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Impact of ethics on business performance
Corporate ethics and performance
Impact of ethics on business performance
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The Damon Investment Company manages a mutual fund composed mostly of speculative stocks. You recently saw an ad claiming that investments in the funds have been earning a rate of return of 21%. This rate seemed quite high so you called a friend who works for one of Damon’s competitors. The friend told you that the 21% return figure was determined by dividing the two-year appreciation on investments in the fund by the average investment. In other words, $100 invested in the fund two years ago would have grown to $121 ($21 ÷ $100 = 21%).
Required:
Discuss the ethics of the 21% return claim made by the Damon Investment Company.
Step 1—The Facts:
• An ad placed by Damon Investment Company is claiming a 21% return on their mutual fund of speculative stocks.
• Based on a calculation by one of their competitors, this rate is based on a two year time period.
• In this case we are considering the time value of money in terms of growth where industry standards typically expect rates to be stated in annual terms.
Step 2—The Ethical Issue and the Stakeholders:
The ethical issue in this case relates to the idea that quoted rates are typically stated on an annual rate basis. The calculation of the 21% rate is misleading because it is not specified in the ad that this rate is earned over a two year period, and most people who read the ad will probably assume that what is being quoted is an annual or effective rate.
Stakeholders include anyone who reads the ad, any employee from Damon Investment Company, Damon’s competitors, and current and future customers or shareholders of Damon.
Step 3—Values:
Values include competence, integrity, objectivity, honesty, loyalty to the employer, responsibility to users of financial...
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...will have a better chance of bringing in new long-term customers because they have presented the information fairly and honestly.
Negative consequences:
• Damon may not receive as much interest from prospective customers to purchase this mutual fund.
Step 7—Decision:
In this case the most conservative course of action is to publish the ad with an effective annual rate which would match any available supporting documentation, such as published financial statements.
Only by following typical industry standards can Damon maintain their credibility and reputation in the marketplace which over time will be much more valuable to the company’s long-term sustainability. They will be able to attract more customers and have a better chance of keeping the ones they already have, as well as solidify their honesty and integrity in comparison to their competitors.
The major areas of my values and ethics can be summarized in six words: excellence, personal integrity, responsibility, ambition, accountability, and determination. Excellence guides me when setting targets in all my undertakings; I normally strive to achieve my best. Personal integrity and accountability enable me to make sound judgments to avoid engaging in actions that will hurt me and/or other people around me. Responsibility is important to me as it enables me to identify the part I need to play in my family, at the workplace, and in the community. Lastly, ambition and determination are applicable in providing me with the momentum needed to ensure that all my initiatives and tasks are done to completion.
In light of an evolving market, faced with new competitors, and after a careful analysis of their current customers, the Vanguard Group (hereinafter referred to as “Vanguard”) realizes it must rethink its entire marketing strategy. However, in order to protect and leverage their competitive advantage, which is their low management fees, and to optimize the loyalty that their customers continuously demonstrate toward their organization, they must now target the most profitable segment for them, and develop the best way to serve and delight these customers.
Every company that has a product to sell wants to have their advertisements grab the attention of the potential buyer. Companies today are competing at high levels to come up with the advertisements that will be flashy and aggressive so consumers will become interested in their product. However, a commercial or an ad might not get the initial point across or cause many viewers to be confused when they see them. Sometimes, what the company is trying to do might offend people. Ethical lines may be walked upon so that the strong points can be presented to the consumer.
LRNA must also determine what marketing mix to utilize and how much of its marketing budget should be allocated to each media strategy. First, we would advocate increasing the marketing budget to approximately $30 million to better position LRNA against our competitors. Since our target consumers are educated, married males in the 35-64 age group with annual incomes of $100K or above, we would suggest allocating sixty percent of our budget to advertising through television and print ads with a 65-35 split between the two. Ads should present the dual nature of the Discovery and Land Rover brand as rugged, exciting, but safe vehicles equally adept at handling the challenge of the jungles of Madagascar and the challenge of the city highway with your children onboard. Print ads would be placed in business and news magazines as well as national newspapers such as The New York Times, Wall Street Journal, Financial Times and Washington Post.
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