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Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

Recent corporate scandals and cases of corporate espionage have focused attention on business ethics. Are these instances of a few unscrupulous individuals or are business managers less ethical? The quest for answers to questions such as this has led to internal scrutiny within the academic community about the way qualifications such as the Masters of Business Administration (MBA) are being taught in business schools.

The late Professor Sumantra Ghoshal of the Advanced Institute of Management Research (AIM) and London Business School argued that the roots of business misconduct may be traced to ideas expounded by business schools over the last three decades. He suggested that “by propagating ideologically inspired amoral theories, business schools have actively freed their students from any sense of moral responsibility”. This was because attempts to make management a science meant denying any moral or ethical considerations.

For example, Ghoshal asserted that few managers would question the economist Milton Friedman’s assertion that a business organisation’s only responsibility was to its shareholders. Yet Thomas Kochan, Professor of Management at MIT’s Sloan School of Management, attributed corporate scandals in the United States to widespread overemphasis on shareholder value at the expense of other constituencies. Ghoshal challenged the priority given to shareholder value, reasoning that other constituencies such as employees, including managers, produce the value created by a company. Furthermore, he argued that employees bear more risk, because it is generally more difficult for them to find alternative employment than for shareholders to sell their stocks.

Robert Cooke, who was the Director of the Institute of Business Ethics at DePaul University, has identified fourteen danger signs that an organization that is at risk of unethical behaviour. These are if it:

• normally emphasizes short-term revenues over long-long considerations
• routinely ignores or violates internal or professional codes of ethics
• always looks for simple solutions to ethical problems and is satisfied with ‘quick fixes’
• is unwilling to take an ethical stand when there is a financial cost to the decision
• creates an internal environment that either discourages ethical behaviour or encourages unethical behaviour
• usually sends ethical problems to the legal department
• looks at ethics solely as a public relations tool to enhance its image
• treats its employees differently than its customers
• is unfair or arbitrary in its performance-appraisal standards
• has no procedures or policies for handling ethical problems
• provides no mechanisms for internal whistle blowing
• lacks clear lines of communication within the organization
• is only sensitive to the needs and demands of the shareholders
• encourages people to leave their personal ethical values at the office door

There are signs that things are changing. Ethics are increasingly being woven into the curriculum of business schools. Recognition of the need for attention to ethics is evident in the Association of MBAs’ (AMBA) requirement that a business school’s curriculum pay attention to ethical and social issues to meet its accreditation criteria. Finally, Ghoshal concluded that the situation be rectified by encouraging a diversity of ideologies and positive perspectives on behaviour.

Find out more

An introduction to business studies

Marketing and society

Managing human resources

Take it further - sharpen up your business skills

Corporate Accountability and Ethics - a disregard for ethics can lead to trouble: remember the Enron saga

‘Danger signs of unethical behaviour: how to determine if your firm is at ethical risk’ by Robert Cooke, in the Journal of Business Ethics, volume 10, (April 1991)

'Bad management theories are destroying good management practices' by Sumantra Ghoshal, in the Academy of Management Learning & Education,  volume 4 (2005)

'Addressing the crisis in confidence in corporations: Root causes, victims and strategies for reform' by Thomas Kochan, in the Academy of Management Executive, Volume 16 (2002)

About the author

Fiona Harris is a lecturer in management in the OU Business School. Her research interests include social marketing and marketing ethics.

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Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

In 50 Cent – Money Machine, The Money Programme focused on the trend of big brands teaming up with rap and hip-hop stars to tap into the youth market. But what are the short and long term implications for Reebok of their banned advertisement featuring the rapper 50 Cent?

Celebrities are a popular and often effective means of promoting products. According to social anthropologist Grant McCracken's meaning transfer model, celebrity endorsers powerfully imbue products with the personality and lifestyle meanings that the celebrities have built up during their careers.

However, using celebrities can also be risky. Brand guru Kevin Lane Keller noted five potential problems:

1. There can be a mismatch between the celebrity and the product
2. Celebrities may endorse too many products, diminishing their value as an endorser
3. The product may be upstaged by the celebrity so that consumers do not remember what they were endorsing
4. Consumers may be sceptical about the celebrity's motives for endorsing a brand
5. Finally, celebrities are human and can, and sometimes do, err. Allegations of impropriety by celebrities, whether proven or not, embarrass the brands associated with them. (The most recent example was Kate Moss, who was dropped by several fashion brands following allegations of drug taking.)

What is interesting about Reebok's involvement with the rapper 50 Cent to promote G-Unit branded trainers is that his 'bad boy' image predated it. So why did Reebok choose 50 Cent in the first place? In a pre-launch press release, Reebok reported that 50 Cent, along with National Basketball Association star Allen Iverson, had teamed up to launch "a street inspired footwear collection designed for young people who want the style of their gear to reflect the attitude of their life".

"Some complained the ad glamorised guns"

However, Reebok's subsequent advertisement, in which 50 Cent featured, drew 57 complaints, which were upheld by the Advertising Standards Association (ASA) and the advertisement was banned. Some viewers complained that the advertisement glamorised guns and might encourage or condone violence. Other viewers expressed concern that youngsters might perceive 50 Cent's violent background as cool or to be aspired to.

In their response to the ASA, Reebok explained that the aim of the 'I am what I am' campaign was to celebrate self expression, individuality and authenticity. The ASA stated that Reebok was responsible for its choice of celebrity and considered that the advertisement appeared to condone violence and implied that the star's life was inspirational for the wrong reasons. The ASA also considered that younger viewers were likely to be particularly influenced by musicians and celebrities and the formulation of the advertisement was unacceptable. The advertisement is described in the full ASA ruling.

What, then, are the possible repercussions of the ban? It is unlikely to damage either 50 Cent's or Reebok's reputations among their target youth audience. If anything, it will only have enhanced their street cred. In a similar way, the consensus appears to be that Kate Moss may still be attractive as an endorser for brands looking to represent themselves as edgy or rebellious. Whilst 50 Cent is likely to prove successful as a celebrity endorser for Reebok in the short-term, brands need constant updating and campaigns involving celebrities typically run for a limited time. Pepsi, for example, has associated itself as a brand with a long stream of celebrities at the peak of their popularity.

The long-term impact of the publicity surrounding Reebok's advertising ban may be less beneficial. The importance of its effects on other categories of consumers will depend on whether these represent important consumer segments for Reebok.

Marketing commentators have suggested that the negative publicity may damage the brand in the eyes of consumers who are more interested in trainers' performance quality. It is also likely to undermine Reebok's apparent attempts to position itself simultaneously as a socially responsible organisation. For example, Reebok promised to donate 50 cents for every pair of G-Unit trainers sold to charity. It also recently hosted a meeting on corporate social responsibility and honours young human rights activists for their contributions to human rights through non-violent means in the Reebok Human Rights Awards, which were established in 1988.

Corporate social responsibility (CSR) is becoming a hot topic. The number and range of ethical products are steadily increasing, as are consumers' concerns about ethical consumption. Political interest is also building and CSR looks set to find a place on the election agenda. The Government is seeking to promote ethical business through a CSR Academy, which it established recently. The leader of the opposition party, David Cameron, was recently reported to have criticised "irresponsible marketing" of unhealthy products in our obesity conscious society and praised brands that have instigated social initiatives.

The concept of CSR is based on the inevitability that organisations have social as well as economic consequences and so cannot dissociate themselves from social responsibility. Chris Marsden, a practitioner, teacher and writer in the field of business in society, argued that the key determinant of CSR was how an organisation conducts its business operations and earns its profits. In other words, it is about the whole business activity, not simply donations or community investment.

Reebok's banned advertisement was criticised because it did not handle the more controversial aspects of its celebrity's past in a responsible way for its intended youth audience. McCracken identified two groups as being particularly receptive to the meanings communicated through celebrity endorsements. These two groups are young people transitioning from one age group to another and individuals joining a new culture. Both groups are more likely to seek out brands rich in meaning as they construct new identities. Given that Reebok's intended youth audience was one of these particularly susceptible groups, the banned advertisement appears to undermine the attempts by the organisation to represent itself as socially responsible.

So whilst Reebok's reputation is unlikely to have been damaged among its young consumers, the longer term effect is that it might hamper Reebok's credibility as a socially responsible corporation. Not only might this impair its standing among other consumers, but also affect its ability to attract employees. This demonstrates the dangers of focusing on one target group to the possible detriment of the wider organisation.

Further reading

• 'Who is the Celebrity Endorser? Cultural Foundations of the Endorsement Process' by Grant McCracken in Journal of Consumer Research pages 310-321, Volume 16, December 1983
• Strategic Brand Management: Building, Measuring and Managing Brand Equity by Kevin Lane Keller, published by Prentice Hall
• 'Making a positive impact on society' by Chris Marsden in Corporate Social Responsibility: partners for progress, published by OECD Publications
• The youth market – companies like Reebok spend a lot of time and effort targeting young people
• The importance of brands – the value of brands explained by this extract based on Open University Business School course material
• Securing your brand – how do you build value into a brand and how do you preserve that value?
• Business briefs: checks and chavs – can brands become victims of their own success?

About the author

Fiona Harris is a lecturer in management in the OU Business School. Her research interests include social marketing and marketing ethics.

Subscribe to Fiona Harris's posts