Entrepreneurial Integrity and Ethics PART 1 Entrepreneurship A

Entrepreneurial Integrity and Ethics PART 1 Entrepreneurship: A World of Opportunity Power. Point Presentation by Charlie Cook, The University of West Alabama © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Looking Ahead After studying this chapter, you should be able to: 1. Define integrity and understand its importance to small businesses. 2. Explain how integrity applies to various stakeholder groups, including owners, customers, employees, the community, and the government. 3. Identify challenges to integrity that arise in small businesses and explain the benefits of integrity to small firms. 4. Explain the impact of the Internet and globalization on the integrity of small businesses. 5. Describe practical approaches for building a business with integrity. 6. Describe social entrepreneurship and the costs and opportunities of environmentalism for small businesses. 2– 2 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Integrity and Entrepreneurship • What Is Integrity? Ø An uncompromising adherence to doing what is right and proper v v v Honesty, reliability, and fairness in business practices An essential element of successful business relationships Is as much about what to do as it is who to be. • Doing the Right Thing Ø Ethical issues—questions of right and wrong v v Legal and ethical considerations Conflicts of self-interest 2– 3 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Exhibit 2. 1 Difficult Ethical Issues Facing Small Firms • Relationships with customers, clients, and competitors (relationships with outside parties in the marketplace) • Human resource decisions (decisions relating to employment and promotion) • Employee obligations to employer (employee responsibilities and actions that in some way conflict with the best interests of the employer) • Management processes and relationships (superior–subordinate relationships) • Governmental obligations and relationships (compliance with governmental requirements and reporting to government agencies) • Relationships with suppliers (practices and deceptions that tend to defraud suppliers) • Environmental and social responsibilities (business obligations to the environment and society) Source: Leslie E. Palich, Justin G. Longenecker, Carlos W. Moore, and J. William Petty, “Integrity and Small Business: A Framework and Empirical Analysis, ” proceedings of the forty-ninth World Conference of the International Council for Small Business, Johannesburg, South Africa, June 2004. 2– 4 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

A Framework for Integrity Promoting the Owners’ Interests Respecting Customers Managerial Integrity Valuing Employees 2– 5 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Kinds of Ethical Issues • Ethical Issues in Business Operations Ø Income and expense reporting (tax fraud) Ø “Truth in advertising”—persuasion and deception Ø Bribing customers and rigging bids Ø Direct selling—pyramid schemes, bait-andswitch selling Ø Effects of owners’ ethics on their employees Ø Accurately reporting financial information 2– 6 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Kinds of Ethical Issues (cont’d) • Ethical Issues and Employees Ø “To do an honest day’s work” Ø Fraudulent workers’ compensation claims Ø Theft of company property and embezzlement of funds Ø Violation of personal ethics to make a sale 2– 7 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Social Responsibilities of Small Firms Environmental Protection Obligations to Stakeholders Contributions to Community Organizations Response to Community Needs Consumerism Social Responsibilities of Small Firms Support of Education Compliance with Government Regulations 2– 8 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

The Challenges and Benefits of Acting Ethically • The Vulnerability of Small Companies Ø Limited resources tempt small firms to cut ethical corners if an issue affects profits. • The Integrity Edge Ø Exhibiting integrity in business may actually boost a firm’s performance. Ø Greatest benefit of integrity is the trust it generates. 2– 9 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Integrity in an Expanding Economy • Internet Ethics Ø Risks of buying and selling on the Internet Ø Maintenance of personal privacy “Cookies” to profile customers’ usage of the Web v Monitoring employees’ e-mail and Internet access. v Ø Protection of intellectual property rights v Misappropriation of content providers’ original intellectual creations, including inventions, literary creations, and works of art, that are protected by patents or copyrights 2– 10 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Integrity in an Expanding Economy cont’d) • International Issues of Integrity Ø Ethical imperialism v The belief that the ethical standards of one’s own country are superior and can be applied universally. Ø Ethical relativism The belief that ethical standards are subject to local interpretation. v “When in Rome, do as the Romans do” v 2– 11 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Building a Business with Integrity • The Foundation of Integrity Ø Underlying values: unarticulated ethical beliefs that provide a foundation for ethical behavior in a firm. Are based on personal views of the universe and mankind. v Strongly held views can lead to tough choices. v Ethics of the firm affect how outsiders view of the firm and their decisions about the firm. v 2– 12 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Building a Business with Integrity (cont’d) • Leading with Integrity ØOwner/leaders and their ethics have more direct and pronounced effects in small firms. ØOwner/leaders can insist that ethical principles be followed by employees. 2– 13 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Building a Business with Integrity (cont’d) • A Supportive Organizational Culture Ø Building an ethical culture requires: Full commitment to ethical conduct by the firm v Strong, ethical managerial leadership v Ø Code of ethics Firm’s official standards of employee behavior. v The foundation for ethical conduct by employees v Clarifies the rules and gives guidance to employees v 2– 14 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Social Entrepreneurship: A Fast-Emerging Trend • Social Entrepreneurship Ø Entrepreneurial activity with an embedded social purpose (goal) of finding innovative solutions to social needs, problems, and opportunities. • Triple Bottom Line Ø People Ø Profits Ø Planet (environment) 2– 15 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Environmentalism—Cost or Opportunity • The Burden of Environmentalism Ø Environmentalism is the effort to protect and preserve the environment. v Adverse impact of environmentalism – Cost of updating and modifying facilities – Compliance with government regulations v Potential of environmentalism – Enhances firm’s image with customers. – Improves firm’s image in the community. – Provides business opportunities (e. g. , recycling). 2– 16 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Key Terms • • • integrity ethical issues stakeholders social responsibilities intellectual property ethical imperialism ethical relativism underlying values code of ethics social entrepreneurship environmentalism 2– 17 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.