Impact on Ethics from Straight Commission Compensation Systems

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The potential negative impact on consumers when faced with a salesperson working on a straight commission compensation system (SCCS) is quite significant when considering the natural tendency of an employee’s perception of their rights and duties, e.g. the duty to sell a service or product for their employer and their consequential right to the greatest compensation for that duty which they can muster. The utilitarian approach to this system would further indicate that the salesperson could justify overselling or presenting a product as deceptively beneficial because the overall transaction could provide greater financial incentives to the agent and employer than the associated harm to the consumer (Velasquez et al., 2013).

Furthering this dilemma is the potential for management to directly impact or negate this mind-set when they, themselves, receive the trickle-down commission benefit. Management which encourages above-the-board consumer disclosure are far more likely to employ agents which adhere to, and even promote, more open disclosure and, as they strive to meet the business ethics level publicized by their superiors, will likely provide a higher benefit to the consumer and employer as their interpretations of justice and fairness more closely align to what is proper rather than what is due them (Trevino & Weaver, 2001).

Such a premise was strengthened by a study involving financial product salespeople who were provided with middle of the road commissions promoted by management which considered the employees’ backgrounds in terms of whether they were commission-oriented or consumer-oriented. Hiring only those which were deemed consumer-oriented and then promoting the tri-benefit of income, employer demands, and consumer needs provided a product for the consumer with appropriate disclosure, efficient sales achievements for the employer, and satisfying income levels for the representative (Kurland, 1995).

References

Kurland, N. (1995). Ethics, incentives, and conflicts of interest: A practical solution. Journal of Business Ethics, 14(6), 465-475.

Trevino, L. K., & Weaver, G. R. (2001). Organizational justice and ethics program follow-through: Influences on employees' harmful and helpful behavior. Business Ethics Quarterly, Vol. 11, Issue 4, 651-671.

Velasquez, M., Andre, C., Thomas Shanks, S., & Meyer, M. J. (2013, September 30). Calculating consequences: The utilitarian approach to ethics. Retrieved from http://www.scu.edu/ethics/practicing/decision/calculating.html