Ethical Issues in Marketing: Rip Curl and Commonwealth Bank

Introduction to Business Ethics and Ethical Marketing

Ethics can be defined as the standards employed by people to choose the right course of action among diverse, often conflicting possibilities. Ethics rely on a logical and rational set of principles to arrive at a decision, which is in essence a cognitive procedure or practice. Ethical standards are an imperative element for any company or organization, especially in contemporary times, where the growth of the internet means that information is accessible to virtually any individual and people are prone to spending extended periods online (Sandilands, 2016). Business ethics impacts organizations in various ways. One of those ways is the manner in which companies carry out their advertising. The majority of businesses need to advertise their products or services with the principal aim of increasing their customer base and, thereby, their revenues. Businesses are obligated to undertake such activities ethically. Ethical advertising is supposed to be honest, explaining clearly and unambiguously the salient features of their offerings to target consumers.

Ethics also affect the way companies undertake their selling methods and practices. How a business chooses to direct its sales is a key ethical decision that defines its integrity. Businesses are obligated to be honest and fair to their clients while undertaking such operations. For example, due to business ethics, an organization is expected to candidly disclose both the benefits and the shortcomings or likely harms of its products and services and acknowledge them fully (Sandilands, 2016).

Ethical marketing is a philosophy that places emphasis on honesty, fairness, and responsibility. Although judgments of right and wrong can be subjective, an overall set of guidelines can be established to ensure that an organization's values are communicated and upheld. Some of the principles encompassed in ethical marketing include a mutual standard of truthfulness in marketing communications, a clear distinction between factual advertising and exaggeration, and the requirement that recommendations be transparent and apparent. Another principle is that the privacy of consumers ought to be maintained at all times. Finally, marketers should practice and adhere to government standards and regulations (Anastasia, 2015). The following paper elucidates the ethical issues in the marketing field and discusses issues two corporations in Australia have faced concerning the manner in which they conduct their business. The two companies examined are Rip Curl and Commonwealth Bank.

Rip Curl: Slave Labor and Misleading Product Labeling

The fashion industry has grown to become not only one of the most commercially significant industries but also one of the most closely scrutinized, owing to the large public following and rapidly evolving practices in the sector. One major controversial issue in the industry has been the location of clothing production and the sourcing of raw materials — for instance, whether clothes are manufactured in facilities that strictly adhere to child labor norms and whether products are composed of the materials advertised. Rip Curl is one of the largest and most successful companies in Australia, designing, manufacturing, and retailing surfing sports gear and related accessories. Rip Curl is also one of the main sponsors in the Australian athletic scene. The primary unethical practice the company has been involved in is the use of slave labor in North Korea to manufacture its clothing economically.

For a considerable period, Rip Curl marketed and retailed clothes valued at millions of dollars that were made in North Korea — a region where factory workers are forced to labor under slave-like conditions. Directed investigations revealed that the Taedonggang Clothing Factory hired personnel drawn mainly from the suburbs of the North Korean capital, Pyongyang, to manufacture items from Rip Curl's 2015 winter collection (McKenzie and Baker, 2016).

In addition, the company engaged in an unethical marketing practice by advertising and selling these garments under misleading declarations. Specifically, the clothes sold in the company's retail outlets carried "made in China" labels, which was false. Workers in North Korea are frequently exploited, forced to work extremely long hours for minimal or no pay. Furthermore, employees who fail to comply with such conditions are forcibly confined in work camps (McKenzie and Baker, 2016). This raises serious questions regarding the ethical marketing and corporate standards of Rip Curl. The company claimed that the ethical lapse was attributable to its subcontractors. However, this explanation is misleading because Rip Curl made no attempt to inform its consumers that its clothing was made in North Korea and even falsely labeled its products as "made in China" (McKenzie and Baker, 2016).

Commonwealth Bank: The CommInsure Claims Scandal

The second corporation under discussion is Commonwealth Bank. In recent years, the company faced issues with unethical behavior in its financial planning department. Now, Australia's largest bank has been linked to unscrupulous conduct in its life insurance business, known as CommInsure. Specifically, CommInsure is alleged to have been deliberately delaying payouts owed to policyholders — reportedly in the hope that clients would pass away before settlement payments became due (Thomsen, 2016). This scandal, involving claims from sick and dying policyholders, raises serious ethical questions, particularly given that two years earlier the company had already been at the center of a Senate Inquiry due to the conduct of its financial planners (Thomsen, 2016).

According to Dr. Benjamin Koh, the former chief medical officer of CommInsure, the company's insurers placed significant pressure on doctors to alter their medical opinions in ways that would allow the company to refuse or delay payouts. He further alleged that medical files containing relevant patient information went missing, and that out-of-date medical terminology was used by CommInsure to deny policyholders their rightful claims (Thomsen, 2016). The unethical conduct was compounded by the fact that doctors who raised these concerns with senior managers and executives of CommInsure were subsequently dismissed, accused of violating the firm's IT policy by forwarding records to a personal account (Thomsen, 2016). These actions represent a serious breach of both professional and insurance ethics, undermining the basic obligation of an insurer to deal fairly and in good faith with its policyholders.

Conclusion and Recommendations

Ethics and ethical behavior have become significant attributes for organizations in the present day. Ethics refers to a prescribed or accepted code of conduct, and ethical issues encompass a set of moral values that must be addressed while carrying out business. Businesses operate within a society structured around moral values, and therefore they bear certain responsibilities: to provide society with quality goods and services that improve people's living standards. Business ethics is an aspect that encompasses corporate social responsibility, through which organizations are both legally and socially mandated to conduct business in an ethical manner (Carroll and Buchholtz, 2012). In the business environment, decisions regarding ethics are made on a daily basis and have an impact on all organizations.

This paper has examined the unethical practices of two Australian companies: Rip Curl and Commonwealth Bank. Commonwealth Bank has demonstrated a pattern of unethical conduct. On this occasion, the financial institution is involved in denying policyholders their rightful claims through CommInsure — a situation brought to light by its former chief medical officer, who was ultimately dismissed by the firm. The company is alleged to have pressured doctors to change their medical opinions and to have ensured that pertinent files were made unavailable (Thomsen, 2016). Rip Curl, meanwhile, engaged in unethical practices by marketing and selling clothes it claimed were made in China while they were in fact manufactured in North Korea under slave labor conditions. It was unethical for the company to retail such products while concealing these facts from consumers, who have every right to know where the clothing they purchase originates.

A robust Code of Ethics contains provisions that prohibit or limit members of the supply chain from engaging in activities that are harmful or contrary to ethical standards. This implies that both companies discussed above should establish a code of ethics and enforce it rigorously across their supply chains. Both Rip Curl and Commonwealth Bank are duty-bound and obligated to their consumers to be ethical and fair at all times in their operations. In the case of Rip Curl, the company must ensure that all of its suppliers are aware that its terms of trade preclude the subcontracting of manufacturing to uncertified factories. To demonstrate greater accountability, the company should publish a full list of its factories and permit external inspections and audits to ensure that such events do not recur (Wahlquist, 2016). In conclusion, it is imperative for both companies to revise their policies and practices to ensure that proper procedures are followed. Each of these firms must be held accountable for all activities undertaken within their business operations and supply chains.

References

Anastasia. (2015). Social responsibility and ethics in marketing. Cleverism.

Carroll, A., & Buchholtz, A. (2012). Business and society: Ethics, sustainability, and stakeholder management. Cengage Learning.

McKenzie, N., & Baker, R. (2016). Surf clothing label Rip Curl using 'slave labour' to manufacture clothes in North Korea. The Sydney Morning Herald.

Sandilands, T. (2016). Marketing issues that have ethical implications. Chron.

Thomsen, S. (2016). The CBA now faces new investigations over its insurance arm. Business Insider Australia.

Wahlquist, C. (2016). Rip Curl's use of North Korean factories leads to calls for industry transparency. The Guardian.