The Relationship Between Consumer Rights and Business Ethics

In order to understand the correlation between consumer rights and business ethics, one looks once again to the Golden Rule. Consumers expect to be treated with courtesy and respect. Therefore, in order to encourage sales, business managers pay close attention to consumer opinion polls, feedback, and attitudes. This has evolved into basic understandings of consumer rights and protections that have been developed through the years in order to encourage a positive relationship between business management and consumer demand.

Expectations Vs. Reality

Whether you're purchasing goods or services, or buying your first car, we as consumers expect honest negotiations in all aspects of our environment. Such expectations may be based on morals and values of common courtesy, but the concept goes much deeper than that. The development of consumer rights and protections in a wide range of industries and fields may be the difference between the success and failure of a business.

For example, topics involving privacy rights, safety, and product reliability are important parts of developing marketing and advertising plans.

Ethical issues surround nearly every aspect of the goal of any business: to increase stocks, backing, reputation, and most importantly, profit. While the pricing of products is an important part of sales and product placement, advertising and marketing are issues that involve a large degree of business ethics.

Consumers demand certain rights, from the expectation of honest and fair practices in the world of banking, to the warranties that cover our appliances and automobiles. We expect to be protected when signing a lease agreement or purchasing a product off a store shelf. We want to be protected against scams and rip-offs and to be able to report such behavior to the proper authorities.

Nearly every aspect of our daily lifestyles involves some sort of reliance on ethical business practices, whether we realize it or not. We expect to pay a fair price for groceries and gasoline. We expect our privacy to be respected when we visit our doctor's office, and we expect honest and fair practices from mortgage companies and financial institutions.

Our expectations have become so ingrained that many business, retailers, and suppliers have had to adapt production and advertising methods to cater to those expectations.

When it comes to advertising and marketing, adherence to basic business ethics is essential for success. Unethical methods of advertising that include deceit, outright lies, or manipulation, may threaten the reputation and success of a manufacturer, a product, or service. Unfortunately, this does not mean that deceit does not occur.

Consumers must remember there's a big difference between deceit and manipulation and persuasion. One of the most common methods of manipulation is through deceit. However, sometimes manipulation is subtler, involving some sort of psychological threat or engendering fear in someone in order to get them to do what you want them to do. Such psychological manipulation instills fear, guilt, or anxiety into some aspect of the business transaction.

This type of marketing is prevalent today, and remains one of the focal points of the practice of business ethics. For example, watch the television on any given evening, and viewers are likely to be inundated with advertisements for everything from aspirin to heart medications. Playing on a person's ignorance or lack of understanding of certain medical conditions is one way that many pharmaceutical companies encourage consumers to purchase their products.

Whether a product is toothpaste or a therapeutic heat patch, consumers are led to believe that one product is better or safer than anyone else's. Indeed, many experts believe that marketing and advertising agencies focus on target populations that are especially susceptible to such manipulation.

And what of manipulation? We all practice it to some degree in our daily lives. Playing on your son's guilt to take out the trash is a form of manipulation. Diet pills targeted toward women with less than perfect bodies is also a form of manipulation. When exactly does manipulation turn into unethical behavior?

Marketing practices that cater to the fears and anxieties of others can be considered unethical. For example, an auto dealer who pressures a single or divorced woman to purchase all sorts of add-ons when buying a car, including things like extended warranties and theft protection, while playing on her fears of being stranded, is a classic example of unethical behavior.

Bridging the Gap Between Business and Society

Consumers play an important role in bridging the gap between business and society. They serve as a barometer to behaviors in multiple industrial fields. The consumer is literally a pulse by which a business advertises and markets a product.

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Consumers expect honest and fair advertising. The United States Federal Trade Commission regulates marketing practices that appear deceitful or unfair. Perhaps one of the most noted scenarios in deceptive and unfair advertising practices is a claim by various pain relief manufacturers. For example, advertisements on television and magazines claim that Brand X is dispensed or recommended by more doctors than any other type of pain reliever.

Marketing campaigns for Brand X claim that hospitals recommended their product more than any other. However, it should be noted that Brand X, manufactured by a well known drug company, was offered to hospitals at reduced costs. Should such information be disseminated to the public? Continuing the painkiller scenario, what of the claims made by other pain killer brands? Each of these claimed fast relief. However, they all contain the same basic, active ingredient.

It is clear to see how a marketing and advertising plays a huge part in the popularity of a particular brand. However, creative and ingenious marketing executives have grown very careful about the claims they make. While marketing executives for each of the aspirin brands mentioned above did not really deceive consumers with their claims, can such practices still be considered unethical?

Consumers who are harmed by deception and purchase a product that they normally wouldn't have, based upon false advertising claims, may feel they have been manipulated by retailers and suppliers. Competitors may also lose out because of such practices. Therefore, anything that is unfair to consumers is unfair to competitors.

Laws and regulations to protect consumers from being cheated provide strong incentives against such behavior. However, advertising does contribute to the economy by providing information to consumers. While many people benefit from positive marketing and advertisements for various products or services, they also expect honesty and truth. Making a responsible choice requires reliable information.

Marketing and sales pitches that employ unethical methods or influence are severely frowned upon by most societies. Target marketing that focuses messages that play on the fears of certain groups of people walk a fine line between ethical and unethical behavior. Such marketing strategies are often hit and miss when it comes to success.

While the majority of advertising executives are careful to avoid overt exploitation and manipulation of consumers in general, it still happens. Those who are vulnerable are especially susceptible to such marketing practices. For example, people suffering from high blood pressure may be susceptible or vulnerable to advertising that claims greater health benefits may be had by using one brand of blood pressure medication over another.

Elderly people living alone are especially vulnerable to advertising that plays on their sense of security and safety. This concept is called consumer vulnerability. The vulnerable consumer generally lacks the knowledge to make an informed decision. Children and senior citizens are prime targets for this type of advertising.

While it is important for many marketing and advertising executives to attempt to determine a target group in order to successfully launch an advertising campaign, the ethics involved in approaching the topic and designing an ad campaign that does not play on fears, but offers reliable information are often blurred.
While marketing and advertising executives deal with the attitudes of the general population, sales people deal with individual customers. Customers dealing with a sales representative on a one-on-one basis seem to be more alert and wary to coercion, pressure, or encouragement to buy a particular service or product. However, when it comes to magazine and television ads, consumers seem to be less aware of manipulation.
Deception and coercion are prime examples of unethical behavior when it comes to consumer rights and expectations. Whether the advertisement is for Viagra or a life alert bracelet, consumers must by necessity continue to demand transparency and fair practices to protect their consumer rights.

Wall Street and Beyond

The incorporation of business ethics is extremely important in all aspects of industry, but perhaps even more so when it comes to financial institutions. Ethical decisions and issues have a great effect on everyone whether one works on Wall Street, or is merely depositing a paycheck in a local bank.
Due to recent scandals that have rocked Wall Street, it is not surprising that many people feel the financial services industry is more unethical than any other industry in society, including medical, science, technology, or retail. 
The financial industry is vast and contains many different formats and organizational structures. The most common insurance companies, investment banks, mortgage lenders, pension funds, and others all offer services to both corporations and individual consumers. Wall Street, stockbrokers, and the stock exchange are not the only financial institutions affected by unethical behavior, but they are the most widely reported.

Billions of dollars a year change hands on Wall Street, and so one may expect occasions of unethical behavior. However, the industry is highly regulated and perhaps because of its size and sensitivity, unethical decisions, scandals, and reports of deceit or unethical behavior are immediately and widely reported and published.

The Securities Industry and Financial Markets Association regulates compliance in many financial markets. They encourage self-regulatory systems via compliance and legal personnel who strive to improve the reputation of the securities industry. Today, thousands of members are committed to transparency and compliance within the securities industry.

Many financial institutions, lending companies, and investment brokers develop codes of ethics for their employees, stockbrokers, and finance officers. In many cases, such a code of ethics may include, but are not limited to, promises for:

  • Integrity and honesty
  • Accurate and complete reports and documentation
  • Legal compliance
  • Confidentiality of information
  • Promoting ethical behavior
  • Acting in good faith

Such promises help to restore the public faith in financial institutions at all levels, from community banks to Wall Street. However, unethical behavior does occur, and while standards and laws have been put in place to combat them, there always seems to be someone looking for a loophole. When it comes to unethical behavior in the financial workplace, social and moral upbringing have a huge impact on the ethical behaviors and challenges found within many financial service provider organizations.

Greed and selfishness have been at the root of many illegal activities since the beginning of mankind. This type of behavior may be subtle or overt. Many new financial employees and officers who find themselves working on Wall Street, lack proper guidance and mentoring when it comes to ethics and standards. They have been taught, and expect, to make money quickly, to maximize profits, and to do whatever it takes to succeed.

In addition, many working in the financial industry believe that as long as something is not considered illegal, it can be done. Whether or not the action is moral doesn't seem to matter. For example, individuals filling out their income tax returns every year often struggle with write-offs. Creating imaginary business expenses in order to avoid taxes, or to lower tax brackets, is a form of deceit and unethical behavior that is widespread, not only among CPAs and tax preparation officials, but by thousands of individuals filling out their own income tax forms.

Speaking of accountants and CPAs, thousands of business managers and owners encourage their accountants to pad their business expense accounts. It seems to be a win-win situation for the accountant, as the client will be happy, and the accountant will remain employed by that happy client.

This is not to say that everyone within the financial industry is dishonest or unethical. Such is far from the truth. The majority of business men and women, financial officers, and bank employees are highly ethical people who strive to make the right choices on a daily basis.

It is every individual's responsibility to take control of his or her own financial stability and to adequately research and investigate banks, securities, stockbrokers, and others when doing business in these realms. Supported by an increase in demand for ethical codes of conduct and compliance throughout the industry, individuals may at some point in the future be able to trust the financial industry at a greater level than they do today.

Financial Responsibility

Financial institutions such as the New York Stock Exchange often have been the initiators of internal reforms. Because of this, CEOs are now required to certify the accuracy of financial statements. Securities fraud carries with it a 25-year jail term. Shredding or otherwise destroying documents amid federal investigations invites a penalty just as severe. Mutual fund corporations also have joined the battle against unethical behavior to enhance and support regulations that carry heavier penalties for unethical behavior.

Avoiding criminal liability and encouraging trust are behind many of the new laws and regulations created among financial institutions to rebuild consumer confidence lost because of insider trading, leveraged buyouts, and junk bonds. Unethical behavior and activities that have done nothing but smear the reputation of investment firms, banking institutions, and Wall Street brokers for many years is finally being addressed by major financial giants.

Today, corporate criminal liability costs may reach into the billions of dollars in fines and sanctions. Not only does a financial institution face astronomical fines, but stock prices also drop and financial performance decreases as a result of unethical business practices. Since the 1980s, fines, not only against individuals, but entire organizations, have increased. White-collar crime has been addressed by the creation in the early 1980s of the United States Sentencing Commission, and covers unethical behavior such as antitrust, fraud, securities, and tax loopholes.

Corporate government regulations help to protect reputation, fair and accurate audits and accounting -- just a few of the aspects that involve financial business ethics. Decisions that affect not only stakeholders, but employees, shareholders and members of the community need to be carefully weighed. Responsibility is the one word that may convey the reason for the development of ethical standards or behaviors. As such, financial or corporate responsibility engenders respect and encourages individuals to invest in communities and charitable organizations.

Corporate responsibility, especially in the financial industry, carries an obligation to not only its stockholders, but to everyone within the organization. Doing so helps to strengthen a corporation's accountability and encourages responsible business practices.


Trust in every aspect of business is vital for success, but within the financial industry, it is absolutely essential. Ethical and social responsibility from financial institutions -- from the community bank to the stockbroker on Wall Street -- are expected and demanded by consumers. Tolerance for unethical behavior is extremely low and the demand for greater sanctions, fines, and jail terms for those who even consider unethical behavior within this field are growing.