Chapter 2
Ethics and Social Responsibility: Doing the Right Thing
Ethical Behavior
Ethical behavior involves doing what is “right” as opposed to what is
“wrong.” When thinking about ethical behavior, it’s important to
consider the perspectives of different stakeholders.
Ethics and Social Responsibility
Ethics and social responsibility set behavioral boundaries for business
owners.
Business Ethics
While maintaining an ethical perspective is essential to creating and
protecting a company’s reputation, it’s not easy! Ethical dilemmas lurk
in the decisions that entrepreneurs make every day.
Benefits of Moral Management
Entrepreneurs must recognize that ethical behavior is an investment in
the company’s future rather than merely a cost of doing business.
Why be Ethical? (1 of 2)
The top five reasons to be ethical are:
1. To protect the brand and company’s reputation;
2. Because it’s the right thing to do;
3. To maintain customer loyalty and trust;
4. To maintain the confidence of investors;
5. To earn public acceptance and recognition
Why be Ethical? (2 of 2)
What drives business ethics?
• Corporate scandals
• Competition
• Investor demands
• Customer pressure
• Globalization
Establishing an Ethical Framework (1 of 2)
To cope successfully with the many ethical decisions they face,
entrepreneurs must develop a workable ethical framework to guide
themselves and the organization.
Establishing an Ethical Framework (2 of 2)
The final choice must be consistent with the company’s goals, culture,
and value system as well as those of the individual decision makers.
Causes of Ethical Lapses
We can explore the primary causes of ethical lapses in more detail.
Features of Ethical Cultures (1 of 2)
Research shows that in organizations with ethical cultures:
1. Leaders support and model ethical behavior.
2. There are consistent communications come from all company
leaders.
3. Ethics is integrated into the organization’s goals, business processes,
and strategies.
4. Ethics is part of the performance management system.
5. Ethics is part of the company’s selection criteria and selection
process.
Features of Ethical Cultures (2 of 2)
In addition:
6. The needs of the various stakeholder are balanced when making
decisions.
7. A strong set of core values supports the vision and mission of the
company.
8. The company maintains a long-term perspective on all decisions.
Establishing and Maintaining Ethical Standards
These tests can help employees identify the moral implications of the
decisions they face.
Principles to Guide Ethical Behavior
The study of history, philosophy, and religion reveals a strong
consensus about certain universal and timeless values that are central
to leading an ethical life.
Maintaining Ethical Standards (1 of 3)
To create an environment that encourages ethical behavior,
entrepreneurs must make building an intentional culture that is based
on a strong ethical foundation a core responsibility as leaders of their
businesses.
To maintain ethical standards, entrepreneurs should:
• Set the tone
• Create a company credo
• Establish high standards of behavior
• Involve employees in establishing ethical standards
• Create a culture that emphasizes two-way communication
Maintaining Ethical Standards (2 of 3)
In addition, firms should:
• Eliminate “undiscussables”
• Develop a code of ethics
• Enforce the code of ethics through policies
• Recruit and promote ethical employees
Maintaining Ethical Standards (3 of 3)
Finally, entrepreneurs should:
• Conduct ethics training
• Reward ethical conduct
• Separate related job duties
• Perform periodic ethical audits
Social Entrepreneurship
Whereas traditional entrepreneurs seek opportunities to create market
value, there is a growing trend to use entrepreneurship to pursue
opportunities to create social value.
Social Responsibility
Society is constantly redefining its expectations of business and now
holds companies of all sizes to high standards of ethics and social
responsibility.
Why be Socially Responsible?
When customers shop for “value,” they no longer consider only the
price–performance relationship of the product or service; they also
consider the company’s stance on social responsibility.
Being Socially Responsible
These are some simple ways small businesses can be socially
responsible.
Business’s Responsibility to the Environment
Due to a strong personal belief in environmental protection, many
entrepreneurs seek to start ventures that have a positive impact on the
environment or take steps to operate their businesses in ways that help
protect the environment. Focusing on the three Rs is one way to
accomplish this.
Business’s Responsibility to Employees
Remember that employees produce the winning competitive edge for
entrepreneurs so it’s important to treat them well.
Managing Diversity
How can entrepreneurs achieve unity through diversity? The only way
is by managing diversity in the workforce. Try using a SPLENDID
approach.
Managing a Culturally Diverse Workforce
Managing a culturally diverse workforce successfully requires a
business owner to do the following:
• Assess diversity needs
• Learn to recognize and correct their own biases and stereotypes
• Avoid making invalid assumptions
• Push for diversity in their management teams
• Concentrate on communication
• Make diversity a core value in the organization
• Continue to adjust the company to their workers
Drug Testing
Substance abuse has infiltrated the workplace making it important even
for entrepreneurs to have an effective, proactive drug program.
Sexual Harassment
Sexual harassment is a violation of Title VII of the Civil Rights Act of
1964 and is considered to be a form of sex discrimination. Studies show
that sexual harassment occurs in businesses of all sizes, but small
businesses are especially vulnerable because they typically lack the
policies, procedures, and training to prevent it.
What is Sexual Harassment?
Most sexual harassment charges arise from claims of a hostile
environment.
Preventing Sexual Harassment
A company’s best weapons against sexual harassment are education,
policy, and procedures.
Privacy
To avoid ethical and legal problems, business owners should follow
these guidelines:
• Establish a clear policy for monitoring employees’ communications
• Create guidelines for the proper use of the company’s
communication technology and communicate them to everyone
• Monitor in moderation
Business’s Responsibility to Customers
Companies have the responsibility to provide their customers with safe,
quality products and services.
Business’s Responsibility to Investors
Although earning a profit may be a company’s first responsibility, it is
not its only responsibility; meeting its ethical and social responsibility
goals is also a key to success. Investors today want to know that
entrepreneurs are making ethical decisions and acting in a socially
responsible manner.
Business’s Responsibility to the Community
As corporate citizens, businesses have a responsibility to the
communities in which they operate. Indeed, consumers expect
companies to be socially responsible and to be good corporate citizens.
Conclusion
Businesses must do more than merely earn profits; they must act
ethically and in a socially responsible manner. Establishing and
maintaining high ethical and socially responsible standards must be a
top concern of every business owner. Finally, business owners and
managers must recognize the key role they play in influencing their
employees’ ethical and socially responsible behavior.
