Ethics in Advertising

Making the case for doing the right thing

Wally Snyder

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317281528
• Edition: 1
• Topic: Commerce
• Subtopic: Publicité

This book provides students and practitioners with a comprehensive overview of the rules and principles associated with ethical advertising practices. With extensive research, and a variety of case studies, and expert opinions, it discusses why advertising ethics is important both to the consumer and the professional.

The author presents the rules of ethical conduct recommended by the Institute for Advertising Ethics and demonstrates how these are applied in practice, examining why ethics is important; what the ethical dilemmas the industry faces are; and how to motivate better practices among professionals. The book uses real life stories of "native advertising, " marketing to children, and diversity in advertising to show how professionals can be inspired to "do the right thing" for consumers and their companies. Readers will learn how they can solve ethical dilemmas to their personal satisfaction in the competitive work environment.

This balanced perspective to the ethical issues that arise in the advertising industry is sure to resonate with students of advertising and marketing.

1

The business and personal cases for enhanced advertising ethics

Advertising, public relations, marketing communications, news and editorial all share a common objective of truth and high ethical standards in serving the public.

Institution of Advertising Ethics Principle 1

Advertising, public relations, and all marketing communication professionals have an obligation to exercise the highest personal ethics in the creation and dissemination of commercial information to consumers.

IAE Principle 2

Ethics in Advertising plays a critical role in the success of our businesses and our professionals. As we look back in recent history, and up to the present time, we find companies and their leaders and employees that have prospered, or suffered, from the consequences of doing, or not doing, the right thing for their customers and shareholders. Perhaps the greatest illustration of failure in this century is Enron and its accounting firm, Arthur Andersen.

Enron began as an oil pipeline company that grew rapidly by acquiring and dealing with other companies—such as energy producing entities—that Enron used to inflate its profits and share price. For example, it acquired an energy producing plant in California, and ordered it to shut down production for a period of time to cause Enron’s energy prices to go up. It constantly pushed its employees to continue to come up with growth proposals, even of questionable legal and ethical status, to push its profits. This included considering aggressive moves into businesses other than energy.

Its stock prices rose dramatically because of the way in which it calculated profits—not as current—but as “expected” future profits. While accounting firms are valued for independence in critical decisions, such as the stock reporting method, Arthur Andersen totally went along with Enron’s illegal orders to do so.

Arthur Andersen was the first accounting firm in history to be convicted, in 2002, of a felony for its part in covering up what its client, Enron, was being investigated for by the Securities and Exchange Commission. The court found that Andersen professionals had destroyed documents critical to the investigation and that an Andersen lawyer sent an email suggesting changing a memo relating to earnings advice that had been given to the client. Enron’s legal problems involved conflicts of interest and false reporting of profits for its off-balance-sheet partnerships. Enron’s reported total assets in 2000 were $66 billion. The company had to restate those assets several times as the government investigation continued. “Enron’s downward spiral continued and on 2 December 2001, Enron filed for protection from creditors and became the largest corporate bankruptcy in U.S. history.”¹

I begin my book on Ethics in Advertising with this vivid account of perhaps unparalleled ethical and legal failure, because I believe it provides the foundation for the study and conduct of modern business ethics in America. Enron conducted its many businesses in violation of known laws and regulations, and demanded that its professionals also strive for business “success” at any cost. The company and its accounting firm’s lack of transparency violated the law and destroyed the very trust necessary for a corporation from its shareholders and Wall Street. The instances of employees being ordered to conduct unethical—and illegal—activities must have been enormous. And, yes, the negative results were overwhelming: Enron’s share price collapsing to $1, thousands of employees retiring without retirement funds, and the end of Arthur Andersen, one of the industry’s largest and most powerful accounting firms. The disaster also spurred the study and writing on ethical dilemmas occurring in business, and led to ethics courses in university MBA programs.

I believe Kurt Eichenwald, in his 700-page book on the downfall of Enron, captures the essence of the ethics failure: “Ultimately, it was Enron’s tragedy to be filled with people smart enough to know how to maneuver around the rules, but not wise enough to understand why the rules had been written in the first place.”²

The premise of this book is the importance of knowing why it is necessary and appropriate to do the right thing in the powerful and important world of advertising, and then having the moral courage to do so. Our clients, agencies, media companies and suppliers—as well as our professionals—face important ethical dilemmas daily. They include the need for honesty and transparency in our advertising and marketing to our consumers, as well as in our business dealings between our clients and agencies and media suppliers. This includes accuracy and fairness in charging for our services. Also, what do we do when our client or our boss wants us to do something unethical? And, how do we advertise to special audiences, including children, or for special products, including prescription drugs and e-cigarettes? We will deal with all of the major ethical dilemmas we encounter, and importantly, how they can be understood and resolved.

There are four key propositions I hope to prove to readers of my book. The first is that companies practicing ethics in their advertising and PR, i.e., doing the right thing for consumers, will do better for their businesses: “The Business Case.” One such example you will read later in the book is the positive action taken by James Burke, Chairman of Johnson & Johnson, in the Tylenol crisis of 1985. Faced with the dilemma of whether to recall all Tylenol capsules, after it had been found that some had been poisoned, he chose to do so even at a cost of $100 million. He recognized this to be a problem greater than Tylenol; rather it was a “Johnson and Johnson” problem. The result was acceptance by consumers that Johnson and Johnson had done the right thing, and the company continued to flourish. We will consider how other companies facing difficult situations can, or will, succeed by adopting ethical solutions. For instance, how will Volkswagen respond to its consumers, the government and public, to correct the allegation that it engineered its diesel autos to cheat on emissions tests worldwide?

The second proposition is that ethics in advertising is best achieved by professionals “feeling” the need to do the right thing: “The Personal Case.” The Institute for Advertising Ethics’ Principles and Practices for Advertising Ethics is directed to the professional, and the professional teams, who decide ethical dilemmas at all levels in the company, as well as to the advertising students who will move into the business. This includes the executive leadership, the account managers, the creative teams, and the media representatives. It is not enough just to know the rules, you have to know “why” they are important, “how” to apply them to ethical dilemmas, and to “want” to do so as a personal mandate.

My third proposition relates to competition in the marketplace. Yes, the advertising business is one of the most competitive businesses on the American landscape. Clients compete against clients for business; agencies compete to win and hold accounts; media companies compete online and in traditional media to win business; and third party suppliers stand in line to provide needed services. I have had the opportunity to visit with many ad professionals and to hear from them just how competitive they find their business lives. For example, I worked with a seasoned creative director from the Detroit market on supervising student teams at Michigan State University in their design of a PSA campaign for a national charity. After we had worked together for several days and gained trust, I asked him one evening, “How do you feel about ethics in advertising?” He paused for a minute or two while continuing to work on his laptop; I think he may have been looking up “Wally Snyder and Advertising Ethics.” Then, he said, “I’ve worked for some of the most ethical and some of the most unethical people in the business.” He paused again, and then said, “They are going to be afraid that if they are ethical they won’t be able to compete against those cheating.”

My answer, and proposition, to my advertising colleague, and to you, is that being ethical does not make one less competitive. To the contrary, if you are doing the right thing you will connect with your clients and customers in a powerful and positive sense. My favorite quote on this comes from Phil Nike, inducted into the Advertising Hall of Fame, when he said, “Play by the rules, but be ferocious!” This powerful statement resonated with me, as a trial attorney, whose goal was to win the case and to follow the extensive ethical rules regarding transparency of your arguments and the evidence you were relying upon.

The fourth proposition is that, because of the recent power consumers have achieved in the digital world of communications, including the power to block ads from their devices, those companies practicing enhanced advertising ethics will be the winners, the only winners. As I document throughout my book, those to whom we advertise now possess “Consumer Information Power” that allows them to learn everything—good and bad—about a company, its products, and advertising. For instance, go on YouTube and look up “offensive advertising.” Or Google “Volkswagen” and/or “diesel emissions tests” and you can read all the news articles about the government’s latest investigation into emission testing “cheating.”

This information power is now coupled with the ability of consumers to block some or all advertisements on any website they explore. Apple’s decision to accommodate consumer choice on whether they want to view ads when seeking original or editorial information on a site is a “game changer” for our industry. Within but a short time, 16% had blocked ads resulting in a loss of ad revenue and money needed by the websites to produce the original content. It is now in the hands of the consumer to make the choice if he or she wants ads, and indirectly, whether the financial model for paying for the production of online information through advertising will continue to work. Fortunately, consumers can “whitelist” a site to continue to receive its advertisements. This choice will be based on how those ads are presented in terms of their attractiveness, usefulness, and the ethical manner in which they are delivered. This will be discussed more in Chapters 4 and 5.

Making the business and personal cases for ethics in advertising

There are two strong cases to be made for why the teaching and practice of enhanced advertising ethics is critical in today’s marketplace. When I began my proposals for enhanced ad ethics, I focused on making a business case to influence individual companies as to the commercial benefits flowing from high ethics. This remains an important argument. Then, over the years, I came to realize that the personal case is what drives our professionals to practice enhanced ethics, and they are the ones upon whom the responsibility rests for the company, as they daily encounter ethical dilemmas. The two cases are related: our professionals can be motivated by knowing how important ethics is to driving a successful business, and their personal desires to do the right thing lead to ethical behavior from which the business benefits.

The two cases are also related in practice. Companies that want to build their businesses by winning over consumers who value enhanced ethics will establish ethical goals and structures to enable their professionals. And their professionals are the ones being called on daily to exercise enhanced ethics for the company. The Principles for Advertising Ethics, adopted by the Institute for Advertising Ethics, call upon companies to fully support and post them for their professionals, and the principles, themselves, are directed to individual professionals for their implementation.

The importance of advertising and its purpose

We begin with a fundamental proposition that I have come to believe as a counselor to the business of advertising, but that is not always understood within the business: advertising is important, as a business and profession, because it advances the social and economic welfare of America. This is a view understood by economists and business advisors. Gene Ahner in his book on business ethics states, “Six services are considered critical in a global economy: accounting, advertising, banking, insurance, law and management consulting.”³

Ahner also urges that business entities need to establish a business purpose that “will eventually come to making some contribution to the general welfare of society. And that is what can inspire and motivate dedication to the core values of the company.”⁴

As one who has spent his entire career in the competitive field of advertising, here is my statement as to our industry’s core business purpose. Advertising:

• Provides consumers with commercial information on product, service and organization in making purchase decisions. Advertising is central to our capitalist economic system in spurring consumer purchase through awareness of products and services and their attributes.

• Provides a vehicle for price competition and product innovation. After all, if you could not comparatively advertise, there would be little reason for improving your product or engaging in price competition. The government agreed with cases striking down prohibitions by professional associations against their members advertising their services (e.g., doctors and dentists). The legal support climaxed in 1976 in the Virginia Pharmacy Board case when the Supreme Court for the first time ruled that truthful advertising is protected under the First Amendment to the United States Constitution. Justice Blackmun, speaking for the majority of the Court, stated that truthful commercial information is as important to the public as political speech.⁵

• Pays for the entertainment we get offline and increasingly online. Beginning with print, and moving through radio and television, the American economic model has relied upon advertising to provide public news and entertainment. Even with cable and satellite platforms, advertising remains important in reducing consumer costs to view. Advertising models are being d...