention of environmental groups, earning negative publicity, and losing the goodwill of society.

Therefore, companies try to install a sense of ethics in their employees and conduct business in a socially responsible way. Indian companies are now more concerned with corporate social responsibility than ever before. Companies in the past were concerned more about making profits than anything else.

But in recent times, firms have realised the importance of corporate social responsibility. Corporate social responsibility has been defined as the commitment made by businesses to contribute to sustainable economic development, to work with employees, their families, the local community, and society at large to improve the quality of life. CSR is a process that helps a firm to function ethically and make a positive contribution to the welfare of society.

All companies are expected to imbibe values pertaining to corporate social responsibility in their mission and make CSR a part of the organizational policies. In order to fulfill their social responsibility, companies need to effectively communicate to the public about the company’s ethical policies, set high ethical standards for themselves, and evaluate themselves on ethical performance from time to time through means of ethical audits.

Several countries have passed declarations and policies regarding CSR. The Indian Government has amended the Indian Companies Act, 1956, making it mandatory for companies to conform to certain provisions of this law in order to be accepted as responsible corporates. Although Indian companies have been indulging in philanthropic activities of some kind or the other, corporate social responsibility is a totally different field altogether.

There is a much wider scope for corporate social responsibility in the Indian corporate scenario with its coverage extending to human rights, labor standards, as well as environmental issues. Companies in the current scenario are operating in an intensely competitive environment. Especially during the past 20 years, competition has been rapidly increasing due to globalization.

According to the US Chamber of Commerce, companies may conduct business on any of the following four levels of social responsibility – obeying the law, meeting public expectations, anticipating new social demands, and leading the way. The ethical behaviour of an individual is influenced by that individual’s stage of moral development. An individual passes through three levels of moral development — preconventional, conventional, and principled.

In organizations, the management is largely responsible for the ethical or unethical behaviour of its employees. A sales manager faces ethical issues that cover the ethical dilemmas of his sales people as well as the ethical aspects pertaining to his decisions regarding hiring and evaluating of salespersons, assigning territories, etc. The ethical issues facing a sales manager may be studied with regard to the sales manager’s relationship with his subordinates, the company, customers, and competitors. On the other hand, the ethical issues facing a salesperson pertain to the salesperson’s accountability to the top management, and his relationship with other salespeople and with customers.

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