ATHENS ACADEMY ENTREPRENEURSHIP

MODULE WEEK 2 Grade Level 12

Understanding Business Ethics and

Legal Challenges in
Entrepreneurship
Learning Objectives
At the end of the lesson, you should be able to:
1. Define Ethics References
2. Identify the factors affecting ethical behavior Entrepreneurship and Small Business
3. Identify ethical issues in entrepreneurship Management by Medina
4. Identify some legal requirements in business
Entrepreneurship by Kuratko

Review/Lesson Preview
Answer the following questions:
1. Entrepreneurship refers to the economic activity of a person who starts, manages, and assumes
the risk of a business enterprise.
2. The person who undertakes entrepreneurial activities is called entrepreneur.

GIVE EXAMPLES OF
ENTREPRENEURSHIP.

COMPARE LIVELIHOOD
FROM
ENTREPRENEURSHIP

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MODULE WEEK 2 Grade Level 12

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 rules of
conduct in society.
The rules about how entrepreneurs ought to behave are referred to as business ethics. The ethical
behavior required of entrepreneurs is determined by the following:
1. the public;
2. interest group like the Society of Prevention of Cruelty to Animals;
3. business organization; and
4. the individual’s personal morals and values.
Adherence to ethical standards contributes to the smooth flow of business exchanges. It establishes trust
between buyers and sellers and between lenders and borrowers. Figure 5 on the next page illustrates on
the effect of adherence to ethical standards.

Factors Influencing Ethical Behavior

Ethical behavior, whether by a person or a business entity, is influenced by any or a combination of the
following:
1. situation;
2. rewards system;
3. individual differences; and
4. other factors.
Circumstances vary, and the reactions of firms or individuals vary. For instance, a firm that behaves
ethically during prosperous times may act unethically in times of financial hardships.

How Ethical Behavior is encouraged

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 committees
5. provision of training in ethics for employees; and
6. top management support.

Code of Ethics. The code of ethics is a formal document indicating the entrepreneurship’s adapted
principles of appropriate behavior. It serves as a basic reference for employees who make big or small
decisions.
A code of ethics can be made effective if the following requirements are met:
1. It should refer to specific unethical practices like receiving gift, avoiding warranty claims, bid-rigging,
making fictitious claims, among others; and
2. it must be supported be supported by top management.

Rewards and Punishments Concerning Ethical Behavior:

1. Internal Programs for Resolving Conflicts

For example, a subordinate may think his superior is acting unethically regarding promotions. The
subordinate may harbor ill feelings toward his superior if the subordinate is not provided with a means to
express his complaint.
2. Ethics Review Committees
The committee provides advice to the entrepreneur and his staff concerning sensitive ethical issues. Ethics
review committees are not yet popular in Philippines entrepreneurship, but it is slowly adapted by
government corporations like state colleges and universities.

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MODULE WEEK 2 Grade Level 12

3. Provision of Training in Ethics for Employees

Ethics training is more appropriate for persons occupying sensitive positions in purchasing, waste disposal,
personnel, research and development, sales, and manufacturing.
4. Top Management Support
For instance, when unethical conduct is committed and top management imposes no sanction, 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 springs 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 its business associates;
4. between the company and the investors and the financial community.

Relation with Customers

Entrepreneurs are expected by society to treat their customers fairly and not to act in ways that will be
harmful to them. Entrepreneurs should provide support for consumer rights, which are as follows:

 The Right to Be Safe. Consumers expect that the product and services that they buy will do them
no harm.

 The Right to Be Informed. Advertisements and information printed on labels are some of the ways
of providing information to consumers about products and services. The requirement for indicating
dates of manufacture and expiry on labels is a result of legislation intended to inform the consumer.

 The Right to Choose. Firms that intend to adhere to business ethics should strive to protect
consumers’ right to choose, what products and services they need and intend to purchase.

 The Right to Be Heard. To support the customers’ right to be heard, some companies install a
system of receiving and processing complaints. An example is the information printed on the
product’s label indicating contact numbers where complaints may be relayed.

Relations with Personnel and Employees

Good ethical conduct requires entrepreneurs to be aware of their responsibilities to employees. These are
following:
1. workplace safety;
2. quality of life issues;
3. avoiding discrimination; and
4. preventing sexual harassment.
Workplace Safety. The ethical entrepreneur is one who makes sure that the workplace is safe for
employees. He sees to it that adequate measures are adapted to prevent accidents from happening in the
factory and in the factory and in the office.
Quality of Life Issues. Companies provide day-care facilities for the children of employees. Housing is
provided near the work sites. If measures like those are not feasible, entrepreneurships can still provide
assistance in locating or facilitating arrangements with private day-care and housing facilities.
Entrepreneurship can go further in helping its workers improve their quality of life by offering flexible work
arrangements.

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MODULE WEEK 2 Grade Level 12

Avoiding Discrimination. Everyone has the right to work in a place where discrimination is not practiced.
Factors like age, sex, race, religion, political beliefs, and the like must not be allowed to affect any person’s
chance of getting employed or promoted.
Preventing Sexual Harassment. Sexual harassment refers to unwelcome sexual advances, request for
sexual favors, and other verbal or physical contact of a sexual nature. Entrepreneurs have the moral
responsibility of keeping the workplace free from sexual harassment and where everybody is treated fairly.
1. issue a specific policy statement prohibiting sexual harassment;
2. develop a complaint procedure for employees to follow;
3. create a work environment that encourage sexually harassed employees to report their experiences;
4. establish a committee to investigate sexual harassment claims; and take disciplinary actions against
harassers
Legal Rights Involve Entrepreneurship

Patent Copyright Trademarks Trade secret

(Service Marks
and Trade Dress)

DEFINITION A grant from the An intangible Any distinctive Any information (including
government that property right word, name, form allies, patterns,
gives an inventor granted to symbol, or device programs, device,
exclusive rights to an authors and image or techniques, and
invention. originators of a appearance, or processes) that a
literary work or combination business possesses and
artistic production thereof, that an that gives the business an
that falls within entity uses to advantage over
specified identify and competitors who do not
categories. distinguish its know the information or
goods or services process.
from those of
others.

REQUIREMENTS An invention must Uterary or artistic Trademarks, Information and

be: works must be: service marks, processes that have
1. Something new 1. Original. and trade dresses commercial value, that
2. Unique / Distinct 2. Fixed in a must be are not known or easily
3. Useful durable medium sufficiently ascertainable by the
that can be distinctive (or general public or other,
perceived, must have and that are reasonably
reproduced, or acquired a protected from disclosure.
communicated. secondary
3. Within a meaning) to
copyright table enable consumers
category. and others to
distinguish the
seller’s, or
business user’s
products or
services from
those of
competitors.

TYPES OR 1. Utility (general). 1. Uterary works 1. Strong

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CATEGORIES 2. Design. (including distinctive marks 1. Customer list.

3. Plants (flowers, computer (such as financial, 2. Research and
vegetables, and so programs). arbitrary, or development.
on). 2. Musical works. suggestive 3. Plans and programs.
3. Dramatic marks). 4. Pricing information.
works. 2. Marks that have 5. Production techniques.
4. Pantomime acquired a 6. Marketing techniques.
and secondary 7. Formulas.
choreographic meaning by use. 8. Compilation.
work. 3. Other types of
5. Pictorial, marks, including
graphic, and certification marks
sculptural works. and collective
6. Films and marks.
audiovisual 4. Trade dress
works. (such décor,
7. Sound menu, style, or
recording type of service).

HOW ACQUIRED By filling a patent Automatic (once 1.At common law, Through the originality
application with in tangible form); ownership is and development of
Patent and to recover for created by use of information and
Trademark Office infringement, the mark. processes that are unique
and receiving that copyright must be 2. Registration to a business, that are
office’s approval. registered with unknown by other, and
the Copyright that would be valuable to
Office, competitors if they knew
of the information and
processes.

RIGHT An inventor has the The author or The owner has The owner has the right to
right to make, use, originator has the the right to use sole and exclusive use of
sell, assign, or exclusive right to the mark of trade the trade secret and the
license the invention reproduce, dress and to right to use legal means
during the duration of distribute, display, exclude other to protect against
the patent’s term. license, or from using it, the misappropriation of the
The first to invent has transfer a right of use can be trade secret by others.
patent rights. copyrighted work. licensed or sold The owner can be license
(assigned) to or assign a trade secret.
another.

DURATION 20 years from the 1. For author; the Unlimited, as long Unlimited, as long as not
date of application; life of the author, as it is in use. To revealed to others.
for design patents, plus 20 years. continue notice by
14 years 2 For publishers; registration, the
95 years after the registration must
date of be renewed by
publication or 120 filling.
years after
creation.

CIVIL REMEDIES Monetary damages, Actual damages, 1. Injunction Monetary damages for
FOR which include plus profits prohibiting future misappropriation; plus,
INFRINGEMENT reasonable royalties received by the

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MODULE WEEK 2 Grade Level 12

and lost profits, plus infringer; or use of mark. costs and attorneys’ fees.
attorneys’ fees. statutory
(Treble damages are damages, if 2. Actual
available for infringement is damages, plus
intentional willful); plus, costs profits received by
infringement) and attorneys’ the infringer
fees.
3. Impoundment
and destruction of
infringing articles.

4. Plus costs and

attorneys’ fees.

Developmental Activity
Identify what right of the customer is being asked below. Number one is done for you as an example

1. The right to be safe Manufactured drugs intended for sale to the public must first pass the standard
requirements of the Food and Drug Administration.
2. ________________The requirement for indicating dates of manufacture and expiry on labels is a result
of legislation intended to inform the consumer.
3. _______________A trader who cornered the year’s supply of a certain brand of cigarettes. Nobody could
buy that brand except from him and he was able he was able to make huge profits by selling at a high price.
4. _______________Information printed on the product’s label indicating contact numbers where
complaints may be relayed.

Getting It Right
The following list of advantages and disadvantages is associated with sole proprietorships, partnerships,
and corporations. Place an S next to those relate to sole proprietorships, a P next to those that relate to
partnerships, and a C next to those that relate to corporations. If the advantage or disadvantage applies to
more than one type of organizational form, put all answers on the accompanying line. Answers are provided
at the end of the exercise.
Advantages Disadvantages
1. Limited liability- C 1. Unlimited liability-S
2. Sole ownership of profits 2. Governmental regulation
3. Unlimited life 3. Lack of continuity
4. Ease of information 4. Double taxation
5. Flexibility 5.Difficulty obtaining large sums of capital
6. Transfer of ownership 6.Organizing expenses
7. Relative freedom from governmental control. 7.Relatively limited viewpoint and experience
8. Increased ability and expertise 8. Activity restrictions

Guided Practice
Fill in the blanks.
1. __________________is the study of moral obligation involving the distinction between right and wrong.

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MODULE WEEK 2 Grade Level 12

2. ___________________refers to the rules about how entrepreneurs ought to behave.

3. Ethical behavior is influenced by the situation, ________________, individual differences, and other
factors.
4. __________________is a formal document indicating the entrepreneur’s adapted principles of behavior.
5. __________________is a group of persons who provide advice to the entrepreneur and his staff
concerning sensitive ethical issues.
6. Ethical issues confront entrepreneurships which spring from the relationship
between________________ and the customers.
7. The dates of manufacture and expiry on labels are intended to_________________
8. Preventing sexual harassment in the workplace is one of the responsibilities of the entrepreneur
to______________.
9. The right to be heard is one of the_________________ that the entrepreneur must support.
10. If a code of ethics is not sufficient, a system of______________ must be instituted.

INSTRUCTION:
What an interesting topic we have, right? So now, let us try another activity if all of you here understand the
concept of legal challenges. Entrepreneurs need to know how to legally protect their interests in a property
or work. The most effective way to gain legal protection is to obtain a copyright or a trademark. Two
definitions are given here. Place a C next to the one that defines a copyright; place a T next to the one that
defines a trademark. Then, on the list that follows (a. through j.), place a C next to each item that could be
protected with a copyright and a T next to each item that could be protected with a trademark. A distinctive
name, mark, symbol, or motto, identified with a company’s product.

Experiential exercises
Protecting Your Legal Interests
1.__________ An exclusive protection of a literary or an artistic production
2.__________ Best-selling novel
3.__________ Logo
4.__________ Company’s initials (such as IBM or ITT)
5.__________ Motion picture
6.__________ Word (such as Coke or Pepsi)
7.__________ Computer program
8.__________ Musical comedy
9.__________ Slogan
10._________ Stage play
11._________ Symbol

Independent Practice

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MODULE WEEK 2 Grade Level 12

Possible Answer: The effect of adherence to ethical

standards is that all concerned parties do have a
single version of what is right or wrong. In effect,
understanding among all parties will manifest,
efficiency in all transactions will take place and
added value is achieved

Encircle the letter of your answer. Begin!

1. An invention must be:

1. Something new
2. Unique / Distinct
3. Useful.

A. Requirements’ of patent
B. Requirements of trademarks
C. Requirements of copyright
D. Requirements of Trade secret

2. Any information (including form allies, patterns, programs, device, techniques, and processes) that a
business possesses and that gives the business an advantage over competitors who do not know
the information or process.
A. Requirements of Patent
B. Definition of trade secret
C. Duration of trademarks
D. How acquired patents

3. By filling a patent application with Patent and Trademark Office and receiving that office’s approval.
A. Requirements of Patent
B. Definition of trade secret
C. Duration of trademarks
D. How acquired patents

4. The author or originator has the exclusive right to reproduce, distribute, display, license, or transfer a
copyrighted work.
A. Requirements of Patent
B. Definition of trade secret
C. Duration of trademarks
D. Right of copyright

5. The owner has the right to use the mark of trade dress and to exclude other from using it, the right of use
can be licensed or sold (assigned) to another.
A. A. Requirements of Patent
B. Right of trademark
C. Duration of trademarks
D. Right of copyright

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Closure
And now that we came to an end, let’s wrap it up! To ensure that you have learned all the lessons for the
day, answer the following questions by matching in the blanks each item in column A with the
corresponding letters in column B.

Column A Column B
___1. Ethics A. Provision of training in ethics for
employees
____2. Business ethics B. Must be supported by top
management
____3. Adherence to ethical standards C. Most probable victim when ethical
abuses are committed
____4. A factor influencing ethical behavior D. The rule about how entrepreneurs
ought to behave
____5. Way of encouraging ethical behavior E. Right to be safe
____6. For a code of ethics to be effective F. Individual differences
____7. Customers G. To make huge profits
____8. Consumer right which the H. Establishes trust between buyers and
entrepreneur must support sellers
____9. Consumer’s right to choose is violated I. A supplier’s attempt to bribe a
by some traders company’s purchasing officers
____10. An unethical conduct J. j. The study of moral obligation
involving the distinction between right
and wrong

Enrichment Activity

1. Why Patent, Copyright, Trademarks and Trade secrets are important?

_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________

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MODULE WEEK 2 Grade Level 12

2. What are the legal challenges in Entrepreneurship?

_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________

3. WHAT ARE THE ADVANTAGES OF BEING ENTREPRENEUR?

_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________

Explore Activity

COMMENT ON THE QUOTE BELOW WRITE YOUR

ANSWERON THE CLOUD CALL OUT.
GIVE EXAMPLES OF
ENTREPRENEURSHIP.

COMPARE LIVELIHOOD FROM

“Follow sound business trends, ENTREPRENEURSHIP
not fashion trends”

Identify all the Logos.

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MODULE WEEK 2 Grade Level 12

1 __________ 2_____________ 3_____________ 4______________ 5 ___________

Assessment Score:

1. What is a Business Ethics? 5 points

2. What are the Factors Influencing Ethical Behavior?

3. Define the following:

 Patent
 Copyright
 Trademark
 Trade secret

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