Entreprenural Ethics

8/7/2019 Entreprenural Ethics

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Figure -1 Classifying Decisions Using a Conceptual FrameworkFigure -1 Classifying Decisions Using a Conceptual Framework

Source: Verne E. Henderson, The Ethical Side of Enterprise, Sloan Management Review(spring 1982): 42.


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Ethics and Laws

Ethics and Laws

Managerial RationalizationsManagerial Rationalizations Justifications in defense of unethical acts are believingJustifications in defense of unethical acts are believing

that an activity:that an activity:

Is not really illegal or immoral.Is not really illegal or immoral.

Is in the individuals or the corporations bestIs in the individuals or the corporations best

interest.interest.

Will never be found out.Will never be found out.

That helps the company will be condoned by theThat helps the company will be condoned by thecompany.company.


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Table 6.1 Types of Morally Questionable ActsTable 6.1 Types of Morally Questionable Acts

Source: James A. Waters and Frederick Bird, Attending to Ethics in Management, Journal of Business Ethics 5(1989): 494.


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The Matter of Morality

The Matter of Morality

Ethical conduct may reach beyond the limits ofEthical conduct may reach beyond the limits ofthe law.the law.

The requirements of law may overlap at times but doThe requirements of law may overlap at times but do

not duplicate the moral standards of society.not duplicate the moral standards of society.

Legal requirements tend to be negative (forbiddingLegal requirements tend to be negative (forbiddingacts), whereas morality tends to be positiveacts), whereas morality tends to be positive

(encouraging acts).(encouraging acts).

Legal requirements usually lag behind the acceptableLegal requirements usually lag behind the acceptable

moral standards of society.moral standards of society. Inherent problems arise when people believe lawsInherent problems arise when people believe laws

represent morality.represent morality.


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Figure 6.2 Overlap Between Moral Standards

and Legal Requirements

Figure 6.2 Overlap Between Moral Standards

and Legal Requirements


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Table .2 Major Problems Regarding Laws

Reflecting Ethical Standards

Table .2 Major Problems Regarding Laws

Reflecting Ethical Standards

1. The moral standards of members of society may be based on a

lack of information relative to issues of corporate conduct.

2. The moral standards of members of society may be diluted by

the formation of small groups.

3. The moral standards of members of society may bemisrepresented in the consensus of large organizations.

4. The moral standards of members of society may be

misrepresented in the formulation of the laws.

5. The legal requirements formed through the political process areoften incomplete or imprecise and have to be supplemented by

judicial court decisions or administrative agency actions.

Source: Reproduced with permission from LaRue T. Hosmer, The Ethics of Management, 2nd ed. (Homewood, IL: Richard D. Irwin, 1991), 9192.


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Economic Trade-OffsEconomic Trade-Offs

Innovation, risk taking, and venture creation areInnovation, risk taking, and venture creation arethe backbone of the free enterprise system whichthe backbone of the free enterprise system which

fosters individualism and competition.fosters individualism and competition.

We cannot blame single individuals for the ethicalWe cannot blame single individuals for the ethical

problems of free enterprise.problems of free enterprise.

Rather, we must understand the total, systematicRather, we must understand the total, systematic

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


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Reasons for Unethical BehaviorReasons for Unethical Behavior

GreedGreedDistinctions between activities at work andDistinctions between activities at work and

activities at homeactivities at home

A lack of a foundation in ethicsA lack of a foundation in ethics

Survival (bottomSurvival (bottom--line thinking)line thinking)

Reliance on other social institutions to conveyReliance on other social institutions to convey

and reinforce ethics.and reinforce ethics.


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Establishing a Strategy forEthical Responsibility

Establishing a Strategy forEthical Responsibility

Ethical Practices and Codes of ConductEthical Practices and Codes of Conduct

A code of conduct is a statement of ethical practicesA code of conduct is a statement of ethical practices

or guidelines to which an enterprise adheres.or guidelines to which an enterprise adheres.

Codes of conduct are becoming more prevalent inCodes of conduct are becoming more prevalent inindustry.industry.

Recent codes are proving to be:Recent codes are proving to be:

More meaningful in terms of external legal and socialMore meaningful in terms of external legal and social

developmentdevelopment More comprehensive in terms of their coverage, and easier toMore comprehensive in terms of their coverage, and easier to

implement in terms of the administrative procedures used toimplement in terms of the administrative procedures used to

enforce them.enforce them.


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Approaches to Managerial EthicsApproaches to Managerial Ethics

ImmoralImmoralManagementManagement

AmoralAmoralManagementManagement

MoralMoralManagementManagement

Managerial decisions,Managerial decisions,

actions and behavioractions and behavior

imply a positive andimply a positive and

active oppositions toactive oppositions towhat is moral (ethical).what is moral (ethical).

Decisions areDecisions are

discordant withdiscordant with

accepted ethicalaccepted ethical

principles.principles.

An active negation ofAn active negation ofwhat is moral iswhat is moral is

implied.implied.

Management is neitherManagement is neither

moral or immoral, butmoral or immoral, but

decisions lie outside thedecisions lie outside the

sphere to which moralsphere to which moraljudgments apply.judgments apply.

Managerial activity isManagerial activity is

outside or beyond theoutside or beyond the

moral order of amoral order of a

particular code.particular code.

A lack of ethicalA lack of ethicalperception and moralperception and moral

awareness may beawareness may be

implied.implied.

Managerial activityManagerial activity

conforms to aconforms to a

standard of ethical, orstandard of ethical, or

right, behavior.right, behavior.Managers conform toManagers conform to

accepted professionalaccepted professional

standards of conduct.standards of conduct.

Ethical leadership isEthical leadership is

commonplace on thecommonplace on the

part of management.part of management.

Source: Archie B. Carroll, In Search of the Moral Manager, Business Horizons (March/April 1987): 12.

Copyright 1987 by the Foundation for theS

chool of Business at Indiana University. Reprinted by permission.


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AHolistic ApproachAHolistic Approach

Principle 1:Principle 1: Hire the right peopleHire the right people

Principle 2:Principle 2: Set standards more than rulesSet standards more than rules

Principle 3:Principle 3: Dont let yourself get isolatedDont let yourself get isolated

Principle 4:Principle 4: The most important principle isThe most important principle is

to let your ethical example at allto let your ethical example at all

times be absolutely impeccabletimes be absolutely impeccable


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Shaping an Ethical StrategyShaping an Ethical Strategy

The entrepreneurs guiding values and commitmentsThe entrepreneurs guiding values and commitmentsmust make sense and be clearly communicated.must make sense and be clearly communicated.

Entrepreneurs must be personally committed, credible,Entrepreneurs must be personally committed, credible,

and willing to take action on the values they espouse.and willing to take action on the values they espouse.

The espoused values must be integrated into the normalThe espoused values must be integrated into the normalchannels of the organizations critical activities.channels of the organizations critical activities.

The ventures systems and structures must support andThe ventures systems and structures must support and

reinforce its values.reinforce its values.

Employees throughout the company must have theEmployees throughout the company must have the

decisiondecision--making skills, knowledge, and competenciesmaking skills, knowledge, and competencies

needed to make ethically sound decisions every day.needed to make ethically sound decisions every day.

SOURCE: Adapted from Lynn Sharp Paine, Managing forOrganizational Integrity, Harvard Business Review(March/April 1994): 106117.


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Ethical ResponsibilityEthical Responsibility

InstitutionalizationInstitutionalization

EthicalEthical

ConsciousnessConsciousness

Ethical ProcessEthical Process

and Structureand Structure

EthicalEthical

ResponsibilityResponsibility

EthicalEthical

ResponsibilityResponsibility


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Figure 6.3 Four Main Themes of Ethical Dilemmas

for Entrepreneurs

Figure 6.3 Four Main Themes of Ethical Dilemmas

for Entrepreneurs

Source: Shailendra Vyakarnam, Andy Bailey, Andrew Myers, and Donna Burnett, Towards an

Understanding of Ethical Behavior inS

mall Firms,J

ournal of Business Ethics 16(15) (1997): 1625-1636.


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Ethics and Business DecisionsEthics and Business Decisions

Complexity of Ethical Decisions:Complexity of Ethical Decisions: Ethical decisions have extended consequencesEthical decisions have extended consequences

Business decisions involving ethical questions haveBusiness decisions involving ethical questions have

multiple alternatives.multiple alternatives.

Ethical business often have mixed outcomes.Ethical business often have mixed outcomes.

Most business decisions have uncertain ethicalMost business decisions have uncertain ethical

consequences.consequences.

Most ethical business decisions have personalMost ethical business decisions have personal

implications.implications.


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The Social Responsibility ChallengeThe Social Responsibility Challenge

Social ObligationSocial Obligation Firms that simply react to social issues throughFirms that simply react to social issues through

obedience to the laws.obedience to the laws.

Social ResponsibilitySocial Responsibility

Firm that respond more actively to social issues;Firm that respond more actively to social issues;

accepting responsibility for various programs.accepting responsibility for various programs.

Social ResponsivenessSocial Responsiveness

Firms that are highly proactive and are even willing toFirms that are highly proactive and are even willing tobe evaluated by the public for various activities.be evaluated by the public for various activities.


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Table 6.5 Classifying Corporate Social BehaviorTable 6.5 Classifying Corporate Social Behavior

Source: Excerpted from S. Prakash Sethi, A Conceptual Framework for Environmental Analysis ofSocial Issues

and Evaluation of Business Response Patterns,A

cademy of ManagementJ

ournal(J

anuary 1979): 68.


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Figure 6.4 Ethical Considerations in Corporate EntrepreneurshipFigure 6.4 Ethical Considerations in Corporate Entrepreneurship

Source: Justin G. Longenecker, Joseph A. McKinney, and Carlos W. Moore, Ethics in

Small Business,

Journal of Small Business Management(

January 1989): 30.


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Ethical Leadership by EntrepreneursEthical Leadership by Entrepreneurs

The Opportunity for Ethical Leadership byThe Opportunity for Ethical Leadership byEntrepreneursEntrepreneurs

An owner has the unique opportunity to displayAn owner has the unique opportunity to display

honesty, integrity, and ethics in all key decisions.honesty, integrity, and ethics in all key decisions.

The owners actions serve as a model for otherThe owners actions serve as a model for otheremployees to follow.employees to follow.

An owners value system is a critical component of theAn owners value system is a critical component of the

ethical considerations that surround a businessethical considerations that surround a business

decisiondecision


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Table 6.6 Issues Viewed By Small-Business OwnersTable 6.6 Issues Viewed By Small-Business Owners

Source: Justin G. Longenecker, Joseph A. McKinney, and Carlos W. Moore, Ethics in

Small Business,

Journal of Small Business Management(

January 1989): 30.


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The Ethics of CaringThe Ethics of Caring

CaringCaring A feminine alternative to the more traditional andA feminine alternative to the more traditional and

masculine ethics that are based on rules andmasculine ethics that are based on rules and

regulations.regulations.

Following laws may not lead to building as strongFollowing laws may not lead to building as strong

of relationships as one could.of relationships as one could.

Entrepreneurs must realize that their personalEntrepreneurs must realize that their personal

integrity and ethical example will be the key tointegrity and ethical example will be the key totheir employees ethical performance.their employees ethical performance.


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Key Terms and ConceptsKey Terms and Concepts

amoral managementamoral managementcode of conductcode of conduct

ecovisionecovision

ethicsethics

environmental awarenessenvironmental awarenessimmoral managementimmoral management

moral managementmoral management

nonrolenonrole

rationalizationsrationalizationsrole assertionrole assertion

role distortionrole distortion

role failurerole failure

social obligationsocial obligationsocial responsibilitysocial responsibility

social responsivenesssocial responsiveness

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Entreprenural Ethics