Report On Business Ethics & Social Responsibility

Business Ethics & Social
Responsibility

EXECUTIVE SUMMARY
Business ethics are vital for the long term success of the business organisation. However
it is very challenging for the organisation to establish a balance between profitability and
corporate social responsibility. The report has provided a comparative analysis of difference
between pyramid-scheme and direct selling through a case example of Herbalife. It has also
analysed the approaches through which organisation has been contributing towards its social
responsibility. Thus from the study it can be concluded that with direct selling service providers
must assure that they does not neglect ethical perspectives and provide full support to social
responsibility.

TABLE OF CONTENT
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
Case study overview ...................................................................................................................1
MAIN BODY...................................................................................................................................1
Misinterpreting multilevel compensation model with pyramid scheme......................................1
Difference between pyramid scheme and legitimate business model ........................................3
Corporate social responsibility of Herbalife ...............................................................................6
CONCLUSION................................................................................................................................8
REFERENCES ...............................................................................................................................9

INTRODUCTION
Business ethics and social responsibility is termed as the contribution of the business
organisation towards society and for its welfare. The organisations must assure that their
operational activities are ethical and are not harmful for the environment or humanity. Multilevel
marketing (MLM) is defined as the direct selling approach in which profits and commissions are
earned by direct selling of products as well as encouraging the recruitments of new distributors
as they also made sales. MLM is also known as the network marketing and a huge network of
distributors is developed by imposing a specific entry fees or the investment (Bosley and
McKeage, 2015). There has been several legitimacy issues associated with multilevel marketing
and the fraudulent pyramid schemes in which only top layers of pyramid earns profits and the
investment of remaining or joining layers is earned only by encouraging recruitment of other
distributors instead of selling products and services. The report will provide analysis of this case
study of Herbalife so that multilevel model can be distinguished with pyramid scheme and
legitimate business model. It will also discuss the corporate social responsibility policy of
organisation so that ethical and business issues and their management can be evaluated.
Case study overview
MAIN BODY
Company and situational analysis related to case
Herbalife is one of the well known and successful multilevel marketing organisation. It deals in
the personal care, weight management and nutritional care products. Despite great success and
popularity all over the world, the organisation faced allegations of having pyramid scheme
instead of MLM operations. However through providing appropriate proofs towards social
responsibilities and validating differences between pyramid-scheme Herbalife successfully
proved the allegation to be false. It also leads to a debate to have more strict approach to ethics
so that direct marketing are not misinterpreted as pyramid-scheme.
Misinterpreting multilevel compensation model with pyramid scheme
Multilevel marketing has been adopted as legitimate business model but still there are
several countries and organisation which consider this direct selling approach as pyramid
scheme. One of the reason for strong resemblance and association of pyramid scheme and MLM
1