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Customer Stakeholder Essay

2820 words - 12 pages

® Academy o/ Management Executive. 2004. Vol. 18. No. 2

Business ethics and customer stakeholders
O.C. Ferrell

A common view of the firm holds that employees, customers, shareholders, and suppliers are key organizational stakeholders.^ While obligations to these stakeholders are sometimes considered to be motivated by organizational self-interest, the ethical perspective asserts the rightness or wrongness of specific firm actions independently of any social or stakeholder obligations.^ Customers are key stakeholders that help establish the firm's reputation and identification. For example, today Procter and Gamble is considered a textbook marketdriven global powerhouse with billion-dollar ...view middle of the document...

Not only is this an ethical requirement but it has been legally enforced in some states. The implied covenant of good faith and fair dealing is to enforce the contract or transaction in a manner consistent with the parties' reasonable expectations.^ From this perspective, ethically questionable actions toward consumers can be addressed in civil litigation. Therefore we do know that ethical judgments of inappropriate conduct have a foundation for legal resolution. For example, in a recent year, Wal-Mart was involved with roughly twelve lawsuits per day or one every two hours. Wal-Mart is the most sued organization except for the U.S. Government.'^ The lawsuits stem from every aspect of customer interaction and the claim from some customers that something wrong has happened in their role as Wal-Mart customers. Ethical responsibilities to consumers have a strong foundation of legal protection. At the federal level, the Federal Trade Commission (FTC) enforces consumer protection laws. Within this

The ethical perspective asserts the rightness or wrongness of specific firm actions independently of any social or stakeholder obligations.
While market orientation is considered a key strategic component of marketing strategy, the importance of customers in the development of ethical programs and social responsibility is not always clear. Although one study found the ethical climate of the firm to be positively associated with customer loyalty,^ there are many other determinants of customer loyalty. As companies engage in competitive markets, market orientation and a customer focus have been recognized as key drivers of marketing performance. However, intense competition sometimes breeds unethical behavior even when a customer orientation is in play. When Pizza Hut and Papa John's aggressively attacked one




agency, the Bureau of Consumer Protection works to protect consumers against unfair, deceptive, or fraudulent practices. In addition to the FTC, other federal agencies such as the Food and Drug Administration, the Consumer Product Safety Commission, and the Federal Communications Commission try to assist consumers in addressing deceptive, fraudulent, or damaging conduct. At the state level, consumer protection statutes exist, and deceptive trade practices laws exist in most states. Key issues addressed in consumer protection include product liability, which refers to a business' legal responsibility for the performance of its products. Communications that are false or misleading can destroy stakeholders' trust in an organization and may at times even be considered fraudulent. False and misleading advertising is increasingly a key issue in organizational communications. Abuses in advertising can range from exaggerated claims and concealed facts to outright lying. Such abuses range from the unethical, which they clearly are, to the illegal, which they may be. The Federal Trade Commission stepped in when KFC promoted the health...

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