Business Ethics and Cultural Values of Entrepreneurs

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By: Site Engineer, Staff

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Entrepreneurial ethics refers to standards of conduct or moral judgment used by entrepreneurs in carrying out their businesses. Such standards arise from the general norms and values of society; from an individual’s experiences within family, religious, educational and other types of institutions; and from interpersonal interactions with others.

Therefore, entrepreneurial ethics may differ among individuals.

 Types of Entrepreneurs Ethics

There are three major levels characterize managers or entrepreneurs:

1. Amoral Management

Amoral entrepreneurs may be generally well-meaning but they pursue profitability as a good and pay little attention to the impact of their behavior on others.

This approach is neither immoral nor moral, but rather ignores or is oblivious to ethical considerations. There are two types of amoral entrepreneurs do not include ethical concerns in their decisions and actions because they think those general ethical standards are more appropriate to non-business areas of life.

Unintentional amoral entrepreneurs do not think about ethical issues in their business because they are inactive or insensitive to the moral implications of their decisions and actions.

 2. Immoral Management

This not only lack ethical principles but also is actively opposed to ethical behavior. This perspective is characterized by the principal or exclusive concern for company gains, emphasis on profits and company success at virtually any price, lack of concern about others’ desire to be treated fairly, a view of law as obstacles to be overcome and willingness to “cut corners”.

The key operating principle of immoral manager is: “can we make money with this action, decision, or behavior” implied in this approach is the view that other considerations matter little, if at all.

3. Moral Management

Moral management strives to follow ethical principles and precepts in contrast to moral, immoral and amoral management. While moral managers also desire to succeed, they seek to do so only within the parameters of ethical standards and the ideals of fairness, justice, and due process. As a result, moral managers pursue business objectives that involve simultaneously making a profit and engaging in legal and ethical behaviors.

They follow not only the letter but also the spirit of the law, recognizing that moral management generally requires operating well above what the law mandates. The central guiding principle is: “is this action, decision, or behavior fair to us and all parties involved?”

Ethical Guidelines for Entrepreneurs

There are a few common guidelines that can be helpful in thinking about the ethical implications of entrepreneurial decisions and behaviors.

(i)        Tell the Truth: Telling the truth is important in building trust with relevant stakeholders.

(ii)       Obey the Law: A basic tenet of social responsibility and manage ethics is obedience to the law, preferably both letter and the spirit of the law.

(iii)     Always Act When You Nape Responsibility: Entrepreneurs have the responsibility of taking action whenever they have the capacity or resources to do so. Entrepreneurial action is particularly important if those nearby are in need and an entrepreneur is the only one who can help.

(iv)      Stick to the Golden Rule: The Golden Rule, “Do unto others as you would have others do unto you”, provides a benchmark for evaluating the ethical dimensions of business decisions. Translated into business terms, it means treating individuals fairly, just as the entrepreneurs would want the business treated if it were an individual.

(v)       Show Respect for People: The notion of treating people with respect has deep roots in the study of ethics. Respect for the individual is an important aspect of the recent emphasis on valuing diversity.

(vi)      Above all, do no harm: This principle – the first rule of medical ethics is considered by some writers to be the bottom-line in ethical consideration and one easily adaptable to business.

(vii)    Practice Participation, not Paternalism: This principle is aimed at learning about the needs of stockholders, rather than deciding what is best for them.

The above principles should be imbibed and utilized by the entrepreneurs for the improvement of their ethical and cultural values.

Situational Factors That Influence Ethical Behaviors

There are some factors in the environment or an organization that can be conducive to illegal and unethical behavior, thus:

(a)       Environmental Competitiveness

This situation tends to encourage unethical behavior. Some industries in which price-fixing has been common, such as those producing automobiles, paper cartons, plumbing fixtures, and heavy electrical equipment, tend to have strong competition, products that are fairly similar, and frequent price changes and negotiations.

(b)       Environmental Munificence (Great Generosity)

This may also be conducive to unethical behavior when munificence is very low, the opportunities for success are very low, and the opportunities for success are limited. The struggle for financial performance in such an environment may cause some organization to behave unethically.

On the other hand, very high munificence may also lead to unethical behavior as organizations attempt to grow quickly and take advantage of a favorable situation.

(c)       Extreme Dependency

The extreme dependency of one organization on another influences unethical behavior e.g., such dependencies can create pressures for bribes and pay-off.

(d)       Pressure for Higher Performance

Internal organization factors can also increase the likelihood of unethical behavior. Heavy pressure for higher performance and output may induce individuals to take “shortcuts,” such as fixing prices, secretly speeding up the assembly line, or releasing unsafe products.

(e)       Labor Dissatisfaction

This may also result in unethical behavior as anger replaces more constrained and rational behavior. Ironically, a delegation of authority and encouragement of innovation may increase the likelihood of unethical behavior because of the greater latitude and creativity involved. This is because at times company workers in their behaviors to be creative and innovative infringe on the image of others probably through malicious rumors or campaigns.

Since external factors and internal pressures may increase the likelihood of unethical acts, entrepreneurs need to monitor such conditions.

 Mechanisms for Ethical Management

An important issue then is: what can managers or entrepreneurs do to foster ethical behavior in others in the organization? While there are no easy ways to influence behavior, there are a number of mechanisms that can help entrepreneurs create an ethical climate. These mechanisms include top management commitment, codes of ethics, ethics committees, ethics audits, ethics training, and ethics hotlines.

(a)       Top Management Commitment  

Entrepreneurs can demonstrate their commitment by instituting a variety of the mechanisms discussed below and by setting positive examples through their own behaviors. Subordinates nowadays are likely to pay more attention to what top managers do than to what they say.

(b)       Codes of Ethics

A code of ethics is a document prepared for the purpose of guiding organization members when they encounter an ethical dilemma.

(c)       Ethics Committee

The ethics committee is a group charged with helping to establish policies and solve major questions involving ethical issues confronting organization members in the course of their work, the committee may also oversee training programmes on ethics. Often the committee consists of several individuals from top management and/or the board of directors.

(d)       Ethics Audits

Some organizations conduct an ethics audit. This is a systematic effort to assess conformance to organization ethical policies, aid understanding of those policies and identify serious breaches requiring remedial action.

(e)       Ethics Training

Many organizations use ethics training to encourage ethical behavior. Such training may focus exclusively on ethical concerns or may be integrated into training programmes that cover a variety of ethical arena with major organizational goals.

(f)       Ethics Hotlines

An ethics hotline is a special telephone line established to enable employees to bypass the normal chain of command in reporting grievances and serious ethical problems. An executive designated to investigate and help resolve issues that are reported usually handles the line. A hotline facilitates the internal handling of problems and thus reduces the likelihood that employees will become external whistleblowers. The whistle-blower is an employee who reports a real or perceived wrongdoing, he should not be allowed to report outside.

In summary, questions of corporate social responsibilities and social responsiveness depend on the ethical standard of entrepreneurs. Three types of entrepreneurial ethics are immoral, amoral and moral.

Ethical guidelines for entrepreneurs include: obey the law, tell the truth; show respect for people; stick to the Golden Rule; above all, do not harm; practice participation not paternalism, and always act when you have responsibility.

An important management challenge is operating an organization so that members conduct their business in an ethical manager. To do so, entrepreneurs need to be knowledgeable about environmental and organizational conditions that increase the likelihood of unethical behavior. They should also use mechanisms that facilitate ethical behavior, such as top management commitment, codes of ethics, ethics committees, ethics audits, ethics hotlines, and ethics training.

 

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