ETHICAL AND SOCIAL RESPONSIBILITIES OF THE ENTREPRENEUR

ETHICAL AND SOCIAL RESPONSIBILITIES OF THE ENTREPRENEUR

What is Business Ethics?

Ethics is the study of moral obligation involving the distinction between right and wrong. As a consequence, the study of ethics paved the way for the adaption of the general rules of conduct in society.


The rules about how entrepreneurs ought to behave are referred to as business ethics. The ethical behavior required of entrepreneurs is determined by the following: The public; Interest groups like the Society of Prevention

of Cruelty to Animals; Business organizations; and the individual’s

personal morals and values.


Adherence to ethical standards contributes to the smooth flow of business exchanges. It establishes trust between buyers and sellers and between lenders and borrowers.

Laws and regulations requiring ethical behavior

• Product safety and quality;• Fair employment practices;• Fair marketing and selling practices;• The use of confidential information for

personal gain;• Community involvement;• Bribery; and• Illegal payments to foreign governments

to obtain business.

Product safety and quality

Fair employmentpractices;

Fair marketing and selling practices;

The use of confidential information for personal gain;

Community involvement;

Bribery

Illegal payments to foreign governments to obtain business.

Factors Influencing Ethical Behavior

Situational context Ethics intensity or issue intensity indicates the degree to

which a situation is recognized to pose ethical challenges The person Family influences, religious values, personal standards, and

personal needs. Ethical framework is a personal rule or strategy for

making ethical decisions Some times the way a person is nurtured also affects his

or her state of mind towards the community. When a child is brought up in a very hostile way towards society he or she will find it very difficult to behave positively ethical in that society


Internal environment and the organization Supervisory behavior, peer group norms and

behavior, and policy statements and written rules.

External environment Government laws and regulations,

societal norms and values, and competitive climate in an industry.


The norms of the community. The rules of a community usually controls

how one should behave in a community in order to fit appropriately within the community.

Reward system

How Ethical Behavior Is Encouraged

Ways of encouraging ethical behavior among employees. These are the following:

1. Adaption of a code of ethics;2. Institution of rewards and punishments concerning

ethical behavior,3. Adaption of internal programs for resolving

conflicts;4. Creation of ethics review committees;5. Provision of training in ethics for employees; and6. Top management support.


Code of Ethics The code of ethics is a formal document indicating the

entrepreneurship’s adapted principles of appropriate behavior. A code of ethics can be made effective if the following

requirements are met: It should refer to specific unethical practices like receiving

gifts, avoiding warranty claims, bid-rigging, making fictitious claims, among others; and

It must be supported by top management. Support comes in various forms such as providing sufficient funds for its implementation and assigning specific employees to handle ethical infractions of other employees, and the like.


Rewards, Punishment, and Ethical BehaviorIf the entrepreneurship wants to have

some measure of control over the behavior of its personnel, a system of reward and punishment must be instituted.


Internal Programs for Resolving Conflicts Conflicts arise, even when ethical conduct of personnel is

concerned. For example, a subordinate may think his supervisor is acting unethically regarding promotions. The subordinate may harbor ill feelings toward his superior if the subordinate is not provided with a means to ventilate his grievance.

It is important for entrepreneurships to adapt a program of resolving conflicts. For instance, a subordinate may appeal a superior’s decision without exposing him to the concerned superior. Later, a meeting between management and the subordinate is arranged.


Ethics Review Committees To encourage ethical behavior, the entrepreneurship may

create an ethics review committee. This committee is usually composed of company employees as well as some who are not employed by the company. These persons have undergone special training in ethics. The committee provides advice to the entrepreneur and his staff concerning sensitive ethical issues. Ethics review committees are not yet popular in Philippine entrepreneurship, but it slowly adapted by government corporations like state colleges and universities. This is not a bad option if the entrepreneur wants ethical conduct from his employees.


Provision of Training in Ethics Company personnel who are exposed to activities

that are ethically charged must be provided with sufficient training in ethics. Such training should make them sufficiently prepared to deal with various ethical issues they would encounter in their respective workplaces.

Ethics training is more appropriate for persons occupying sensitive positions in purchasing, waste disposal, personnel, research and development, sales and manufacturing.


The Management Support As mentioned earlier, it is very difficult for any

program or activity to succeed without sufficient support from top management. For instance, when unethical conduct is committed and no sanction is imposed by top management, it can be expected that more violations of good ethics will be made.

Ethical Issues Facing Entrepreneurs

Entrepreneurships face ethical questions on a daily basis. This spring from the following relationships:

1. Between the company and the customers;2. Between the company and its personnel and

employees;3. Between the company and its business

associates; &4. Between the company and the investors and the

financial community.


Relations with Customers When ethical abuses are committed, the most

probable victims are customers. This is expected because of the high frequency of transactions between the company and the customers.

The types of abuses vary and they come in forms as varied as the transactions. An example is the practice of sending unsolicited message to the customers through the cell phone.


Relations with Customers Entrepreneurs are expected by society to treat

their customers fairly and not to act in ways that will be harmful to them. Entrepreneurs should provide support for consumer rights which are as follows:

The right to be safe; The right to be informed; The right to choose; and The right to be heard.


Relations with Customers

Navotas Mayor John Rey Tiangco ordered yesterday the city’s agriculture and market authorities to closely monitor public markets to prevent unscrupulous traders from selling “botcha” fish from Batangas and Pangasinan which have reportedly injected with hazardous chemicals to make them appear fresh. Tiangco issued the directive following reports that some unscrupulous traders in other places are using formalin to the fish affected by the massive fish kills in the two provinces. (Traders Warned from Selling Botcha Fish, Journal Online, 6/3/2011)


Relations with Customers The Right to Be Safe Consumers expect that the products and services that

they buy will do them no harm. They also expect to be free from bodily harm when they are inside the entrepreneur’s business premises. This concern brought about the passage of laws intended to protect the consumer. For example, manufactured drugs intended for sale to the general public must first pass the standard requirements of the Food and Drugs Administration. The purpose is to provide some guarantee to the public that the drugs are safe to use.


Relations with Customers The Right to Be Informed Consumers make purchasing decisions often. The

quality of their decisions, however, will depend on whether or not they are properly informed. Advertisements and information printed on labels are some of the ways of providing information to consumers about products and services. The requirement for indicating dates of manufacture and expiry on labels is a result of legislation intended to inform the consumer.


Relations with Customers The Right to Choose Firms that intended to adhere to business ethics should strive

to protect consumers’ right to choose, what products and services they need and intend to purchase. However, some traders would violate this right to make huge profits.

An example is the trader who cornered the year’s supply of a certain brand of cigarettes. Nobody could buy that brand except from him and he was able to make huge profits by selling at a high price.

Another “hot issue” in the Philippines is the question on the right of consumers to choose between branded and generic drugs.


Relations with Customers The Right to Be Heard. Customers have the right to communicate their concerns

to entrepreneurships they patronize. This right may be used to express appreciation about what the company is doing, or to provide information about defects in the products the customer bought.

To support the customer’s right to be heard, some companies install a system of receiving and processing complaints. An example is the information printed on the product’s label indicating contact numbers where complaints may be relayed.


Relations with Personnel and Employees There is always the possibility that business firms, including

entrepreneurships, will commit unethical acts towards their employees. Since entrepreneurs and their staff make decisions on various business activities like hiring, promotion, transfer, compensation, and dismissal, it is not uncommon for ethical lapses to happen every now and then. An example is the ethical question faced by a manager in deciding whether or not to give hiring preference to a relative of his superior.

Good ethical conduct requires entrepreneurs to be aware of their responsibilities to employees. These are the following: Workplace safety; Quality of life issues; Avoiding discrimination; and Preventing sexual harassment


Relations with Personnel and Employees Workplace safety

The ethical entrepreneur is one who makes sure that the workplace is safe for employees. He sees to it that adequate measures are adapted to prevent accidents from happening in the factory and in the office. Sufficient ventilation must be maintained. Fire exits must be provided. Machines and chemicals must be handled by properly trained personnel.


Relations with Personnel and Employees Quality of Life Issues

Many employees are burdened by problems about maintaining a good balance between work and family. Caring for children and the elderly are two of the most common responsibilities that make life difficult for any employee. The more difficult it becomes if the employee is a single parent. Many years ago, such concerns are taken for granted because most Filipinos have extended families and there is someone who would take care of the children and the elderly. However, the situation has changed since then.


Relations with Personnel and Employees

Avoiding Discrimination Everyone has the right to work in a place

where discrimination is not practiced. Factors like age, sex, race, religion, political beliefs, and the like must not be allowed to affect any person’s chance of getting employed or promoted.


Relations with Personnel and Employees Preventing Sexual Harassment

Sexual harassment refers to unwelcome sexual advances, requests for sexual favors, and other verbal or physical contact of a sexual nature. Entrepreneurs have the moral responsibility of keeping the workplace free from sexual harassment and where everybody is treated fairly.

In preventing sexual harassment, the entrepreneur needs to do the following:

1. Issue a specific policy statement prohibiting sexual harassment;

2. Develop a complaint procedure for employees to follow;

3. Create a work environment that encourages sexually harassed employees to report their experiences;

4. Establish a committee to investigate sexual harassment claims; and

5. Take disciplinary actions against harassers


Relations with Business Associates Preventing Sexual Harassment Entrepreneurships operate in conjunction with the

efforts of suppliers, agents, and various types of middlemen. In the course of business transactions between the players mentioned and the firms, some ethical questions may come into fore. A supplier who badly needs a contract, for instance, may attempt to bribe the company’s purchasing officer. Another example would be the company’s sales manager extending favors to a trader by giving priority to delivery of orders, in exchange for personal favors.


Relations with Investors and the Financial Community The country’s financial system survives partly

because investors and other players have placed a certain degree of trust in firms they deal with. The degree of trust is maintained at a high level if the investors and the financial community feel that business firms practice good business ethics, especially if they think that their investments are well protected. If that is so, the desired level of investment is maintained.

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ETHICAL AND SOCIAL RESPONSIBILITIES OF THE ENTREPRENEUR