Ethical Perspective for Entrepreneurship
Objectives:
1. Define Business Ethics and its Importance:
2. Differentiate Macro-Ethics and Micro-Ethics:
3. Identify Communication as a Root Cause of Ethical Issues:
4. Establish the Four Pillars of Ethical Enterprises:
5. Describe the Five Stages of Organizational Moral Development:
What is Business Ethics:
‘Business ethics is like a company's moral compass. It sets guidelines for how everyone
in the company should act, going beyond just following the law. This creates a clear
code of conduct that employees can follow, which helps build trust with customers who
value honesty and fairness.
Two types of business ethics:
macro-ethics & micro-ethics.
1. Macro-ethics defines the moral relationships within a business, relationships
between businesses as moral entities, and also between their shareholders
and employees.
2. Micro-ethics is a part of business ethics that defines the specifics of moral
relationship between the socio-economic system of the macro-entities, the
state, business organizations, and society in general.
The ethical problem generally results due to people’s communication. By
communicating with each other, people make decisions that are usually judged from
ethical positions. So the moral maturity of a business and its moral values determine
the ethical problems in a business.
Building a Trustworthy Business: The Four Pillars of Ethical Enterprise
In today's world, consumers are increasingly drawn to businesses that operate ethically.
But how can you tell if your company is on the right track? Here are four key questions
to ask yourself:
1. Fairness: Is Everyone Winning?
Ethical businesses create win-win situations. Remember the financial crisis of 2008?
Unethical practices like selling risky investments to customers while betting against
their success were a major factor. A core principle of ethical business is that both the
company and the customer benefit. Trying to win at the expense of your customers is
a fundamental breach of trust.
2. Integrity: Honesty is the Best Policy (for Marketing Too!)
Truthful marketing is essential for ethical businesses. Companies with legitimate value
propositions don't need to distort reality. This means avoiding practices like
exaggerating product features, faking customer reviews, or hiding important details in
fine print. Creativity in communicating your message is great, but resorting to
dishonesty is a red flag.
3. Decency: Be Proud of What You Do
Imagine explaining your business to your family. Would you feel comfortable? Ethical
businesses operate with a sense of decency. You should be able to describe your
company's activities with pride to anyone you know. If you hesitate or feel embarrassed,
it might be a sign of a morally questionable business model.
4. Sustainability: Using Resources Wisely
Wastefulness is not just bad for the environment, it's also unethical. Ethical businesses
strive for sustainability by using resources efficiently. While profitability is important,
sustainability goes beyond just making money. It means being responsible stewards of
resources for the long-term well-being of everyone, not just a select few. A business
model built on excessive resource consumption is not only unsustainable, but also
ethically irresponsible.
These four pillars - fairness, integrity, decency, and sustainability - are the foundation
of an ethical enterprise. While they don't guarantee perfect morality, adopting them
early on creates a solid base for building a trustworthy and successful business.
ETHICAL ENTREPRENEURS
Setting the Stage: Ethical startups are clear about their values from the very
beginning. They write these values into their plans and mission statements.
Taking a Stand: Ethical founders don't compromise their principles, even when it's
tempting. This builds trust and a good reputation.
Thinking Ahead: Ethical startups anticipate tough choices and discuss them openly
as a team before they happen.
Open Communication: Ethical startups encourage questions and discussions about
what's right and wrong. This shows everyone that ethics matter.
Avoiding Trouble: Ethical startups watch out for situations where someone might be
tempted to put their own interests ahead of the company's.
Leading by Example: Ethical founders talk about their values constantly, especially
with new employees, to make sure everyone understands what's expected.
Building a Team: Ethical startups don't keep employees who don't share their values.
They look for people who want to be part of something bigger than just making money.
Giving Back: Ethical startups find ways to contribute to the community and build
positive relationships with the people around them.
Regular Check-Ins: Ethical startups take time to reflect on their values and make
sure they're still living up to them.
Adapting Over Time: As a startup grows, the ethical challenges it faces will change.
Ethical startups need to adjust their approach to keep doing the right thing.
The Moral Compass of Organizations: A Five-Stage Journey
Organizations, like people, can be viewed through the lens of their ethical
development. This framework outlines five distinct stages, representing a company's
evolving approach to ethical decision-making and behavior.
Stage 1: The Amoral Organization (Profit at Any Cost)
At the lowest level resides the amoral organization. Here, profit reigns supreme. Ethical
and moral considerations hold little weight, often leading to rule-breaking and
unethical behavior in the pursuit of financial gain. These organizations are inherently
unsustainable and rarely thrive in the long term.
Stage 2: The Legalistic Organization (The Letter of the Law)
A step up from amorality is the legalistic organization. This stage represents the bare
minimum of ethical behavior. Companies at this level understand the rules and
regulations but adhere to them only for compliance purposes, not necessarily out of a
sense of right or wrong. They prioritize staying "on the right side of the law" to ensure
continued profitability.
Stage 3: The Responsive Organization (Doing the Right Thing... Sometimes)
The middle ground is occupied by responsive organizations. While profit remains a key
driver, there's a growing recognition of the importance of ethical behavior. These
organizations strive to "do the right thing" when convenient, but lack a proactive
approach to ethical leadership. Their morality is reactive, responding to external
pressures rather than taking a leading role in ethical conduct.
Stage 4: The Emerging Ethical Organization (Building a Moral Foundation)
The penultimate stage brings us to emerging ethical organizations. Here, the balance
between profit and ethical considerations starts to shift. These companies actively
integrate moral and ethical principles into their strategic and operational decisions.
Acting ethically becomes a core principle, not just an occasional consideration. This
commitment to ethical behavior begins to permeate the company culture, influencing
all levels of the organization. A focus on ethical sourcing and responsible supply chains
often emerges at this stage.
Stage 5: The Ethical Organization (A Model of Moral Leadership)
The pinnacle of ethical development is the ethical organization. Here, concern for
profit and ethical behavior are perfectly balanced. Decisions are made with a keen
awareness of their ethical impact, and leadership embodies a strong moral compass.
These organizations are seen as ethical leaders within their industries, fostering a highly
ethical internal culture that serves as a model for others.
Most common Ethical issues faced by Entrepreneurs:
• Greediness
• Production of poor products
• Hiding correct information in reports
• Overconfidence
• Unfair price increase
• Direct fraud in negotiations
• Poor quality of work
• Blind obedience to management
• The conflict between personal & business interest
• No opportunity to disapprove an unethical behavior
• Insufficient attention to personal life due to excess workload
• Fraudulent behavior to benefit the organization
References:
Entrepreneur Media, Inc. (2023, October 26). The 4 Pillars of Ethical Enterprises.
Entrepreneur. Retrieved [Date you accessed the website], from
[Link]
enterprises/240035
Our Business Ladder. (n.d.). What is Entrepreneurial Ethics?. Our Business Ladder.
Retrieved [Date you accessed the website], from
[Link]
World of Work. (2019, August 5). 5 Stages of Corporate Ethical Development. World of
Work. Retrieved [Date you accessed the website], from
[Link]
corporate-ethical-development
