Weighing the importance of sales and ethics

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When I first came to Colorado Springs in the summer of 1986, with a freshly minted doctorate from a university on the east coast, I thought I knew it all, especially when it came to ethics.

I was teaching ethics seminars at Boston University’s medical school. I drafted the Informed Consent form for one of the first hospital Institutional Review Boards in the country and was a published author on the subject of business ethics.

But, it wasn’t until I gave a breakfast presentation to a group of local real estate brokers, I realized how little I knew. As my presentation ended and some questions were posed by audience members, one guy at the very back — it’s always that one guy at the very back — who said: “nothing happens in America until a sale is made.” With this statement, he summarized American capitalism and the uselessness of my presentation of economic frameworks and ethical principles.

It was friendlier than the request not to ever come back I got that same year from the dean of Beth-El School of Nursing for almost inciting a riot among the students after my presentation.

I told them they were overworked and underpaid, and should stand up to doctors who treat them poorly.

So, if sales determine the economy or at the very least make the wheels of commerce turn, does that mean that a sale must be consummated no matter what? Does that mean that the completion of a sale trumps ethical considerations?

According to Professor Shlomo Benartzi of UCLA, a specialist in behavioral finance (an offshoot field of behavioral economics), his stock-broker clients should come clean when the stock-portfolio of a client is down, tell them the truth about their own bad picks and thereby gain the trust of their clients over time. In the long-run, it pays to be honest with your clients. Really?

John Maynard Keynes, the famous British economist who inspired the New Deal and the current stimulus packages, is reputed as having said instead that in the long-run we are all dead. Ethical behavior is deemed economically prudent; that’s good news! Does that mean that sales at any cost, no matter what, will be curtailed?

In the popular 2005 book Freakonomics Steven Levitt and Stephen Dunbar retell the case of Sonoma Williams being unable to sell a bread maker (it was too expensive at $199.99). The counter-intuitive solution was to introduce a more expensive bread maker, so that the current one would seem cheap enough. Sure enough, sales soared! Why? Because we are comparative shoppers who don’t have an absolute value attached to whatever we buy, bread makers or houses.

Benartzi and his colleagues have done studies that prove that the framing of sales (just like comparing) is most important: labeled cold cuts “90 percent fat-free” sell more than “containing 10 percent fat,” even though they say the same. It’s not what you say, but how you say it. Happy hour at restaurants are popular because of this psychological effect: we are attracted to what we get for free (or discounted) than to what the actual cost is going to be at the end of the evening. Is this cheating? Is this ethical? Since nothing takes place in a restaurant, as the real-estate broker told me 25 years ago, until something is sold, what criteria of ethics should be adhered to?

There are some simple ethical principles that relate to food purchase and liquor service. First, the balance between cost and quality must be renegotiated daily, especially as it relates to perishable products, from eggs and dairy products to fish and meats. Even if guests refuse to pay the extra cost for wild as opposed to farmed salmon, will the owner be willing to increase his food cost and reduce profits? This in itself is a moral dilemma; it balloons quickly if the wait staff misinforms guests about what they are served. Second, free-pour may pose ethical quandaries to either the owner (if the pour is heavy), to the liquor board (if it’s really heavy) or to the customers (if it’s light). Should the bartender adhere to the letter or to the spirit of the law? Each drinker is unique, and no two drunks ever display identical behavior. What is the right thing to do? Can your training ever be fool-proof?

Then there are broader ethical questions that come about from owning a restaurant: who should get credit for the success or failure of a restaurant — owner, chef, servers, bartenders, dish-washers? How much should be shared with guests — gossip about the internal workings of the restaurant, information about the food and liquor sources, whether or not the restaurant is profitable? Should the restaurant operate as a cooperative where decisions, policies, and profits are equally shared? Should it be competitive where servers who sell more get bonuses and those selling less are fired? Should owners cut corners to keep costs down? Should employees steal as much as possible without being caught?

If nothing happens in America without a sale, then nothing good happens in America without an ethical sale, a sale where integrity is maintained every step of the way. But the sale is only a first step, not a final step in the relationship that develops among the parties.

Raphael Sassower is professor of philosophy at the UCCS and has fourteen years’ experience as a restaurateur.