Chapter 6 ETHICAL ISSUES AND SOCIAL RESPONSIBILITY OF ENTREPRENEURS Chapter 6

• ETHICAL ISSUES AND SOCIAL RESPONSIBILITY OF ENTREPRENEURS
Defining Business Ethics:
• Ethics is the determination of what is right and proper or just and fair, by an entrepreneur by
undertaking decisions and actions that reflect this. (Hisrich and Peters,2002)
• It is all about acting in an acceptable manner
• Ethics refers to a set of principles prescribing a behavioral code that explains what is good and
right or bad and wrong. It outlines moral duty and obligations. (Koratko and Hodgetts, 2004),
• ETHICAL ISSUES (contd)
• Ethical decision making is a challenge that confronts every business person involved in large or
small enterprises.
• Recent scandals :
• Anglo-leasing
• Goldenberg
• Nyaga Stock brokers/Franci Thuo Stockbrokers
• Enron,
• Citicorp, and other several large companies
• It’s no wonder consumers are concerned about the ethical standards that businesses hold.
• ETHICAL ISSUES (contd)
• Even after defining ethics as “a set of principles of right conduct or a theory or system of moral
values” it is still difficult to determine which businesses are better at complying with ethical
standards and which businesses are acting unethically. WHY?
• This is because people disagree about what is right and wrong
• Common examples of unethical actions by a firm or entrepreneur
• Theft
• Falsification
• Bribery
• Embezzlement
• Stealing supplies
• Manipulating suppliers
• Failure to withdraw a defective product from the market place
• Reasons for Unethical Behavior (contd)
• Businesses seem to take part in unethical behavior for different reasons today than in the past.
• According to Vogel (1987), corporate misdeeds during previous generations resulted from a lack
of governmental controls.
• Reasons include
i) A lack of foundation in ethics
ii) Survival drives (bottom line thinking)
iii) Reliance on other institutions to convey or reinforce ethics
• Reasons for Unethical Behavior (contd)
• balancing work and family demands
• Poor leadership
• work hours and work load
• need to meet high targets
• No recognition given for achievements
• Company politics
• Strategy
• The main strategy is to develop a set of ethical practices and codes of conduct for the
employees to follow.
• A code of conducts is a statement of ethical practices or guidelines to which an enterprise

adheres.
• These codes cover many areas ranging from how to use corporate asset, conflict of interest, use
of inside information, equal employment practices, falsification of books or records.
• Another strategy is to Teach Ethics in Business Schools
• How Businesses Can Improve Ethical Standards

• There are certain actions a company can take to help its employees maintain ethical standards.
• A business can encourage employees to adhere to a company’s code of ethics:
a) Review the relevant laws and regulations pertaining to the business.
b) Review which values produce highly ethical and successful people or products.
• How Businesses Can Improve Ethical Standards (contd)
c) Identify the top five to ten ethical values that are high priorities within the organization.
a) Compose a code of ethics for the business. Within the code, attempt to associate two
example behaviors with each value
b) Include wording that indicates all employees are expected to conform to the values
stated in the code of ethics.
• How Businesses Can Improve Ethical Standards (contd)
f) Make sure there are no double standards and that management sets a good example by following the
same code of conduct the employees must follow.
g) Codes of conduct are an important first step – begin today by putting business values on paper, then
begin to live by them.
• Conclusion
• Ethical business standards could be strengthened if companies uphold a code of ethics on a day-
to-day basis.
• Business ethics that are modeled by CEOs, management, and employees can help a company
remain profitable and stable and avoid corporate scandals.
• Although embracing ethical behavior does not guarantee success, good ethics combined with
business competence is still a winning combination.
• Social Responsibility
• Obligations business has to society:
1. Environment
2. Energy
3. Fair business practices
4. Human resources
5. Community Involvement
6. Products
• The Future of Entrepreneurship
• Entrepreneurship is about risk-taking, creativity, independence and rewards.
• These are and will continue to be the driving force behind the notion of entrepreneurship in the
future.
• The future of entrepreneurship appears bright; this is because the field is being given prominent
recognition by:
• The Future of Entrepreneurship (contd)
• Education institutions
• Governments
• Society
• Corporations
• What other factors will contribute to the development of the field of entrepreneurship?
• Homework
• One of the key factors that motivate a person to become an entrepreneur is to be

independent. However another set of factors influence and motivate entrepreneurs in their
career path. Discuss how each of these factors motivate an entrepreneur a along his career
path
– Role models
– Moral support network
– Proffessional support network

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• ETHICAL ISSUES AND SOCIAL RESPONSIBILITY OF ENTREPRENEURS

Defining Business Ethics:

• It is all about acting in an acceptable manner

• ETHICAL ISSUES (contd)

• Nyaga Stock brokers/Franci Thuo Stockbrokers

• Citicorp, and other several large companies

• ETHICAL ISSUES (contd)

• This is because people disagree about what is right and wrong

• Common examples of unethical actions by a firm or entrepreneur

• Failure to withdraw a defective product from the market place

• Reasons for Unethical Behavior (contd)

i) A lack of foundation in ethics

ii) Survival drives (bottom line thinking)

iii) Reliance on other institutions to convey or reinforce ethics

• Reasons for Unethical Behavior (contd)

• balancing work and family demands

• work hours and work load

• need to meet high targets

• No recognition given for achievements

• A code of conducts is a statement of ethical practices or guidelines to which an enterprise

• Another strategy is to Teach Ethics in Business Schools

• How Businesses Can Improve Ethical Standards

• A business can encourage employees to adhere to a company’s code of ethics:

a) Review the relevant laws and regulations pertaining to the business.

• How Businesses Can Improve Ethical Standards (contd)

• How Businesses Can Improve Ethical Standards (contd)

• Obligations business has to society:

3. Fair business practices

• The Future of Entrepreneurship

• Entrepreneurship is about risk-taking, creativity, independence and rewards.

• The Future of Entrepreneurship (contd)

• One of the key factors that motivate a person to become an entrepreneur is to be

– Moral support network

– Proffessional support network

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