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Improper accounting practices top ethical concern in U.S. business
August 30, 2004
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Framingham, Mass. -- A new poll from IDG's CMO magazine, a business publication for Chief Marketing Officers, shows almost half (48 percent) of marketing executives believe improper accounting practices is number one among three top ethical issues facing U.S. business, followed by conflicts of interest (42 percent) and deceptive sales and marketing practices (42 percent).  The poll comes amid corporate scandals rocking the nation, including cases involving brand names such as Enron, Tyco, Pfizer and Martha Stewart.

Fully a third (31 percent) of marketing chiefs warn they are not confident U.S. companies are taking appropriate actions to stem the tide of corporate scandals. In their careers as marketers, the executives say they have personally witnessed colleagues: participating in high pressure, misleading or deceptive sales tactics (45 percent); misrepresenting company earnings, sales and/or revenues (35 percent); withholding or destroying information that could hurt company sales or image (32 percent), and conducting false or misleading advertising (31 percent). When asked the best way to deter future unethical behavior, almost three-quarters of respondents (73 percent) answered increasing penalties for offenders, with 64 percent suggesting employee education programs and 52 percent recommending continued publicity about those being punished for unethical behavior.

Ninety-four percent of marketing chiefs participating in the poll are actively following the on-going corporate ethics scandal cases, with the majority (66 percent) stating they want to know what demands are being placed on corporate America.  Half of respondents (50 percent) are monitoring the cases because they want to avoid similar situations while 55 percent are watching from the sidelines out of curiosity.

In spite of the concern expressed by some marketers taking the poll, the majority (68 percent) say they are confident in the actions of U.S. companies aimed at preventing future financial mismanagement and scandals.  The majority also rates America's companies as somewhat ethical (62 percent).  Interestingly, only 11 percent rate the actions of U.S. companies as very ethical.  Yet, when asked to rate their own company, 59 percent say they view their companies as very ethical. Additionally, more than half (52 percent) of marketing strategists believe, based on their own experience and knowledge, that the ethical standards in their company have improved during the last two years.

"Marketing chiefs have a wide view of their workplace environs and interact with peers across many functions,” says CMO magazine Editor in Chief Rob O'Regan. “They, almost better than any other executive, know first hand what is and isn't happening inside U.S. companies.  This poll is proof positive that all executives need to roll up their sleeves and work harder to clean up U.S. businesses, establishing ethical practices as a primary objective for the future.  If they do not heed this clarion call, they stand to further erode consumer confidence."

The CMO Marketing & Ethics News Poll was designed to elicit the opinions of CMOs-executives responsible for building brands, growing revenues, and courting consumer affinity-on a wide range of ethical issues facing the nation.  Additional highlights appear below.

Ethics and Legal Violations:

Forty-one (41 percent) of respondents say their company has suffered a violation and 39 percent say they have not seen a violation in the past two years.  Marketing strategists whose companies experienced a violation say the leading outcomes after a violation are: termination of employees (84 percent), an incident report to law enforcement (36 percent), temporary suspension of employees (32 percent), and a lawsuit being filed against an employee (31 percent).  The majority of the group who experienced a violation (73 percent), state the incidents did not have a significant impact on their marketing efforts.

Policies & Enforcement:

While 86 percent of respondent companies have an ethics policy to govern the decisions of employees, only 58 percent of marketing chiefs say their CEO/COO is directly involved in creating and communicating ethics policies, and only 56 percent say their executives are required to take ethics training. 

"This finding suggests senior management needs to take a more active role in setting, and building awareness about, ethics policies since their actions set the tone for the rest of the organization," says O’Regan.

The top activities covered by existing ethics policies are: financial reporting; sexual conduct; conflict of interest; bribery, coercion or kick backs; gifts and graft as well as applicable laws and regulations; safety; online customer privacy, and customer data handling.  Nearly three quarters of respondents (71 percent) say they work in a place with a method for reporting unethical behavior anonymously and 61 percent say there are policies to protect those who point out unethical behavior.  Ethics training leaves room for improvement, with nearly a third of respondents (27 percent) stating their company does not provide training on how to handle unethical practices they may observe.  According to these marketing executives, the number one factor with the greatest impact on increasing the need for ethics policies in U.S. companies is: misstatement of financial results to make the bottom line look better (83 percent).

About the CMO Marketing & Ethics News Poll:

The CMO Marketing & Ethics News Poll was conducted by CMO magazine to learn the opinions of chief marketing officers about the state of ethics in U.S. business and its impact on the marketing function.  The survey was conducted online from July 28 to August 4 over an independent list of senior marketing executives from the e-Rewards for Business panel.  Of the 300 marketing executives who responded, 83 percent hold the title of Vice President or above up to, and including, the title of CMO.  Eighty-nine percent (89 percent) of respondents work in organizations with 500 or more employees, with an average company size of 15,630 employees and average marketing budgets of $76.4 million. At a 95 percent confidence level, the margin of error is +/- 5.7 percent.  
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