Ethics in Marketing
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Ethics In Marketing
Advertising, logistics, and product positioning may be some important components of marketing, however, a companys public image can be the entire cause of its early demise. A companys ethics affect all their business decisions and, in turn, construct their image. Although, not all ethics are pure; many corporations put on a façade of good intentions to disclose their blunders and scandals and induce customer interest and trust. In a market economy, many companies are expected to act in their own best interest. In most cases, that goal is to make the most profit possible. In order to gain customer loyalty, a company must choose to be represented by ethics their target market has in common or expects from that company. With little to no ethics, a company untrustworthy image will drive away investors, customers, and business partners to offer help and profit. Accounting, being something built up entirely on strong facts and supported information, should always be out of reach to personal opinion. However, anytime humans have an excessive amount of control, greed and scandals follow.
Enron, what was thought to be one of the worlds biggest and most successful companies, lost its way in 2001 by creating one of the most notorious financial scandals in American History. By hiding their losses, investors began to swarm in, assuming that they were investing wisely in a profitable and stable company. In reality, Enron quickly sank into bankruptcy. Led by Arthur Andersen, executives were able to hide billions in debt caused by failed projects and deals through the use of poor financial reporting and accounting loopholes. Shareholders lost over $11 billion when stock prices fell from $90 to $1 by the end of November 2001. The U.S. Security and Exchange Commission led an investigation and offered to buy Enron Corporation, but the deal fell through. The company filed for bankruptcy shortly after, with $63 billion in assets lost.
In all the confusion, stockholders demanded an explanation. Unfortunately, Enrons answer didnt reflect what the public was looking for. An Enron employee was anonymously caught on tape stating “Leave us alone, let us make a bit of money” directed at the U.S. government investigations. However, their duplicity did not end there. In addition to hiding their losses, Enron decided to attempt to catch up on their debt in a way the state of California had to pay for personally. Enron violated the rules for trading electricity by submitting a bid in the market for 2500 megawatts to be carried down a transition line that has a carrying capacity of 15 megawatts. By abusing their power and creating a hefty power outage by overloading their power lines, Enron was able to make billions off of the clean up. Laughing out loud during the crisis, Enron officials seemed unfazed by their unethical decisions. In a public light, however, they claimed there ethics, along with their business, were very much intact.
WorldCom, another major company for telecommunications, later brought on another financial crisis in 2002 when it announced that they had overstated earnings by $3.8 billion and filed for bankruptcy. Response came quickly. On June 26th, the U.S. Securities and Exchange Commission charged the company with massive accounting fraud and quickly obtained court order barring the company from destroying financial records. In the very beginning, CEO Bernard Ebbers was under pressure from banks to cover margin call that was used to finance his other business endeavors. Along with that increased pressure, the company took a major hit when forced to abandon their merger with sprint in 2000. To fix the margin calls, Ebbers managed to persuade WorldComs board directors into giving him corporate loans worth more than $400 million. His plan failed and he was fired as CEO in April 2002. After these slips in finances, WorldCom struggled to contain their debts. Immediately after the scandal, WorldComs stocks dropped from $64.50 to less than $2 a share. The company reported $103.8 billion in assets in march, 2002 along with $41 billion in debt, causing layoffs of 17,000 of their 85,000 employees. On March 15th, 2005 Bernard Ebbers was found guilty of all charges and convinced of fraud, conspiracy, and the act of filing