Chapter 02 Revised

Entrepreneurial Integrity: A Gateway to Small Business Opportunity
Part 1 Entrepreneurship: A World of Opportunity

PowerPoint Presentation by Charlie Cook The University of West Alabama
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.
Integrity and Entrepreneurship

What Is Integrity?
An uncompromising adherence to doing what is right and proper
Honesty, reliability, and fairness in business practices An essential element of successful business relationships Integrity is as much about what to do and it is who to be.
Doing the Right Thing

Ethical issuesquestions of right and wrong
Legal and ethical considerations Conflicts of self-interest Entrepreneurs Are People Of Principle and Integrity ?
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Difficult Ethical Issues Facing Small Firms

Customer Relationships
Environmental and Social Responsibilities Human Resource Decisions
Relationships with Suppliers
Ethical Issues Affecting Small Businesses
Employee Obligations
Regulatory Compliance
Managerial Processes and Relationships
Source: Leslie E. Palich, Justin G. Longenecker, Carlos W. Moore, and J. William Petty, Integrity and Small Business: A Framework an d Empirical Analysis, Proceedings of the 49th World Conference of the International Council for Small Business, Johannesburg, South Afri ca, June 2004.
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A Framework for Integrity

Personal Integrity of the Owner
Social responsibility for all stakeholders versus a narrow focus on using the firms resources only for honest profit making (Milton Friedman).
Respecting Customers
Service orientation and respect in the treatment of customers is both ethical and profitable.
Valuing Employees
Fair and honest treatment of employees is a sign of managerial integrity.
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Kinds of Ethical Issues

Ethical Issues in Business Operations
Income and expense reporting (income tax fraud) Truth in advertisingpersuasion and deception Bribing customers and rigging bids Direct sellingpyramid schemes, bait-and-switch selling Effects of owners ethics on their employees Accurately reporting financial information
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Kinds of Ethical Issues (contd.)

Ethical Issues and Employees
To do an honest days work Fraudulent workers compensation claims Theft of company property and embezzlement of funds Violation of personal ethics to make a sale
_ Temptations to act unethical , Big or Small Business ?
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Social Responsibilities and Small Business

Social Responsibility
The role of a small business as a good citizen in its community is meeting its ethical obligations to customers, employees, and the general community.
Regarded as the price of freedom to operate in a free economic system. Frequently takes the form of personal contributions, volunteerism, and the contribution of services by the firm and its employees.
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Social Responsibilities of Small Firms

Environmental Protection
Obligations to Stakeholders
Consumerism
Contributions to Community Organizations
Social Responsibilities
Support of Education
Response to Community Needs
Compliance with Government Regulations
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The Challenges and Benefits of Acting Ethically

The Vulnerability of Small Companies
The limited resources of small firms tempt them to cut ethical corners if an issue directly affects profits.
The Integrity Edge

Exhibiting integrity in business may actually boost a firms performance. The greatest benefit of integrity is the trust it generates.
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Ethics and Small Business (contd.)

Internet Ethics
Risks of buying and selling on the Internet Maintenance of personal privacy
The use of cookies to profile customers usage of the Web Monitoring employees e-mail and Internet access at work
Protection of intellectual property rights

Misappropriation of content providers original intellectual creations, including inventions, literary creations, and works of art, that are protected by patents or copyrights
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Ethics and Small Business (contd.)

International Ethical Perspectives
Illegal immigrants and forced labor in sweatshops
Outsourcing into cheap labor markets
Application of Federal Corrupt Practices Act

Bribery versus customary local business practices
Ethical imperialism
The belief that the ethical standards of ones own country are superior and can be applied universally
Ethical relativism
The belief that ethical standards are subject to local interpretation When in Rome, do as the Romans do
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Building a Business with Integrity

A Strong Foundation
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 Strongly held views can lead to tough choices
Ethics of the firm affect how outsiders view the firm and their decisions about the firm
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Building a Business with Integrity (contd.)

Leading with Integrity
Owner/leaders and their ethics have more direct and pronounced effects in small firms. Owner/leaders can insist that ethical principles be followed by employees.
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A Supportive Organizational Culture
Building an ethical culture requires:
Full commitment to ethical conduct by the firm Strong, ethical managerial leadership
Code of ethics
Official standards of employee behavior set by the firm The foundation for ethical conduct by employees Clarifies the rules and gives guidance to employees _ The Bake Principles ? _Religious Values ?
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 217

Better Business Bureau
Provides free buying guidelines and information about companies to consumers Attempts to resolve questions or disputes concerning purchases Bait advertising
An insincere offer to sell a product or service at a very low price, used to lure customers in so that they can be switched later to a more expensive product
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EnvironmentalismCost or Opportunity
The Burden of Environmentalism
Environmentalism is the effort to protect and preserve the environment.
Potential of Environmentalism
Enhances firms image with customers Improves firms image in the community Provides business opportunities (e.g., recycling)
Adverse impact of environmentalism

Cost of updating and modifying facilities Government regulations and lawsuits
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Entrepreneurial Integrity: A Gateway to Small Business Opportunity

Part 1 Entrepreneurship: A World of Opportunity

Integrity and Entrepreneurship

Doing the Right Thing

Difficult Ethical Issues Facing Small Firms

Relationships with Suppliers

Ethical Issues Affecting Small Businesses

Managerial Processes and Relationships

A Framework for Integrity

Kinds of Ethical Issues

Kinds of Ethical Issues (contd.)

Social Responsibilities and Small Business

Social Responsibilities of Small Firms

Contributions to Community Organizations

Response to Community Needs

Compliance with Government Regulations

The Challenges and Benefits of Acting Ethically

The Integrity Edge

Ethics and Small Business (contd.)

Protection of intellectual property rights

Ethics and Small Business (contd.)

Application of Federal Corrupt Practices Act

Building a Business with Integrity

Building a Business with Integrity (contd.)

Building a Business with Integrity (contd.)

Building a Business with Integrity (contd.)

Adverse impact of environmentalism

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