71 5.4 B2B and B2C Marketer Ethical Dilemmas
Learning Objectives
- Explain how B2B marketing creates unique ethical risks and challenges
- Describe the risks associated with customer gifts and bribes
- Explain how ethical dilemmas in business-to-business marketing differ from those in consumer marketing
In June 2013, Los Angeles United School District (LAUSD), the second-largest school district in the U.S., announced that it had signed a $30 million contract with Apple to provide students with iPads that were preloaded with educational software from Pearson PLC. It was an ambitious education technology initiative that promised to give students new learning tools and technology literacy.
By the end of 2015, the superintendent would resign, the program would be canceled, Pearson’s philanthropic foundation would be closed, the companies would pay a $6.4M settlement to the school district to prevent litigation, and the FBI would be involved in a criminal probe of the program. It would be hard to imagine a worse result for any of the parties involved.
Circumventing the Public Bid Process
California law requires that such large projects go to public bid, which this project did, but well before the bid process, the email record between LAUSD Superintendent John Deasy and then CEO of Pearson Marjorie Scardino suggested that deals were made to purchase Pearson curriculum and Apple hardware. In fact, Superintendent Deasy made the initial introduction between Scardino and Apple CEO. In an email to Scardino, Deasy writes:
I wanted to let you know I have [sic] an excellent meeting with Tim at Apple last Friday. The meeting went very well and he was fully committed to being a partner. He said he and his team will take 5 days to present a price plan and scope of partnership. He was very excited about being a partner with Pearson. I think it would be good for you to loop back with him at this point. I will reach out to you again in a week.[1]
Deputy Superintendent Jaime Aquino was tasked to work with Pearson on the project in advance of the bid process. His email messages indicate that he was attempting to influence the bid process in Pearson’s favor. His email messages to Pearson executives include the following statements:
I am not sure if legally we can enter into an agreement when we have not reviewed the final product for each grade and if the materials have not been approved by the state. I believe we would have to make sure that your bid is the lowest one.[2]
Violating the Restriction on Nonprofit Philanthropy
Pearson’s non-profit philanthropy foundation was also involved in securing the deal, which violated certain federal restrictions. A Pearson Foundation vice president, Sherry King, was deeply involved in discussions with top officials at the Los Angeles Unified School District about selling the district the new Common Core digital curriculum in 2012 and 2013, well in advance of the formal bid process. The Pearson Foundation was providing education le