Does the organization effectively communicate standards and procedures to its employees via ethics training programs?
| A. ETHICAL QUESTIONS RELATING TO THE PRODUCT | ||
| Core Product | YES | NO |
| Is there an underlying benefit to the product? The clothes can be re-usable if their timeline is not exhausted (Farrant, Olsen, & Wangel 2010)
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| Are benefits accurately communicated? Yes, if the products stay for long in the shelves, it is donated to the less privileged families. The item do not go to waste, and it is clearly communicated (Palmer & Clark 2005)
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| Product Offering | ||
| Does the package adequately present the size or components of the product? Yes, the packaging of the product is adequate for the product inside and it is recyclable (Farrant, Olsen, & Wangel 2010).
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| Are the brand name and manufacturer clearly spelled out on the label? Yes, the label “American Apparel” and “Made in the USA are included in the product labeling (Slideshare 2016)
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| Does the label contain adequate amounts of information for safe consumer use? The care Labeling Rule mandates manufacturers to attach care instructions to clothing (The Federal Trade Commission, 2016)
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| Is after-sale service promised with adequate provisions to deliver it?
The company makes deliveries within the United States upon payment (Slideshare, 2016) |
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| Is the warranty, including restrictions and requirements, clear to consumers?
The company includes the components used to make their products. For instance, stating that their products are 100 percent organic cotton (Slideshare 2016). |
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| B. ETHICAL QUESTIONS IN PRICING | ||
| Pricing Objectives | ||
| Does the company consciously set pricing objectives not to damage competitors? In a competitive market, a company charge prices depending on the competitiveness of their products (Gereffi, Spener, & Bair 2002) | ü | |
| Do marketers who convey a discount image do so accurately (i.e., try not to add expensive services and accessories that inflate the final price)? The retailers of apparels offer competitive prices (Fratto, Jones & Cassill 2006)
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| Are only major product changes promoted by the media as innovations? Most of the marketing of new product are done in house even though some new products are marketed as innovations (Slideshare 2016)
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| Pricing Methods | ||
| Is the price discrimination that the marketer practices always justifiable? (For example, do professionals avoid charging more to people they know can or will pay more?
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| In competitive bidding, does the firm not attempt (by lawful means) to find out what another firm bid? Do they also avoid low-balling (bidding the first contract low in hopes of recovering on later contracts)?
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| In markup pricing, does the marketer promote only accurate sales percentages (e.g., refrain from advertising large, i.e., 50%, discounts from the normal selling price)?
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| Pricing Decisions | ||
| Does the marketer promote only one line as its highest quality (e.g., he or she does not try to differentiate on only cosmetic differences or a different package that distinguishes it from the middle price line)?
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| Does the firm always justify its flexible pricing (i.e., different prices for differing customers)?
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| Are loss leaders beneficial to consumers (rather than an expensive version of bait and switch)?
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| C. ETHICAL QUESTIONS IN DISTRIBUTION | ||
| Channel Questions | ||
| Do large channel members avoid coercing smaller ones in selling or buying products?
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| Do manufacturers try to build relationships with their intermediaries rather than seek new channels to force traditional channel members to take small markups?
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| Are smaller wholesalers or retailers banding together to influence public policy to protect them from larger channel members?
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| Wholesaling | ||
| Do wholesalers avoid keeping products in reserve for larger customers while not adequately serving smaller customers? Yes, American Apparel is planning to expand their supplies to the wholesale market and focus less on retail (Slideshare 2016)
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| Do the services rendered relate to the quantity of products purchased? The American Apparel serves all customers; wholesalers and individual customers equally (Slideshare, 2016)
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| Retailing | ||
| Does the retailer avoid special (lower quality) merchandise used for sales?
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| Does the commission system discourage salespeople from using high-pressure sales tactics?
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| Are salespeople instructed to “trade up” customers only when the buyers express interest in the more expensive product?
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| Physical Distribution | ||
| Are cost minimization decisions arrived at in a manner equitable to all parties?
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| Are conservations and pollution considerations important in deciding among modes of transportation such as trucks, trains, planes?
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| D. ETHICAL QUESTIONS ABOUT PROMOTION | ||
| Advertising | ||
| Does advertising promise only what it can deliver? No, salespeople should only promise what they can deliver (Warner, 2011)
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| Is embellishment (i.e., exaggerated product benefits) discouraged?
Yes, people are encouraged to promise only what they can deliver and deliver more than what they promise (Warner, 2011) |
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| Do ads promote significant facts (as opposed to leaving them out) about the products? Yes, ads also have some element of truth, for instance, the American Apparel indicates that their apparels are 100 percent cotton.
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| Are claims based on unbiased research results? Sales Promotion
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| Are products properly represented at trade shows and exhibitions?
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| Are samples or premiums only promoted when they have significant value?
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| Publicity | ||
| Do organizations rely on newsworthiness rather than influence to get publicity?
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| Are only major product changes promoted to the media as innovations?
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| Personal Selling | ||
| Does the organization discourage salespeople from using high-pressure selling techniques?
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| Do salespeople avoid utilizing questionable psychological pressure to close the sale?
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| Sales Management | ||
| Do sales managers monitor expense accounts and watch out for inflated expenses and padding of these accounts?
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| Are territory quotas adjusted to economic conditions rather than automatically inflated every year? | ||
| Public Relations | ||
| Does the public-relations department share valuable information with the media even if it is sometimes negative?
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| If negative stories about the organization appear, does the public-relations department avoid retaliation at a later time?
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Ethical Compliance Audit
| ORGANISATIONAL QUESTIONS | ||
| 1. Does the company have a code of ethics that is reasonably capable of preventing misconduct? Yes, anyone who is found breaching the American Apparels code of ethics will face disciplinary action (Kell 2015).
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YES
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NO |
| 2. Does the board of directors participate in the development and evaluation of the ethics program?
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| 3. Is there a person with the high managerial authority responsible for the ethics program? No, the board reviews the cases pertaining to ethics and decides on the remedy (Kell 2015).
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| 4. Are there mechanisms in place to avoid delegating authority to individuals with a propensity for misconduct?
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| 5. Does the organization effectively communicate standards and procedures to its employees via ethics training programs?
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| 6. Does the organization communicate its ethical standards to suppliers, customers, and significant others that have a relationship with the organization?
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| 7. Do the company’s manuals and written documents guiding operations contain ethics messages about appropriate behavior?
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| 8. Is there formal or informal communication within the organization about procedures and activities that are considered acceptable ethical behavior? The American Apparel is revising the standards of conduct expected of all employees of the company (Kell 2015).
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| 9. Does top management have a mechanism to detect ethical issues relating to employees, customers, the community, and society?
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| 10. Is there a system for employees to report unethical behavior?
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| 11. Is there consistent enforcement of standards and punishments in the organization? Yes, there is a system to punish offenders. For instance, Charney was removed from office by the management following his abuse of office (Bhasin 2016).
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| 12. Is there a committee, department, team, or group that deals with ethical issues in the organization?
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| 13. Does the organization make a continuous effort to improve its ethical compliance program? Yes, the American Apparel company has instituted reforms such as revamping their code of ethics (Bhasin 2016).
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| 14. Does the firm perform an ethics audit?
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| EXAMPLES OF SPECIFIC ISSUES THAT COULD BE MONITORED IN AN ETHICS AUDIT | ||
| 1.Do the firm lack systems and operational procedures to
safeguard employees’ individual ethical behavior?
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YES | NO |
| 2. Is it necessary for employees to break the company’s ethical rules to get the job done?
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| 3. Is it necessary for employees to break the company’s ethical rules to get the job done?
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| 4. Is there an environment of deception, repression, and coverups concerning events that would embarrass the company?
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| 5. Is there a lack of participatory management practices that allow ethical issues to be discussed?
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| 6. Are compensation systems totally dependent on performance?
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| 7. Is there sexual harassment? Yes, there is. The CEO of American Apparels was fired for using his position to sexually harass his subordinates (Bhasin 2016).
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| 8. Is there any form of discrimination—race, sex, or age—in hiring, promotion, or compensation? No, the American Apparel as an equal opportunity employer (Bell 2015)
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| 9. Are the only standards about the environmental impact those that are legally required?
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| 10. Do the firm’s activities fail to show any concern for the ethical value systems of the community?
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| 11. Are there deceptive and misleading messages in promotion?
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| 12. Are products described in misleading ways or without communicating their limitations to customers?
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| 13. Are the documents and copyrighted materials of other companies used in unauthorized ways?
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| 14. Are expense accounts inflated?
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| 15. Are customers overcharged?
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| 16. Is there unauthorized copying of computer software?
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| *A high number of YES answers indicates that ethical control mechanisms and procedures are in place within the organization.
“The number of YES answers indicates the number of possible ethical issues to address.
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Source: O. C. Ferrell, J. Fraedrich and L. Ferrell, Business Ethics: Ethical Decision Making and Cases, 6th ed. (Boston, MA: Houghton Mifflin Company, 2005), 202-203.
Ethical Climate Audit
| YES | NO | |
| A. Does top management have a common understanding of and strong commitment to ethical values? Yes, the management is to ensure that all employees adhere to the ethics codes of standard (Bhasin 2016).
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| B. Do management’s actions and policies reflect the organization’s ethical values? The management of American Apparel has zero tolerance for unethical business behavior (Bell 2015)
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| C. Do employees throughout the firm share management’s ethical values and commitment?
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| D. Do managers at all levels work to build shared ethical values?
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| E. Does management provide employees with ethical guidance when needed?
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| F. Are ethical considerations included in personnel decisions?
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| G. Does the firm’s system of rewards include ethical accountability?
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| H. Does the organization have a procedure for identifying and dealing with ethical violations? Yes, it is important that employees have an easy way of reporting their concerns and for your company.
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| I. Does the organization have designated personnel whose job it is to monitor and promote an ethical climate?
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| J. As a result of all the above, does every employee consider ethical conduct, supervision, and guidance part of the job?
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