What are the Business Ethics and Cultural Values of an Entrepreneur in Business?

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By: Site Engineer, Staff

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In this article, we shall be treating the types of entrepreneurial ethics, ethical guidelines for entrepreneurs, situational factors that influence ethical behaviors, and mechanisms for ethical management in organizations.

Entrepreneurial ethics refers to standards of conduct and moral judgment used by entrepreneurs in carrying out their businesses.

These standards arise from the general norms and values of society; from an individual’s experiences within the family, religious, educational, and other types of institutions; and from interpersonal interactions with others. Therefore, entrepreneurial ethics may differ among individuals.

Social responsibility is intertwined deeply with ethics, which is the discipline that deals with what is “good or bad” or right or wrong. Ethics is not a science and there are few universally accepted standards of ethical conduct. Increasingly, consumers expect firms to do more than simply meet legal requirements. Ethics, morality, and fairness are also being used to assess the business in terms of social responsibility.

Types of Entrepreneurial Ethics

There are three major levels of moral or ethical judgment characterizes entrepreneurs, such as:

(i)         Amoral Management

There are two types of amoral management: intentional and unintentional.

Intentional amoral entrepreneurs do not include ethical concerns in their decisions and action because they think that general ethical standard is more appropriate to non-business areas of life.

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

(ii)        Moral Management

Moral management strives to follow ethical principles and precepts. 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?

(iii)       Immoral Management

Immoral management not only lacks ethical principles but also is actively opposed to ethical behavior. This standpoint 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 laws as obstacles to be overcome and willingness to “cut corners.” The key operating principle of immoral management 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.

Ethical Guidelines For Entrepreneurs

There are a few common-sense guidelines that can help think about the ethical implications of entrepreneurial decisions and behaviors.

These guidelines are:

  • 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.
  • Above All, Do No Harm: The 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.
  • Practice Participation, Not Paternalism: This principle is aimed at learning about the needs of stockholders, rather than deciding what is best for them.
  • Always Act When You Have 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.
  • Obey the Law: A basic tent of social responsibility and management ethics is obedience to the law, preferably both letter and the spirit of the law.
  • Tell the Truth: Telling the truth is important in building trust with relevant stakeholders.
  • 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.

These above principles should be 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 of an organization that can be conducive to illegal and unethical behavior, thus:

(i)         Extreme Dependency

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

(ii)        Pressure for Higher Performance

Internal organizational 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.

(iii)       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.

(iv)       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, fairly similar products, and frequent price changes and negotiations. Competitions can foster unethical behavior is not-for-profit organizations as well.

(v)        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 organizations 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.

Mechanisms for Ethical Management

This question is important at this point, “What can managers or entrepreneurs do to foster ethical behavior in others in the organizations?” While there are no easy ways to influence behavior, there are several mechanisms that can help entrepreneurs create an ethical climate.

These mechanisms are:

(i)         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 programs that cover a variety of organizational issues. Ethical training can help align behavior in the ethical arena with major organizational goals.

(ii)        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. A whistle-blower is an employee who reports a real or perceived wrongdoing, he should not be allowed to report outside.

(iii)       Top Management Commitment

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

(iv)       Codes of Ethics

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

(v)        Ethics Committee

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 programs on ethics. Often the committee consists of several individuals from top management and/or the board of directors.

(vi)       Ethics Audits

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

 

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