Republic of the Philippines

CENTRAL BICOL STATE UNIVERSITY OF AGRICULTURE

Impig, Sipocot, Camarines Sur 4408
Website: www.cbsua.edu.ph
Email Address: [email protected]
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Lesson 5 – Ethical Issues in Entrepreneurship

How would you finish this statement?

One rule everyone should live by is……

Explain briefly your answer.

EXPLORE

The Importance of Ethics in Business

Entrepreneurs are today urged to look seriously into ethics because

more and more people realized that the saying “We are our brother’s
Keeper” is true. Capital and money in the enterprise become depleted but
the character of the entrepreneur outlasts these material resources.

Ethics is internally imposed by the character of the entrepreneur.

Honesty cannot be imposed from outside the person; honesty is part of the
person’s character, carried over from the person’s upbringing and character
development. Without ethics, the person will fall under the weight of
corruption, which in some readings, is termed lack of conscience or lack of
character.

The government can impose laws and organizations can draw up a

code of conduct for the employees. But these are intended for people who
violate them. Those who have integrity obey these laws and ordinances as
part of their character, of who they are.

Reasons Why Ethical Entrepreneurs Are Important for the Right and
Sustainable Development of a Country

We do not only want to grow and develop; but to grow and develop in
the right way, which is the sustainable way. Sustainable development is
centered not on science, not on technology but on man. Human beings
(employees, customers, suppliers, the members of the community where the
business is located) need to live healthy, dignified, and productive lives in
harmony with nature.
Thus, an entrepreneur must run his business taking into account his
responsibilities not only towards himself but also towards others and towards
the gifts of nature that he often utilizes for his business. In other words, he
must run his business based on high ethical standards.

Consider an entrepreneur who exploits his employees, overworks

them, underpays them. Will these workers give their best efforts in
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Entrepreneurship
producing goods and services? Will they serve customers efficiently and
cheerfully? How long will they stay in their jobs?

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Entrepreneurship
 Or take a quick-buck operator, a businessperson out to earn a lot of
money in one or two deals by cheating customers through overpricing and
deceptive product information. Do you think such an entrepreneur will thrive
in business for long? How can that be possible when buyers eventually lose
their interest due to the poor quality of the goods being sold, failure to
deliver on promises, shoddy service, short-lived demand, and other negative
reasons?

Again, consider an entrepreneur who makes a profit at the expense of

environmental degradation. He may be a fisherman who uses dynamite, a
logger who depletes the forest cover, a manufacturer who has no qualms
throwing chemical waste by the riverside. If the law does not catch up with
him, nature has a way of claiming retribution. Soon, there will be no fish to
catch, no trees to cut, and no customers to buy what they say. Soon, people
will be angry with the entrepreneur for the pollution (and disease) he has
caused. Doing business, the ethical way builds consumer loyalty, keeps good
employees and makes them happy and productive, and creates a stable
environment that minimizes unexpected problems.

Defining Ethics

To define ethics, it is important to understand first the closely related

concepts of “values” and “morality” with which ethics is often confused.
Values are the qualities or ideas which each of us cares about, upholds, and
considers important. Examples of an individual’s values are family, money,
career, love, friendship. In the case of a business, these may be efficiency,
innovation, accountability, service excellence and empowerment of workers.
Morality is one’s individual perception of right and wrong, good and evil.
Ethics is a set or system of behavior based on moral ideals. It is a product of
society; no wonder many ethical issues deal with the relationship between
the individual and the group. Some of the most basic ethical concepts
include honesty, integrity, justice, equality and respect.

Business Ethics

Are moral principles applied to business issues and actions?

Entrepreneurs have considerable influence on their company’s business
ethics. Like operating a business, itself, this is both an opportunity and a
responsibility.

Why Ethical Business is Good Business

Build consumer loyalty – Consumers are getting increasingly educated and

aware of their rights. They may let a company take advantage of them once,
but will not tolerate being treated shoddily and unfairly again. They would
write letters, e-mail, make phone calls, complain to the DTI (Department of
Trade and Industry), post their bad experience on Facebook and other social
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Entrepreneurship
media. Conversely, a good experience with a business can easily spread by
word of mouth and online. Remember that companies need a

Lesson 5 Ethical Issues in

Entrepreneurship
broad base of loyal customers, repeat customers attracted to the business
because they have been served efficiently and given a good deal, for what
they pay. A reputation for doing ethical business will help build this large and
loyal customer base.

Keep good employees — Employees, the efficient and talented ones, will stay
long with a company only if they believe in it, are proud of it, and are happy
in it. They would want to be compensated fairly for the work and
commitment they put in. They would want their managers to be transparent
and truthful about what is going on in the business that would affect them.
They would want to stick with a company with a prestigious name.
Entrepreneurs who observe good ethical practices have a better chance of
retaining the most talented and hard-working people.

Improve productivity in the workplace – When employees are well

compensated and happy and proud to belong to a company, morale in the
workplace rises. People are motivated to do their best and to cooperate
willingly in all the company's productivity programs. Only happy employees
can make customers happy — an application of the principle “You cannot
give What you do not have.”

Avoid legal problems — In its eagerness to make a profit, a business may

ignore worker safety, underpay their employees or refuse to awe them
legally mandated benefits. Or it may violate environmental regulations such
as having a proper waste disposal system. Or possibly ignore proper labeling
and packaging laws. Or install “jumpers” to reduce their utility costs. The
penalty for these violations may be severe, including fees, fines and
sanctions and even imprisonment, not to mention a severely blemished
reputation that would be very hard to erase from the public’s mind.

Establishing an Ethical Workplace

Universal values establish a strong foundation for society. Universal
values are also a good basis for running your business. Deciding how to
apply these values will be as important as any other planning you do.
Creating Transparency
Have you heard the expression “The buck stops here”? It describes a
management style that assumes it has the authority to make decisions and
takes responsibility for those decisions. That’s the idea behind transparency,
or openness and accountability in business decisions and actions. Letting
people see what a company is doing, and why, is a strong deterrent to
unethical behavior. For example, when transparency is practiced, employees
know how their retirement fund is being invested. Consumers know that
wrongdoers are punished.
Communication is essential to transparency. Companies have
traditionally communicated through memos to employees and press releases
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Entrepreneurship
and press conferences for the public. More and more, they’re using social
media as well. Social media are interactive electronic forms of
communication. Blogs and message boards, where people carry on public
conversations, are two popular examples.

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Entrepreneurship
Responding to Whistle-Blowers
A whistle-blower is a term for someone who reports illegal or unethical
conduct to superiors or to the public. In some cases, these actions are
protected by law. Management’s response to whistleblowing, beyond these
legal requirements, sends a message about its commitment to business
ethics. Does a company encourage employees to speak up when a job or
situation troubles them? Does it discourage employees who pressure whistle-
blowers to keep silent? Finally, does it take these reports seriously and act to
correct unethical practices?
Writing a Code of Ethics
A code of ethics describes a business’s moral philosophy and gives
concrete guidelines for carrying it out. Writing a code and distributing a copy
to every employee is a wise move for several reasons. First, writing a code of
ethics forces you to clarify your own values and principles. Before you can
write such a code, you will have to ask yourself what you believe is
important. Answering those questions helps you understand the concepts in
more concrete terms. Everyone says they value honesty, for instance, but
what does that word mean to you exactly?
Having a code will also help prevent and resolve problems. When a
question arises about whether an action is ethical, you and others can see
how it compares to the code.
Finally, a written code provides some protection against claims of
unfairness. Employees know from their first day what behavior is encouraged
and what could result in dismissal. Suppliers can see your reasons for
choosing another business over their own. The code shows that you don’t
knowingly tolerate unethical behavior.

Ethical Issues for Entrepreneurs

Intellectual Property
When music downloads first became available, many music fans
started filling their MP3 players and swapping songs with friends. They were
stunned when record companies began prosecuting them for theft.
Can music be stolen? Yes. Music, paintings, literature, inventions, and
architectural designs are types of intellectual property. Intellectual property is
artistic and industrial creations of the mind. “Possession” of these creations
is protected by law. The owners are entitled to credit and usually some form
of payment when their works are used, especially when used for commercial
gain.

Artistic creations are protected by copyright. Copyright is the exclusive

right to perform, display, copy, or distribute an artistic work. Copyright
applies automatically as soon as a work is created. It covers all forms of
expression, whether words, music, images, or concrete objects. It includes
works published on the Internet.
Lesson 5 Ethical Issues in
Entrepreneurship
Another type of intellectual property—industrial invention—is protected by
patent. A patent is the exclusive right to make, use, or sell a device or
process. Many types of creations can be patented, from an improved design
for a ketchup bottle, to a variety of tomato used to make the ketchup, to a
process for bottling the ketchup.

Lesson 5 Ethical Issues in

Entrepreneurship
A trademark is a symbol that indicates that the use of a brand or brand name
is legally protected and cannot be used by other businesses. A trademarked
brand or brand name is a type of intellectual property. Two symbols are
associated with U.S. trademarks. The trademark symbol ™ is used to indicate
that the brand is protected in a general way, but does not have formal legal
protection.

Violating a copyright, trademark, or patent holder’s rights is called

infringement. A shop owner who plays music for customers’ enjoyment
commits copyright infringement. A fashion designer who copies software that
creates dress patterns commits patent infringement.

Conflict of Interest

Another ethical decision that entrepreneurs often face is related to

conflicts of interest. A conflict of interest exists when personal considerations
and professional obligations interfere with each other. It’s wise to avoid such
situations—or even the appearance of such situations—even if you think you
can act fairly and objectively.

Confidentiality

As an entrepreneur, you will be gathering a good deal of information.

You may run a background check and find that a job applicant has a criminal
record, or discover sensitive financial data through a credit check on
potential investors or partners.
How you and others in your company use this information can be an ethical
matter, and the decision isn’t always clear-cut. On one hand, you have a
duty to respect the confidentiality (privacy) of others. On the other hand,
keeping silent could expose some people to harm. Someone may have a
criminal conviction on record, for example, but you should ask yourself
whether you have a reason, or a right, to make it known.

POST-ASSESSMENT [LESSON 5]

Instruction: Explain each questions, your answer should be as

well organized and as carefully written as you can make it.

1. Discuss in your own way of understanding about the term “character” [5

points]

Lesson 5 Ethical Issues in

Entrepreneurship
 2. Cite examples of people whom you think have “character.” You can
also explore movies or TV Series that show people who have
“character.” What makes these people different from others? What
makes them who they are? What problems

Lesson 5 Ethical Issues in

Entrepreneurship
 do they face which tempt them to lose their character and become
unethical in their relationship with others? [15 points]

3. Discuss why ethics is difficult to maintain in society. [5 points]

4. Can ethics be learned by children? How? [5 points]

Lesson 5 Ethical Issues in

Entrepreneurship
Lesson 8S etting Up, Launching and Operating an
Enterprise