It is an interesting phenomenon in the field of business that when a company faces declining market share and revenues in a highly competitive market, organizational pressure to increase sales may have shaped an individual’s conduct or behavior. Under a scenario where companies need to meet their sales targets desperately and legitimately, there have been infamous cases where company executives have erred in their judgment and decisions.
One example is when companies resort to false advertising. A classic example is the case of a famous over-the-counter mouthwash brand sold in the United States (and is still being sold here in the Philippines) since the early 1900s. Its woes began when it started declaring its product as a cure-all for common cold ailments (cough and sore throats), as a dandruff medicine, an anti-shave tonic, and also a safe way to protect one’s self from cuts, bruises, wounds and stings.
In the 1970s, the Federal Trade Commission (FTC), an independent regulatory agency for consumer protection and anti-competitive business practices, ordered the company to spend about $10 million in corrective advertising. Since the company didn’t learn the expensive lesson, it was again slapped with another lawsuit a few years ago for claiming that its product was “as effective as floss” after manipulating its clinical tests.
In the local scene across different industries, I have come across many cases of exaggerated, misleading, or even sly marketing schemes and advertising claims. Even though we have available remedial local laws (e.g. Republic Act No. 3740, penalizing fraudulent advertising, mislabelling or misbranding of any product, stock bond, etc.) for corrective measures, it would be prudent to learn and understand the dynamics of ethical business practices in business competition as a suggested paradigm and preventive measure.
Does competition affect a corporate individual’s behavior resulting in unethical conduct and decision-making? How can profit-seeking organizations avoid breaking laws as they compete with other firms in a market economy?
Although free competition could bring stressful situations to corporate individuals and owners in an organization, competition is still considered as one of the most significant elements in promoting positive growth, economic development, and welfare to society. Joseph Schumpeter (1934), for example, talked about how entrepreneurial innovation contributed to economic development by creating new products, introducing new production methods, generating new markets, seizing new sources of supplies, and even destroying monopolies, among others.
A good analogy would be competition in a particular sport with “a level playing field” where all athletes play by the same set of rules. These rules in business are the laws of societies, which include domestic and international laws. If complied with accordingly, this will encourage ethical behavior among businesses.
Unfortunately, unethical behavior is often seen as the sole responsibility of an individual. But should we not consider the organization’s responsibility, too? This brings us to one important ingredient: professional and organizational integrity. An integrity-based approach to ethics management requires not only compliance with the laws of societies but also an emphasis on managerial responsibility. This paradigm emanates from the concept of having self-governance through a set of broad, deep, and sometimes compelling guiding principles within an organization. Many successful and sustainable business organizations have these “guiding values,” which promote an organizational environment supporting ethical behavior and a sense of shared accountability among its team members.
So the next time you feel you are falling for a potentially deceitful marketing tactic, ponder carefully whether it is a trick or a treat?
Jose Mari L. Yupangco is a Doctor of Business Administration student at the Ramon V. Del Rosario College of Business of DLSU. He was also the former president of the Business Doctoral Society of DLSU. He welcomes comments at firstname.lastname@example.org. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty and its administrators.
JOSE MARI YUPANGCO