Part II – The Entrepreneurial

Perspective
Chapter 4 – Understanding the
Entrepreneurial Perspective
in Individuals
Chapter 5 – Developing Creativity and
Understanding Innovation
Chapter 6 – Ethical and Social
Responsibility Challenges for
Entrepreneurs
Copyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 6 – Ethical and Social
Responsibility
Challenges for
Entrepreneurs
 Defining Ethics
Ethics provide the basic
rules or parameters for
conducting any activity in
an “acceptable” manner.
 Classifying Decisions Using a Conceptual Framework
Ethical
Quadrant II: Quadrant I:
Ethical and Illegal Ethical and Legal
Codification

Manifestation

Corporate Legal
Illegal Decisions

Quadrant IV: Quadrant III:

Unethical and Illegal Unethical and Legal

Unethical
Ethics and Laws
 Managerial Rationalizations
The four rationalizations are believing:
1. That the activity is not “really” illegal or
immoral;
2. That it is in the individual’s or the
corporation’s best interest;
3. That it will never be found out; and
4. That because it helps the company, the
company will condone it.
 Types of Morally Questionable Acts
Type Direct Effect Examples

Against the
Nonrole Expense account Cheating
firm

Role Against the

Superficial performance appraisal
Failure firm

Role For the

Bribery
Distortion firm

Role For the Not withdrawing product line in face of

Assertion firm initial allegations of inadequate safety
 Major Problems Regarding Laws Reflecting
Ethical Standards
1. The moral standards of members of a society may be based
on a lack of information relative to issues of corporate
conduct.
2. The moral standards of members of a society may be
diluted by the formation of small groups.
3. The moral standards of members of society may be
misrepresented in the consensus of large organizations.
4. The moral standards of members of a society may be
misrepresented in the formulation of the laws.
5. The legal requirements formed through the political
process are often incomplete or imprecise and have to be
supplemented by judicial court decisions or administrative
agency actions.
 Economic Trade-Offs
We cannot blame single individuals
for the ethical problems of free
enterprise. Rather, we must
understand the total, systematic
impact that free enterprise has on the
common good.
Establishing a Strategy
for Ethical
Responsibility
 Ethical Practices and Codes
of Conduct
A code of conduct is a statement
of ethical practices or guidelines
to which an enterprise adheres.
 Approaches to Managerial Ethics
Immoral Amoral Moral
Management Management Management

Managerial decisions, Management is neither Managerial activity

actions and behavior moral or immoral, but conforms to a standard
imply a positive and decisions lie outside of ethical, or right,
active oppositions to the sphere to which behavior. Managers
what is moral (ethical). moral judgments apply. conform to accepted
Decisions are Managerial activity is professional standards
discordant with outside or beyond the of conduct. Ethical
accepted ethical moral order of a Leadership is common-
principles. An active particular code. A lack place on the part of
negation of what is of ethical perception management.
moral is implied. and moral awareness
may be implied.
 A Holistic Approach
• Principle 1: Hire the right people
• Principle 2: Set standards more than rules
• Principle 3: Don’t let yourself get isolated
• Principle 4: The most important principle is
to let your ethical example
at all times be absolutely
impeccable
Ethics and Business
Decisions
Four Main Themes of Ethical Dilemmas
for Entrepreneurs

Conflict
of Interests

Social
Small-Business
Personality Responsibility
Ethical
Traits to
Dilemmas
Stakeholders

Level
of
Openness
 Complexity of Decisions
• First, ethical decisions have extended
consequences
• Second, business decisions involving ethical
questions have multiple alternatives
• Third, ethical business often have mixed
outcomes
• Fourth, most business decisions have
uncertain ethical consequences
• Finally, most ethical business decisions have
personal implications
 The Social Responsibility Challenge

• Some firms simply react to social issues

through obedience to the laws – social
obligation; others respond more actively;
accepting responsibility for various programs
– social responsibility; still others are highly
proactive and are even willing to be evaluated
by the public for various activities – social
responsiveness.
 The Opportunity for Ethical
Leadership by Entrepreneurs
An owner has the unique opportunity
to display honesty, integrity, and
ethics in all key decisions. The
owner’s actions serve as a model for
other employees to follow.