ENTREPRENEURIAL MANAGEMENT

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MODULE 3: (Chapter 3)The Ethical and Social Responsibilities of The Entrepreneur

Objectives:
By the end of this module, students will be able to:
1. Define business ethics
2. Know the factors influencing ethical behavior
3. Explain how ethical behavior is encouraged
4. Inform of the ethical behavior issues facing entrepreneurship
5. Define personality and identify the different entrepreneur’s personality
6. Describe the characteristics of entrepreneurs and what motivates them to become an entrepreneur
7. Differentiate an entrepreneur from manager

To Do List:
Readings:
Every now and then broadcast and print media reports on corruption, deception, and illegality
committed by various personalities including entrepreneurs. A very common topic of conversation is the
involvement of contractors and suppliers in anomalous transactions with the government personnel.
Example: the amount of supplies ordered and purchased by a government agency has doubled or
triple the amount as compared to its regular price.
There are indications that this practice has the tendency to become more intense and destructive.

What is Business Ethics?

Ethics is the study of moral obligation involving the distinction between right and wrong. As a
consequence, the study of ethics paved the way for the adaption of the general rule of conduct in society.
The rule about how entrepreneur ought to behave are referred to as business ethics. The ethical
required of entrepreneurs is determined by the following:
1. the public,
2. interest groups like the Society of Prevention of Cruelty to Animals
3. business organization
4. the individual’s personal morals and values

Factors Influencing Ethical Behavior

1. the situation
2. reward system
3. individual differences
4. other factors

How Ethical Behavior is Encouraged?

If the entrepreneur believes that business success requires good ethical behavior, his next concern
would be to encourage his people adapt good ethical behavior.
Certain Ways of Encouraging Ethical Behavior Among Employees:
1. adaption of a code of ethics
2. institution of rewards and punishments concerning ethical behavior
3. adaption of internal programs for resolving conflicts
4. creation of ethics review committee
5. provisions of training in ethics for employees; and
 6. top management support
Code of ethics is a formal document indicating the entrepreneurship’s adapted principle of
appropriate behavior.
A code of ethics can be made effectively if the following requirement are met.
1. It should refer to specific unethical practices like receiving gifts, avoiding warranty claims, bid-
rigging, making fictitious claims among others; and
2. It must be supported by top management. Supports comes in various forms such as providing
sufficient funds for its implementation and assigning specific employees to handle ethical
infractions of other employees and the like.

Rewards, Punishment, and Ethical Behavior

A code of ethics is sufficient for some people if ethical behavior is required. For many people
however, this may not be enough to motivate them to act ethically, if the entrepreneurship wants to have
some measure of control over this behavior of its personnel, a system of reward and punishment must be
instituted.
Punishment could take the form of dismissal, demotion, suspension or reprimand. Reward may be
given in the form of cash gifts, promotion, citations.

Internal Program for Resolving Behavior

Conflict arise even when ethical conduct of personnel is concerned.
For example, a subordinate may thick his superior is acting unethically regarding promotion. The
subordinate may harbor ill feelings toward his superior if the subordinate is not provided with a means of
ventilate grievances.

Ethics Review Committees

To encourage ethical behavior, the entrepreneur may create an ethics review committee. This
committee is usually composed of company employees as well as some who are not employee by the
company. These persons should have undergone special training in ethics. The committee provides advice
to the entrepreneur and his staff concerning sensitive ethical issues.

Provision of Training in Ethics

Ethics training is more appropriate for persons occupying sensitive position in purchasing, waste
disposal, personnel, research and development, sales, and manufacturing.

Top Management Support

When unethical conduct is committed and no sanction is imposed by the top management, it can be
expected that more violations of good ethics will be made.

Ethical Issues Facing Entrepreneurships

Entrepreneurships face ethical questions on a daily basis. These spring from the following
relationships:
1. between the company and the customers
2. between the company and its personnel and employees
3. between the company and it business association
4. between the company and the investors and the financial community

Relationship with Customers

Entrepreneurs are expected by the society to treat their customers fairly and not to act in a way that
will be harmful to them. Entrepreneurs should provide support for their consumer rights which are as follows:
1. the right to be safe
 2. the right to be informed
3. the right to choose
4. the right to be heared

The Right to Be Safe

1. customers expect that the product and services that they buy will not harm them
2. free from bodily harm when they are inside the business premises.

The Right to be Informed

Advertisements and information printed on labels are some of the ways of providing information to
the consumers about the products and services. Indicate the date of manufacturing and the expiration date
of the products.

The Right to Choose

Firms that adhere to business should strive to protect consumer’s right to choose, what products and
services they need and intend to purchase.

The Right to Be Heard

Customers have the right to communicate their concerns to entrepreneurships they patronize.

Relations with Personnel and Employees

Good ethical conduct requires entrepreneurs to be aware of their responsibilities to employees.
These are the following:
1. workplace safety
2. quality of life issues
3. avoiding discrimination
4. preventing sexual harassment

Workplace Safety
The ethical entrepreneur is one who makes sure that the workplace is safe for employees.

Quality of Life Issues

Many employees are burdened by problem about maintaining a good balance between work and
family. The two most common responsibilities that make life difficult for any employee are: caring for
children and the elderly.

Avoiding Discrimination
Everyone has the right to work in a place where discrimination is not practiced.
Factors like: age, sex, race, religion, political beliefs.

Preventing Sexual Harassment

Sexual harassment refers to unwelcome sexual advances, request for sexual factors, and other
verbal or physical contact of a sexual nature.

Relations with Business Associates

In the course of business transactions between then players mentioned and the firms, ethical
questions may come.
1. A supplier who badly needs a contract, for instance, may attempt to bribe the company’s purchasing
officer.
 2. The company’s sales manager extending favors to a trade by giving priority to delivery of orders, in
exchange of personal favors

Relations with Investors and the Financial Community

The country’s financial system survives partly because investors and other players have placed
certain degree of trust in firms they deal with. The degree of trust is maintained at a high level if the
investors and the financial community feel that business firms practice good business ethics, especially if
they thinks that their investments are well protected.
Trust and confidence are eroded by wrong doing of some firms. The investment scams perpetrated
by some scheming persons do not provide good examples of ethical firms. It is to the best interest of
companies including entrepreneurships if companies behave ethically.
Some ethical and illegal practices that undermine our country’s financial stability are:
1. Misrepresentation concerning the financial health of firms
2. Land swindles
3. Embezzlement and misleading reports about non-existent assts
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Learning Activity:
Questions for Review: Give your own answer regarding the following questions.
1. Why is corruption an unwanted activity in a country like the Philippines?
2. What is business ethics? Why is it important?
3. What are the factors that influence the ethical behavior of firms?

Items for Research:

Prepare a short report on the ethical practices of entrepreneurs in your area?

Case Study: Fina’s Photo Copy Center: Right or Wrong?

The photocopying business is thriving in Manila. Miss Josefina “Fina” Datu is the owner of the
biggest copying firm in the city. Fina has been in the business for mor than 20 years and because of her
daring enterprise, she was able to put up three branches in each of the capital towns of the three
neighboring cities. She is planning to operate in Cavite and Batangas in the near future.
This business actually involves using machines to copy documents, books, magazines, and other
materials. Fina employs six young ladies per branch. A big dealer in Manila supplies her with the latest
copying machines, paper and ink. Fina has an open credit line with the dealer.
Fina personally trains new employees in the firm’s main office in Manila. After a month of training,
the new employees are deployed in the various branches. New employees are paid daily wages depending
on output. They are also entitled to free board and lodging.
The firm’s customers consist of teachers, students, government employees, and some others. Just a
week ago, the dean of a big school in the city proposed to her the copying of books to be sold to students.
The dean indicated that she will take care of selling the books to students in her school. For the service. The
dean was expecting a 20 percent commission.
Fina thinks the proposal is a sound one and it will yield good profits. She is not yet fully convinced,
however, if the proposal is ethically right. Fina considers seeking the advice of someone who should be
informing her about the right thing to do before she makes a decision.

Guide Question:
If you were consulted by Fina, what would you advise her? Why?

Assessment: Quiz Online