In response to Morningstar’s release of carbon risk (CR) scores in May 2018, (environmentally) sustainable mutual funds in the U.S. showed a greater reduction in their portfolio CR relative to conventional funds. The observed causal impact of this third-party disclosure is consistent with the funds’ primary investment objectives. Differences in fund names, potentially driven by marketing considerations, appear irrelevant to the behavior of sustainable funds. Conventional funds that are signatories to the UN’s Principles for Responsible Investment (PRI) or those with (...) secondary sustainability mandates behave more like other conventional funds rather than sustainable funds. These funds appear relatively insensitive to disclosures as their sustainability considerations are superseded by other primary investment criteria. Fiduciary and legal bonding influences fund managers’ response to sustainability disclosures. Sustainable funds lower their CR score by reducing exposure to fossil fuels, not by increasing exposure to renewables. (shrink)

The Sarbanes–Oxley (SOX) Act was passed in 2002 in response to various instances of corporate malfeasance. The Act, designed to protect investors, led to wide-ranging regulation over various actions of managers, auditors and investment analysts. Part of SOX, and the focus of this study, targeted the disclosure by firms of “pro forma” earnings, an alternate (from GAAP earnings), flexible and unaudited measure of firm performance. Specifically, SOX directed the Securities and Exchange Commission (SEC) to craft regulation which would reduce – (...) and preferably eliminate – any pro forma earnings disclosure which might be “misleading”. Examining earnings press releases over a 3-year period, this study addresses three questions. Were firms disclosing pro forma in a potentially misleading manner, what was the nature of this potentially misleading disclosure, and did SOX affect the disclosure practices? We find the following. In 2001 (prior to SOX), 53 firms – over 10% of all U.S. S&P 500 firms – were disclosing pro forma earnings in a potentially misleading manner. This was being done most commonly by using traditional GAAP terminology (e.g., “net income”) in the press release headline to describe what was later in the press release revealed to be a pro forma amount (i.e., “net income excluding special items”). By 2003 (subsequent to the SEC regulation), potentially misleading disclosure practices were seen in less than 1% of the earnings press releases of S&P 500 firms. This significant reduction suggests that managers, prior to the regulation, were either careless in their pro forma reporting practice, or were intentionally – and unethically – attempting to mislead investors. Either way, we conclude that the SEC regulation was both necessary and effective. (shrink)

Many argue that consumers possess a “right to know” when products contain ingredients derived from genetically modified organisms, on the grounds that it would protect consumer autonomy. In this paper, I critically evaluate that claim. I begin by providing a version of the “consumer autonomy” argument, showing that its success relies on ambiguities in the notion of autonomy. I then distinguish four approaches to autonomy and articulate the circumstances under which they would support active disclosure of a product property. I (...) argue that none of these conceptions would support active disclosure of the presence of ingredients derived from genetically modified organisms. (shrink)

Previous behavioral research on advertising deception has focused on the extent to which consumers would be misled by claims and implications of advertisements. The present research examines the effect of an important, but largely neglected, dimension: the severity of anticipated harm as a result of being deceived. Two experiments disentangle the effect of anticipated harm on consumer brand attitudes and purchase intentions from that of perceived deception. Interestingly, greater harmfulness increases diagnosticity of perceived deception, which partially accounts for consumers’ negative (...) reactions to deceptive advertising. Theoretical, methodological, and ethical implications are discussed. (shrink)

Misleading information pervades marketing communications, and is a long-standing issue in business ethics. Regulators place a heavy burden on consumers to detect misleading information, and a number of studies have shown training can improve their ability to do so. However, the possible side effects have largely gone unexamined. We provide evidence for one such side-effect, whereby training consumers to detect a specific tactic (illegitimate endorsers), leaves them more vulnerable to a second tactic included in the same ad (a restrictive qualifying (...) footnote), relative to untrained controls. We update standard notions of persuasion knowledge using a goal systems approach that allows for multiple vigilance goals to explain such side-effects in terms of goal shielding, which is a generally adaptive process by which activation and/or fulfillment of a low-level goal inhibits alternative detection goals. Furthermore, the same goal systems logic is used to develop a more general form of training that activates a higher-level goal (general skepticism). This more general training improved detection of a broader set of tactics without the negative goal shielding side effect. (shrink)

In recent years, insurance companies have begun tracking their customers’ behaviors and price premiums accordingly. Based on the Market-Failures Approach as well as the Justice-Failures Approach, I provide an ethical analysis of the use of tracking technologies in the insurance industry. I focus on the use of telematics in car insurance and on the use of fitness tracking in life insurance. The use of tracking has some important benefits to policyholders and insurers alike: it reduces moral hazard and fraud, increases (...) actuarial fairness, and incentivizes safe behavior. These benefits, however, are outweighed by significant moral objections. First, the use of tracking technologies significantly undermines the fairness of the interaction between insurance companies and policyholders. Specifically, the use of tracking eliminates information asymmetries, but in such a way that favors insurers exclusively. Furthermore, tracked behaviors and the ability to choose to behave safely are highly correlated with other variables such as income. Therefore, tracking-based insurance relies on and exacerbates existing inequalities and injustices, which undermines the benefits that tracking is supposed to introduce. (shrink)

As information technologies have become synonymous with progress in modern society, several ethical concerns have surfaced about their societal implications. In the past few decades, information technologies have had a value-laden impact on social evolution. However, there is limited agreement on the responsibility of businesses and innovators concerning the ethical aspects of information technologies. There is a need to understand the role of business incentives and attitudes in driving technological progress and to understand how they steer the ethics discourse on (...) technology. In the information technology industry, there is an observed trivialization of ethics supported by a business driven and technology-centric approach to ethics. This trivialization rests on hardened beliefs, ideologies, and arguments which hint at reduced accountability for business and tend to individualize social responsibility. The phenomenon of ethics trivialization needs to be duly addressed to resolve the tensions between business needs and ethical concerns. This paper has identified from literature and conceptually analyzed the beliefs and ideologies underlying ethics trivialization which undermine ethics in business contexts. The paper has attempted to address the business concerns indicated by this phenomenon as well as highlight the weaknesses of its assumptions, rhetoric, and justifications. The aim of this paper is to systematically present the justifications in favor of and against the practice of ethics trivialization in the information technology domain, thereby highlighting the need to develop frameworks for assessment of ethical responsibility, accountability, and democratization of the value trade-offs involved in the design of technologies. (shrink)

Consumer autonomy is a fundamental topic for marketing ethics scholars. Nonetheless, autonomy’s philosophical treatment may have compromised its conceptual clarity. After reviewing the relevant ethics literature on consumer autonomy, the benefits of formally defining consumer autonomy are illustrated, and a novel formalization is adapted from potential performance theory mathematics. The goal is to transfigure a hitherto amorphous topic via a mathematical formalization that defines true autonomy, actual autonomy, reliability of wills, and reliability of product choice. The crucial and surprising result: (...) an action that decreases true autonomy can increase actual autonomy if that action engenders a sufficient increase in one or both types of reliability. Relating the insights from the formalization to the long-standing debates in consumer autonomy suggests fruitful avenues for future research. (shrink)

This paper examines ethical issues involved in the mass marketing of securities to individuals. The marketing of products deemed “socially questionable” or “sinful” (like tobacco and alcohol) has long been recognized as posing special ethical challenges (Kotler, P. and S. Levy: 1971, Harvard Business Review 49, 74–80; Davidson, D. K: 1996, Selling Sin: The Marketing of Socially Unacceptable Products (Quorum Press, Westport). We contend that marketers should consider securities (i.e. common stock, options) in a similar vein, as a potentially dangerous (...) product. Given the inherent volatility of equity prices, responsible marketers need to exercise caution and restraint in promoting securities. We evaluate whether the NYSE’s current guidelines adequately encourage ethical marketing practices and deter unethical ones. Using recent examples of controversial brokerage advertisements, we expose weaknesses in the Exchange’s vague injunction that members not “mislead” reasonable people by making “exaggerated claims” in their communications. From a moral perspective, we find it troublesome that intentionality need not be present for a promotion to be considered misleading. Also problematic is the continued invocation of the reasonable person standard to judge the propriety of advertisements. We close with some thoughts on improving the quality of securities marketing. We suggest that the NYSE, in the interests of fostering higher ethical behavior among member marketers, may need to revive a marketing code of conduct prevalent on Wall Street in an earlier era. (shrink)