Ch a pter 2

Entrepreneurial Integrity: A Gateway to Small Business Opportunity

Part 1 Entrepreneurship: A World of Opportunity
PowerPoint Presentation by Charlie Cook The University of West Alabama
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

Integrity Integrity and and Entrepreneurship Entrepreneurship

What Is Integrity?
An uncompromising adherence to doing what is right and proper
Honesty, reliability, and fairness in business practices An essential element of successful business relationships Integrity is as much about what to do and it is who to be.

Doing the Right Thing

Ethical issuesquestions of right and wrong
Legal and ethical considerations Entrepreneurs Are People Of Principle and Integrity ? Conflicts of self-interest Copyright 2006 Thomson Business &

Professional Publishing. All rights reserved.

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Difficult Difficult Ethical Ethical Issues Issues Facing Facing Small Small Firms Firms
Customer Customer Relationships Relationships Environmental Environmental and andSocial Social Responsibilities Responsibilities Human HumanResource Resource Decisions Decisions

Relationships Relationshipswith with Suppliers Suppliers

Ethical EthicalIssues Issues Affecting Affecting Small Small Businesses Businesses

Employee Employee Obligations Obligations

Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

Regulatory Regulatory Compliance Compliance

Managerial Managerial Processes Processesand and Relationships Relationships

Source: Leslie E. Palich, Justin G. Longenecker, Carlos W. Moore, and J. William Petty, Integrity and Small Business: A Framework and Empirical Analysis, Proceedings of the 49th World Conference of the International Council for Small Business, Johannesburg, South Africa, June 2004.

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A A Framework Framework for for Integrity Integrity

Personal Integrity of the Owner
Social responsibility for all stakeholders versus a narrow focus on using the firms resources only for honest profit making (Milton Friedman).

Respecting Customers
Service orientation and respect in the treatment of customers is both ethical and profitable.

Valuing Employees
Fair and honest treatment of employees is a sign of managerial integrity. Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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Kinds Kinds of of Ethical Ethical Issues Issues

Ethical Issues in Business Operations
Income and expense reporting (income tax fraud) Truth in advertisingpersuasion and deception Bribing customers and rigging bids Direct sellingpyramid schemes, bait-and-switch selling Effects of owners ethics on their employees Accurately reporting financial information Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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Kinds Kinds of of Ethical Ethical Issues Issues (contd.) (contd.)

Ethical Issues and Employees
To do an honest days work Fraudulent workers compensation claims Theft of company property and embezzlement of funds Violation of personal ethics to make a sale
_ Temptations to act unethical , Big or Small Business ?

Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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Social Social Responsibilities Responsibilities and and Small Small Business Business
Social Responsibility
The role of a small business as a good citizen in its community is meeting its ethical obligations to customers, employees, and the general community.
Regarded as the price of freedom to operate in a free economic system. Frequently takes the form of personal contributions, volunteerism, and the contribution of services by the firm and its employees.

Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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Social Social Responsibilities Responsibilities of of Small Small Firms Firms

Environmental Protection Obligations to Stakeholders Consumerism

Contributions to Community Organizations

Social Responsibilities

Support of Education

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Response to Community Needs

Compliance with Government & Regulations

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The The Challenges Challenges and and Benefits Benefits of of Acting Acting Ethically Ethically
The Vulnerability of Small Companies
The limited resources of small firms tempt them to cut ethical corners if an issue directly affects profits.

The Integrity Edge

Exhibiting integrity in business may actually boost a firms performance. The greatest benefit of integrity is the trust it generates. Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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Ethics Ethics and and Small Small Business Business (contd.) (contd.)
Internet Ethics
Risks of buying and selling on the Internet Maintenance of personal privacy
The use of cookies to profile customers usage of the Web Monitoring employees e-mail and Internet access at work

Protection of intellectual property rights

Misappropriation of content providers original intellectual creations, including inventions, literary Copyright 2006 and Thomson Business & are protected by creations, works of art, that patents or copyrights Professional Publishing. All rights

reserved.

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Ethics Ethics and and Small Small Business Business (contd.) (contd.)
International Ethical Perspectives
Illegal immigrants and forced labor in sweatshops
Outsourcing into cheap labor markets

Application of Federal Corrupt Practices Act

Bribery versus customary local business practices

Ethical imperialism
The belief that the ethical standards of ones own country are superior and can be applied universally

Ethical relativism
The belief that ethical standards are subject to local interpretation When in Rome, do as the Romans do Copyright 2006 Thomson Business &

Professional Publishing. All rights reserved.

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Building Building a a Business Business with with Integrity Integrity

A Strong Foundation
Underlying values: unarticulated ethical beliefs that provide a foundation for ethical behavior in a firm
Are based on personal views of the universe and mankind Strongly held views can lead to tough choices Ethics of the firm affect how outsiders view the firm and their decisions about the firm

Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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Building Building a a Business Business with with Integrity Integrity (contd.) (contd.)
Leading with Integrity
Owner/leaders and their ethics have more direct and pronounced effects in small firms. Owner/leaders can insist that ethical principles be followed by employees.

Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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Building Building a a Business Business with with Integrity Integrity (contd.) (contd.)
A Supportive Organizational Culture
Building an ethical culture requires:
Full commitment to ethical conduct by the firm Strong, ethical managerial leadership

Code of ethics
Official standards of employee behavior set by the firm The foundation for ethical conduct by employees Clarifies the rules and gives guidance to employees _ The Bake Principles ?

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Building Building a a Business Business with with Integrity Integrity (contd.) (contd.)
Better Business Bureau
Provides free buying guidelines and information about companies to consumers Attempts to resolve questions or disputes concerning purchases Bait advertising
An insincere offer to sell a product or service at a very low price, used to lure customers in so that they can be switched later to a more expensive product

Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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Environmentalism EnvironmentalismCost Cost or or Opportunity Opportunity

The Burden of Environmentalism
Environmentalism is the effort to protect and preserve the environment.

Potential of Environmentalism
Enhances firms image with customers Improves firms image in the community Provides business opportunities (e.g., recycling)

Adverse impact of environmentalism

Cost of updating and modifying facilities Government regulations and lawsuits Copyright 2006 Thomson Business & Professional Publishing. All rights reserved.

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