Part II – The Entrepreneurial Perspective Chapter 4 – Understanding the Entrepreneurial Perspective in Individuals Chapter 5 – Developing Creativity and.

Part II – The EntrepreneurialPart II – The Entrepreneurial Perspective Perspective

Chapter 4 – Understanding the Chapter 4 – Understanding the Entrepreneurial Perspective Entrepreneurial Perspective in Individuals in IndividualsChapter 5 – Developing Creativity andChapter 5 – Developing Creativity and Understanding Innovation Understanding InnovationChapter 6 – Ethical and Social Chapter 6 – Ethical and Social Responsibility Challenges for Responsibility Challenges for Entrepreneurs Entrepreneurs

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Chapter 6 – Ethical and SocialChapter 6 – Ethical and Social Responsibility Responsibility Challenges for Challenges for Entrepreneurs Entrepreneurs

Defining EthicsDefining Ethics

Ethics provide the basic Ethics provide the basic rules or parameters for rules or parameters for

conducting any activity in conducting any activity in an “acceptable” manner.an “acceptable” manner.

Classifying Decisions Using a Conceptual FrameworkClassifying Decisions Using a Conceptual Framework

EthicalEthical

UnethicalUnethical

LegalLegalIllegalIllegal

CodificationCodification

ManifestationManifestation

CorporateCorporateDecisionsDecisions

Quadrant I:Quadrant I:Ethical and LegalEthical and Legal

Quadrant III:Quadrant III:Unethical and LegalUnethical and Legal

Quadrant IV:Quadrant IV:Unethical and IllegalUnethical and Illegal

Quadrant II:Quadrant II:Ethical and IllegalEthical and Illegal

Ethics and LawsEthics and Laws

Managerial RationalizationsManagerial Rationalizations

The four rationalizations are believing:The four rationalizations are believing:

1.1. That the activity is not “really” illegal or That the activity is not “really” illegal or immoral;immoral;

2.2. That it is in the individual’s or the That it is in the individual’s or the corporation’s best interest;corporation’s best interest;

3.3. That it will never be found out; andThat it will never be found out; and

4.4. That because it helps the company, the That because it helps the company, the company will condone it.company will condone it.

Types of Morally Questionable ActsTypes of Morally Questionable Acts

TypeType Direct EffectDirect Effect ExamplesExamples

NonroleNonrole Against theAgainst thefirmfirm Expense account CheatingExpense account Cheating

Role Role FailureFailure

Against theAgainst thefirmfirm Superficial performance appraisalSuperficial performance appraisal

Role Role DistortionDistortion

For theFor thefirmfirm BriberyBribery

Role Role AssertionAssertion

For theFor thefirmfirm

Not withdrawing product line in face ofNot withdrawing product line in face ofinitial allegations of inadequate safetyinitial allegations of inadequate safety

Major Problems Regarding Laws Reflecting Major Problems Regarding Laws Reflecting Ethical StandardsEthical Standards

1.1. The moral standards of members of a society may be based The moral standards of members of a society may be based on a lack of information relative to issues of corporate on a lack of information relative to issues of corporate conduct.conduct.

2.2. The moral standards of members of a society may be The moral standards of members of a society may be diluted by the formation of small groups.diluted by the formation of small groups.

3.3. The moral standards of members of society may be The moral standards of members of society may be misrepresented in the consensus of large organizations.misrepresented in the consensus of large organizations.

4.4. The moral standards of members of a society may be The moral standards of members of a society may be misrepresented in the formulation of the laws.misrepresented in the formulation of the laws.

5.5. The legal requirements formed through the political The legal requirements formed through the political process are often incomplete or imprecise and have to be process are often incomplete or imprecise and have to be supplemented by judicial court decisions or administrative supplemented by judicial court decisions or administrative agency actions.agency actions.

Economic Trade-OffsEconomic Trade-Offs

We cannot blame single individuals We cannot blame single individuals for the ethical problems of free for the ethical problems of free

enterprise. Rather, we must enterprise. Rather, we must understand the total, systematic understand the total, systematic

impact that free enterprise has on the impact that free enterprise has on the common good.common good.

Establishing a Strategy Establishing a Strategy for Ethical for Ethical

ResponsibilityResponsibility

Ethical Practices and Codes Ethical Practices and Codes of Conductof Conduct

A code of conduct is a statement A code of conduct is a statement of ethical practices or guidelines of ethical practices or guidelines to which an enterprise adheres.to which an enterprise adheres.

Approaches to Managerial EthicsApproaches to Managerial Ethics

ImmoralImmoralManagementManagement

AmoralAmoralManagementManagement

MoralMoralManagementManagement

Managerial decisions,Managerial decisions,actions and behavioractions and behaviorimply a positive andimply a positive andactive oppositions toactive oppositions towhat is moral (ethical).what is moral (ethical).Decisions areDecisions arediscordant withdiscordant withaccepted ethicalaccepted ethicalprinciples. An activeprinciples. An activenegation of what isnegation of what ismoral is implied.moral is implied.

Management is neitherManagement is neithermoral or immoral, butmoral or immoral, butdecisions lie outsidedecisions lie outsidethe sphere to whichthe sphere to whichmoral judgments apply.moral judgments apply.Managerial activity isManagerial activity isoutside or beyond theoutside or beyond themoral order of a moral order of a particular code. A lackparticular code. A lackof ethical perceptionof ethical perceptionand moral awarenessand moral awarenessmay be implied.may be implied.

Managerial activityManagerial activityconforms to a standardconforms to a standardof ethical, or right, of ethical, or right, behavior. Managersbehavior. Managersconform to acceptedconform to acceptedprofessional standardsprofessional standardsof conduct. Ethicalof conduct. EthicalLeadership is common-Leadership is common-place on the part ofplace on the part ofmanagement.management.

A Holistic ApproachA Holistic Approach

• Principle 1: Hire the right peoplePrinciple 1: Hire the right people

• Principle 2: Set standards more than rulesPrinciple 2: Set standards more than rules

• Principle 3: Don’t let yourself get isolatedPrinciple 3: Don’t let yourself get isolated

• Principle 4: The most important principle isPrinciple 4: The most important principle is to let your ethical example to let your ethical example at all times be absolutely at all times be absolutely impeccable impeccable

Ethics and Business Ethics and Business DecisionsDecisions

Four Main Themes of Ethical Dilemmas Four Main Themes of Ethical Dilemmas for Entrepreneursfor Entrepreneurs

Small-BusinessSmall-BusinessEthicalEthical

DilemmasDilemmas

ConflictConflictof Interestsof Interests

SocialSocialResponsibilityResponsibility

totoStakeholdersStakeholders

LevelLevelofof

OpennessOpenness

PersonalityPersonalityTraitsTraits

Complexity of DecisionsComplexity of Decisions• First, ethical decisions have extended First, ethical decisions have extended

consequencesconsequences• Second, business decisions involving ethical Second, business decisions involving ethical

questions have multiple alternativesquestions have multiple alternatives• Third, ethical business often have mixedThird, ethical business often have mixed

outcomesoutcomes• Fourth, most business decisions have Fourth, most business decisions have

uncertain ethical consequencesuncertain ethical consequences• Finally, most ethical business decisions have Finally, most ethical business decisions have

personal implicationspersonal implications

The Social Responsibility ChallengeThe Social Responsibility Challenge

• Some firms simply react to social issues Some firms simply react to social issues through obedience to the laws – through obedience to the laws – social social obligationobligation; others respond more actively; ; others respond more actively; accepting responsibility for various programs accepting responsibility for various programs – – social responsibilitysocial responsibility; still others are highly ; still others are highly proactive and are even willing to be evaluated proactive and are even willing to be evaluated by the public for various activities – by the public for various activities – social social responsivenessresponsiveness..

The Opportunity for Ethical The Opportunity for Ethical Leadership by EntrepreneursLeadership by Entrepreneurs

An owner has the unique opportunity An owner has the unique opportunity to display honesty, integrity, and to display honesty, integrity, and ethics in all key decisions. The ethics in all key decisions. The

owner’s actions serve as a model for owner’s actions serve as a model for other employees to follow.other employees to follow.