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Business Ethics

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Business Ethics ­MGT610
Though advertising is sometimes defined as "information," this fails to distinguish it from the
type of information found in Consumer Reports. Most advertisements contain precious little
information in any case: "Got Milk?" and "Just Do It" are nearly empty statements. The
primary function of advertisements is to sell products to prospective buyers. It is publicly
addressed to a mass audience, so it has a necessarily widespread social effect. It is also intended
to create desire and a belief in consumers that the product will satisfy the desire.
Advertising's critics point out that it has several harmful effects on society. First, its
psychological effects are damaging in that it debases the tastes of consumers by inculcating
materialistic values about how to achieve happiness. Whether or not advertising has such
effects is still uncertain. Indeed, the success of advertising may depend on consumers already
having the values that the advertisements focus upon.
Another major criticism of advertising is that it is wasteful. Those who make this type of
objection point to the distinction between production costs and selling costs. Production costs
are the costs of the resources consumed in producing a product. Selling costs are the additional
costs of resources that do not go into the product itself, but rather are incurred as a result of
persuading consumers to purchase it. The resources consumed by advertising, according to this
theory, add nothing to the utility of the product.
Advertisers counter that advertisements do add information to the product, but of course, the
information could be supplied more directly and inexpensively. They also say, however, that
advertising creates desire and thus is responsible for a gradually expanding economy.
There is considerable controversy over whether advertising is responsible for the growing
economy, however. Advertising appears to be most successful at shifting consumption from
one producer to another, not at expanding consumption generally. Even if it could expand
consumption, theorists do not agree that this would be good: increased consumption leads,
among other things, to increased pollution and depletion of resources. Though some critics
have also blamed advertising for monopolies, there is no conclusive evidence that advertising
and monopolistic markets are connected.
John Kenneth Galbraith and other critics have long argued that advertising merely manipulates
consumers, creating desires solely to absorb industrial output. Physical desires, such as the
desire for food and shelter, are perfectly normal. But the psychological desires that are inspired
by advertising are not under the consumer's control in the same way that physical desires are,
which puts the firm (instead of the individual) in control. If Galbraith's view is correct, then
advertising violates the individual's right to choose freely for him or herself. It is not clear,
however, that this view is correct, and theorists such as F. A. von Hayek have pointed out that
psychic wants have been around longer than advertising in any case.
The most common criticism of advertising concerns is its effect on the consumer's beliefs.
Because advertising is a form of communication, it can be as truthful or deceptive as any other
form of communication. Most criticisms of advertising focus on the deceptive aspects of
modern advertising. Nevertheless, even if advertising as a whole is not manipulative, there are
clearly some advertisements that are intended to manipulate. Such advertisements do clearly
violate the consumer's right to be treated as a free and equal rational being.
Business Ethics ­MGT610
Deceptive advertising takes many forms: the "bait and switch," untrue paid testimonials, or
simulating brand names are all forms of deception. There is no controversy over whether or not
deceptive advertising is immoral: it clearly is. The problem is to understand how advertising
becomes deceptive.
All communication involves three things: the author or originator of the message, the medium
that carries the message, and the audience who receives it. Deception involves three necessary
conditions in the author:
1. The author must intend to have the audience believe something false.
2. The author must know it to be false.
3. The author must knowingly do something to bring about this false belief.
Thus, an advertiser cannot be held responsible for an audience having misinterpreted a message
when the misinterpretation is unintended, unforeseen, or the result of carelessness on the part of
the audience.
The media carrying the message also has a responsibility to ensure the truth of what it carries to
the audience. Both the author and the media must take into account the interpretive skills of the
audience as well. To determine the ethical nature of an advertisement, the following points are
relevant: the intended and actual social effects of the advertisement; the informing or
persuasive character of the advertisement, and whether it creates irrational or injurious desires;
and the whether the advertisement's content is truthful or tends to mislead.
The Benefits of Advertising
4. Enormous human and material resources are devoted to advertising. Advertising is
everywhere in today's world, so that, as Pope Paul VI remarked, "No one now can escape the
influence of advertising."6 Even people who are not themselves exposed to particular forms of
advertising confront a society, a culture -- other people -- affected for good or ill by
advertising messages and techniques of every sort.
Some critics view this state of affairs in un-relievedly negative terms. They condemn
advertising as a waste of time, talent and money -- an essentially parasitic activity. In this
view, not only does advertising have no value of its own, but its influence is entirely harmful
and corrupting for individuals and society.
We do not agree. There is truth to the criticisms, and we shall make criticisms of our own. But
advertising also has significant potential for good, and sometimes it is realized. Here are some
of the ways that happens.
a) Economic Benefits of Advertising
5. Advertising can play an important role in the process by which an economic system guided
by moral norms and responsive to the common good contributes to human development. It is a
necessary part of the functioning of modern market economies, which today either exist or are
emerging in many parts of the world and which -- provided they conform to moral standards
based upon integral human development and the common good -- currently seem to be "the
most efficient instrument for utilizing resources and effectively responding to needs" of a
socio-economic kind.7
Business Ethics ­MGT610
In such a system, advertising can be a useful tool for sustaining honest and ethically responsible
competition that contributes to economic growth in the service of authentic human
development. "The Church looks with favor on the growth of man's productive capacity, and
also on the ever widening network of relationships and exchanges between persons and social
groups....[F]rom this point of view she encourages advertising, which can become a wholesome
and efficacious instrument for reciprocal help among men."8
Advertising does this, among other ways, by informing people about the availability of
rationally desirable new products and services and improvements in existing ones, helping
them to make informed, prudent consumer decisions, contributing to efficiency and the
lowering of prices, and stimulating economic progress through the expansion of business and
trade. All of this can contribute to the creation of new jobs, higher incomes and a more decent
and humane way of life for all. It also helps pay for publications, programming and productions
-- including those of the Church -- that bring information, entertainment and inspiration to
people around the world.
b) Benefits of Political Advertising
6. "The Church values the democratic system inasmuch as it ensures the participation of
citizens in making political choices, guarantees to the governed the possibility both of electing
and holding accountable those who govern them, and of replacing them through peaceful
means when appropriate."
Political advertising can make a contribution to democracy analogous to its contribution to
economic well being in a market system guided by moral norms. As free and responsible media
in a democratic system help to counteract tendencies toward the monopolization of power on
the part of oligarchies and special interests, so political advertising can make its contribution by
informing people about the ideas and policy proposals of parties and candidates, including new
candidates not previously known to the public.
c) Cultural Benefits of Advertising
7. Because of the impact advertising has on media that depend on it for revenue; advertisers
have an opportunity to exert a positive influence on decisions about media content. This they
do by supporting material of excellent intellectual, aesthetic and moral quality presented with
the public interest in view, and particularly by encouraging and making possible media
presentations which are oriented to minorities whose needs might otherwise go un-served.
Moreover, advertising can itself contribute to the betterment of society by uplifting and
inspiring people and motivating them to act in ways that benefit themselves and others.
Advertising can brighten lives simply by being witty, tasteful and entertaining. Some
advertisements are instances of popular art, with a vivacity and elan all their own.
d) Moral and Religious Benefits of Advertising
8. In many cases, too, benevolent social institutions, including those of a religious nature, use
advertising to communicate their messages -- messages of faith, of patriotism, of tolerance,
compassion and neighborly service, of charity toward the needy, messages concerning health
and education, constructive and helpful messages that educate and motivate people in a variety
of beneficial ways.
Business Ethics ­MGT610
For the Church, involvement in media-related activities, including advertising, is today a
necessary part of a comprehensive pastoral strategy. This includes both the Church's own media
-- Catholic press and publishing, television and radio broadcasting, film and audiovisual
production, and the rest -- and also her participation in secular media. The media "can and
should be instruments in the Church's program of re-evangelization and new evangelization in
the contemporary world."11 While much remains to be done, many positive efforts of this kind
already are underway. With reference to advertising itself, Pope Paul VI once said that it is
desirable that Catholic institutions "follow with constant attention the development of the
modern techniques of advertising and... know how to make opportune use of them in order to
spread the Gospel message in a manner which answers the expectations and needs of
contemporary man."
The harm done by advertising
9. There is nothing intrinsically good or intrinsically evil about advertising. It is a tool, an
instrument: it can be used well, and it can be used badly. If it can have, and sometimes does
have, beneficial results such as those just described, it also can, and often does, have a negative,
harmful impact on individuals and society.
Communio et Progressio contains this summary statement of the problem: "If harmful or
utterly useless goods are touted to the public, if false assertions are made about goods for sale,
if less than admirable human tendencies are exploited, those responsible for such advertising
harm society and forfeit their good name and credibility. More than this, unremitting pressure
to buy articles of luxury can arouse false wants that hurt both individuals and families by
making them ignore what they really need. And those forms of advertising which, without
shame, exploit the sexual instincts simply to make money or which seek to penetrate into the
subconscious recesses of the mind in a way that threatens the freedom of the individual ... must
be shunned."
a) Economic Harms of Advertising
10. Advertising can betray its role as a source of information by misrepresentation and by
withholding relevant facts. Sometimes, too, the information function of media can be subverted
by advertisers' pressure upon publications or programs not to treat of questions that might prove
embarrassing or inconvenient. More often, though, advertising is used not simply to inform but
to persuade and motivate -- to convince people to act in certain ways: buy certain products or
services, patronize certain institutions, and the like. This is where particular abuses can occur.
The practice of "brand"-related advertising can raise serious problems. Often there are only
negligible differences among similar products of different brands, and advertising may attempt
to move people to act on the basis of irrational motives ("brand loyalty," status, fashion, "sex
appeal," etc.) instead of presenting differences in product quality and price as bases for rational
Advertising also can be, and often is, a tool of the "phenomenon of consumerism," as Pope
John Paul II delineated it when he said: "It is not wrong to want to live better; what is wrong is
a style of life which is presumed to be better when it is directed toward ?having' rather than
?being', and which wants to have more, not in order to be more but in order to spend life in
enjoyment as an end in itself. "Sometimes advertisers speak of it as part of their task to "create"
needs for products and services -- that is, to cause people to feel and act upon cravings for
items and services they do not need. "If ... a direct appeal is made to his instincts -- while
Business Ethics ­MGT610
ignoring in various ways the reality of the person as intelligent and free -- then consumer
attitudes and life-styles can be created which are objectively improper and often damaging to
his physical and spiritual health."
This is a serious abuse, an affront to human dignity and the common good when it occurs in
affluent societies. But the abuse is still more grave when consumerist attitudes and values are
transmitted by communications media and advertising to developing countries, where they
exacerbate socio-economic problems and harm the poor. "It is true that a judicious use of
advertising can stimulate developing countries to improve their standard of living. But serious
harm can be done them if advertising and commercial pressure become so irresponsible that
communities seeking to rise from poverty to a reasonable standard of living are persuaded to
seek this progress by satisfying wants that have been artificially created. The result of this is
that they waste their resources and neglect their real needs, and genuine development falls
Similarly, the task of countries attempting to develop types of market economies that serve
human needs and interests after decades under centralized, state-controlled systems is made
more difficult by advertising that promotes consumerist attitudes and values offensive to human
dignity and the common good. The problem is particularly acute when, as often happens, the
dignity and welfare of society's poorer and weaker members are at stake. It is necessary always
to bear in mind that there are "goods which by their very nature cannot and must not be bought
or sold" and to avoid "an? Idolatry' of the market" that, aided and abetted by advertising,
ignores this crucial fact.
b) Harms of Political Advertising
11. Political advertising can support and assist the working of the democratic process, but it
also can obstruct it. This happens when, for example, the costs of advertising limit political
competition to wealthy candidates or groups, or require that office-seekers compromise their
integrity and independence by over-dependence on special interests for funds.
Such obstruction of the democratic process also happens when, instead of being a vehicle for
honest expositions of candidates' views and records, political advertising seeks to distort the
views and records of opponents and unjustly attacks their reputations. It happens when
advertising appeals more to people's emotions and base instincts -- to selfishness, bias and
hostility toward others, to racial and ethnic prejudice and the like -- rather than to a reasoned
sense of justice and the good of all.
c) Cultural Harms of Advertising
12. Advertising also can have a corrupting influence upon culture and cultural values. We have
spoken of the economic harm that can be done to developing nations by advertising that fosters
consumerism and destructive patterns of consumption. Consider also the cultural injury done to
these nations and their peoples by advertising whose content and methods, reflecting those
prevalent in the first world, are at war with sound traditional values in indigenous cultures.
Today this kind of "domination and manipulation" via media rightly is "a concern of
developing nations in relation to developed ones," as well as a "concern of minorities within
particular nations."
The indirect but powerful influence exerted by advertising upon the media of social
communications that depend on revenues from this source points to another sort of cultural
Business Ethics ­MGT610
concern. In the competition to attract ever larger audiences and deliver them to advertisers,
communicators can find themselves tempted -- in fact pressured, subtly or not so subtly -- to
set aside high artistic and moral standards and lapse into superficiality, tawdriness and moral
Communicators also can find themselves tempted to ignore the educational and social needs of
certain segments of the audience -- the very young, the very old, the poor -- who do not match
the demographic patterns (age, education, income, habits of buying and consuming, etc.) of the
kinds of audiences advertisers want to reach. In this way the tone and indeed the level of moral
responsibility of the communications media in general are lowered.
All too often, advertising contributes to the invidious stereotyping of particular groups that
places them at a disadvantage in relation to others. This often is true of the way advertising
treats women; and the exploitation of women, both in and by advertising, is a frequent,
deplorable abuse. "How often are they treated not as persons with an inviolable dignity but as
objects whose purpose is to satisfy others' appetite for pleasure or for power? How often the
role of woman as wife and mother is undervalued or even ridiculed? How often is the role of
women in business or professional life depicted as a masculine caricature, a denial of the
specific gifts of feminine insight, compassion, and understanding, which so greatly contribute
to the ?civilization of love'?"
d) Moral and Religious Harms of Advertising
13. Advertising can be tasteful and in conformity with high moral standards, and occasionally
even morally uplifting, but it also can be vulgar and morally degrading. Frequently it
deliberately appeals to such motives as envy, status seeking and lust. Today, too, some
advertisers consciously seek to shock and titillate by exploiting content of a morbid, perverse,
pornographic nature. What this Pontifical Council said several years ago about pornography
and violence in the media is no less true of certain forms of advertising:
"As reflections of the dark side of human nature marred by sin, pornography and the exaltation
of violence are age-old realities of the human condition. In the past quarter century, however,
they have taken on new dimensions and have become serious social problems. At a time of
widespread and unfortunate confusion about moral norms, the communications media have
made pornography and violence accessible to a vastly expanded audience, including young
people and even children, and a problem which at one time was confined mainly to wealthy
countries has now begun, via the communications media, to corrupt moral values in developing
nations." We note, too, certain special problems relating to advertising that treats of religion or
pertains to specific issues with a moral dimension.
In cases of the first sort, commercial advertisers sometimes include religious themes or use
religious images or personages to sell products. It is possible to do this in tasteful, acceptable
ways, but the practice is obnoxious and offensive when it involves exploiting religion or
treating it flippantly.
In cases of the second sort, advertising sometimes is used to promote products and inculcate
attitudes and forms of behavior contrary to moral norms. That is the case, for instance, with the
advertising of contraceptives, abortifacients and products harmful to health, and with
government-sponsored advertising campaigns for artificial birth control, so-called "safe sex",
and similar practices.
Table of Contents:
  1. INTRODUCTION:Business Issues
  5. MORAL REASONING:Arguments For and Against Business Ethics
  7. UTILITARIANISM:Utilitarianism: Weighing Social Costs and Benefits
  8. UTILITARIANISM (CONTD.):rule utilitarianism, Rights and Duties
  11. JOHN RAWLS' THEORY OF JUSTICE:The Ethics of Care
  12. THE ETHICS OF CARE:Integrating Utility, Rights, Justice, and Caring
  13. THE ETHICS OF CARE (CONTD.):Morality in International Contexts
  14. MORALITY IN INTERNATIONAL CONTEXTS:Free Markets and Rights: John Locke
  16. LAW OF NATURE:Theory of Absolute Advantage, Comparative Advantage
  17. FREE MARKETS AND UTILITY: ADAM SMITH:Free Trade and Utility: David Ricardo
  18. RICARDO & GLOBALIZATION:Ricardo’s Assumptions, Conclusion
  19. FREE MARKET ECONOMY:Mixed Economy, Bottom Line for Business
  20. COMPETITION AND THE MARKET:Perfect Competition
  22. MONOPOLY COMPETITION:Oligopolistic Competition
  23. OLIGOPOLISTIC COMPETITION:Crowded and Mature Market
  24. OLIGOPOLIES AND PUBLIC POLICY:Ethic & Environment, Ozone depletion
  25. WORLDWATCH FIGURES:Population Year, Agriculture, Food and Land Use
  26. FORESTS AND BIODIVERSITY:The Ethics of Pollution Control
  27. THE ETHICS OF POLLUTION CONTROL:Toxic Chemicals in Teflon
  29. THE ETHICS OF POLLUTION CONTROL:Recommendations to Managers
  30. COST AND BENEFITS:Basis of social audit, Objectives of social audit
  31. COST AND BENEFITS:The Ethics of Conserving Depletable Resources
  32. COST AND BENEFITS:The Club of Rome
  34. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:Should Consumers Bear More Responsibility?
  38. ADVERTISING ETHICS:The Benefits of Advertising, The harm done by advertising
  39. ADVERTISING ETHICS:Basic Principles, Evidence, Remedies, Puffery
  40. ADVERTISING IN TODAY’S SOCIETY:Psychological tricks
  41. ADVERTISING IN TODAY’S SOCIETY:Criticism of Galbraith's Work
  44. ADVERTISING IN TODAY’S SOCIETY:Consumer Privacy, Accuracy
  45. THE ETHICS OF JOB DISCRIMINATION:Job Discrimination: Its Nature