HC2121 - Comparative Business Ethics: Herbalife Case Study Report

This case study report examines the business ethics and social responsibility of Herbalife, a multi-level marketing (MLM) company. The report delves into Herbalife's business model, comparing it to legitimate business practices and pyramid schemes. It analyzes the company's corporate social responsibility (CSR) initiatives, including its ethical standards, philanthropic efforts, and environmental approach. The report highlights the ethical considerations surrounding Herbalife's recruitment practices and compensation model, discussing the company's response to accusations. The conclusion emphasizes the importance of business ethics and the company's efforts to maintain transparency in its operations. This case study provides a comprehensive analysis of Herbalife's ethical and social responsibilities, drawing upon academic sources to support its findings.

COMPARATIVE
BUSINESS ETHICS
AND SOCIAL
RESPONSIBILITY
Student’s Details-

Introduction
 Business ethics and social responsibility are the
important concepts in the business.
 Business ethics are the moral principles and
moral values of a business that needs to be
fulfilled(Crane, et al., 2019).
 Social responsibility of a business are the
obligations that needs to be fulfilled towards
the different stakeholders of the company.

Multi-level Marketing
Concept
 Multi-level marketing includes the selling of
products through the recruitment process.
 There are various regulations and guidelines
that are needed to be fulfilled under this
model or marketing concept(Good &
Hassay, 2015).

Herbalife Multi-level
Compensation Model
 Herballife is the multi-level marketing
corporation that is expected to have 3.7
million members in 90 different
countries(Partnoy, 2014).
 The company has a strong distribution of
contractors who help the company to make
revenue.

Herbalife accused of using
Pyramid Scheme
 Herbalife engages with the customers to
recruit new people rather than making them
convinced to buy the product again.
 The company forces the recruitment process
which is unethical and seems to be a part of
pyramid scheme.

Legitimate Model and Pyramid
Scheme
 Legitimate business has major emphasis on
making the sale of the product rather than
recruiting people for making further sales.
 Pyramid scheme is the fraudulent activity
that is engaged in recruiting people for the
purpose of making sales(Sullivan, 2019).

Differences in Both Models
Legitimate Business
Model
Pyramid Scheme
 It is legal in the eyes
of the law where the
major focus is on the
increasing in sales.
 Compensation is
decided on behalf of
the sales made.
 It is an illegal activity.
 Compensation is
given on the basis of
people recruited.

Corporate Social Responsibility
 It is considered as the responsibility of a
business to serve the interest of the
stakeholders.
 CSR suggest that the main aim of the
company is to fulfill the social responsibility
along with the earning of economic benefit.
 The company’s policies and operations
should be ensure the wellbeing of society
and environment.

Social Responsibility of Herbalife
 The social responsibility program of
Herbalife promotes “the right, honest and
ethical thing”.
 The company has effective corporate
governance that takes important decisions
and provides direction to the organization.
 The company has laid down certain ethical
standards for the employees to ensure an
ethical code of conduct.

Continue
 Herbalife has made philanthropic efforts
through Herbalife Family Foundation and also
made partnerships with GAIN to avail
nutritious products to customers.
 The company has been using employee
engagement programs and also avails them
with the complimentary products.
 Herbalife has save green approach for
maintaining the integrity of the environment.

Conclusion
 It can be concluded that business ethics is
crucial for the business as it helps in
maintaining transparency and ethical decision
making.
 Herbalife continues to be direct selling
company despite various accusations being
imposed upon the company.
 However, the company has fought against the
allegations by maintaining transparency in all
business works.

References
 Crane, A., Matten, D., Glozer, S. & Spence, L., 2019. Business
ethics: Managing corporate citizenship and sustainability in the
age of globalization. s.l.:Oxford University Press.
 Good, W. & Hassay, D., 2015. Multilevel marketing plans: A
new channel of distribution. In: Proceedings of the 1995 World
Marketing Congress . s.l.:Springer, pp. 294-300.
 Partnoy, F., 2014. Is Herbalife a Pyramid Scheme?. [Online]
Available at:
https://www.theatlantic.com/magazine/archive/2014/06/wall-
streets-6-billion-mystery/361624/
[Accessed 21 September 2019].
 Sullivan, M. O., 2019. Multi-level marketing has been likened to
a legal pyramid scheme – the backlash against it is growing.
[Online]
Available at: http://theconversation.com/multi-level-marketing-
has-been-likened-to-a-legal-pyramid-scheme-the-backlash-
against-it-is-growing-117931
[Accessed 22 September 2019].