Module 2 Entrep PDF

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Module 2: The Ethical & Social Responsibilities of the EntrepreneursLearning Objectives:At the end of the lesson, the students should be able to: define business ethics;  identify the factors influencing ethical behaviors;  evaluate how ethical behavior is encouraged; and  discuss some e...

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Module 2: The Ethical & Social Responsibilities of the Entrepreneurs 8

MODULE 2: THE ETHICAL AND SOCIAL RESPONSIBILITIES OF THE ENTREPRENEUR Learning Objectives: At the end of the lesson, the students should be able to:    

define business ethics; identify the factors influencing ethical behaviors; evaluate how ethical behavior is encouraged; and discuss some ethical issues facing entrepreneurships.

INTRODUCTION The concern for society’s survival brought into the fore the need to adapt ethical standards and socially responsible actions. The role of the entrepreneur in propagating ethics and social responsibility in business cannot be overemphasized. ESSENTIAL KNOWLEDGE WHAT IS BUSINESS ETHICS? Ethics is the study of moral obligation involving the distinction between the 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: 1. the public; 2. interest groups like the Society Prevention of Cruelty to Animals; 3. business organizations; and 4. the individual’s personal morals and values. Adherence to the ethical standards contributes to the smooth flow of business exchanges. It establishes trust between buyers and sellers and between lenders and borrowers. FACTORS INFLUENCING ETHICAL BEHAVIOR Entrepreneurs today are well aware of the ethical issues and hence they want to improve the ethical standards of the business venture. Self-regulation is, of course, better and produce impressive results. Besides, there are also a number of factors, which significantly influence the managers to take ethical decisions. Ethical behavior, whether by a person or business entity, is influenced by any or a combination of the following: 1. situation; 2. reward system; 3. individual differences; and 4. family and peer influences.

Module 2: The Ethical & Social Responsibilities of the Entrepreneurs 9 Circumstances vary, and the reactions of firms or individuals also vary. For instance, a firm that behaves ethically during prosperous times may act unethically in times of financial hardships. The expectation of high rewards for committing unethical behavior motivates a person to do it. However, when he knows that there is a possibility that he would be censured, the motivation is diminished. People are different from one another and that includes differences in reacting to specific situations. When a person is in competition with others, and he wants to be sure of winning, he is more inclined to adapt unethical behavior. HOW ETHICAL BEHAVIOR IS ENCOURAGED? If the entrepreneur believes that business success requires good ethical behavior, his next concern would be to encourage his people to adapt good ethical behavior. There are certain 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; and 6. 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 is very useful to the firm espousing ethical behavior. It serves as a basic reference of employees who make a big or small decisions. A code of ethics can be made effective if the following requirements are met: 1. It should refer to specific unethical practices like receiving gifts, avoiding warranty claims, bidrigging, making fictitious claims, among others; and 2. 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. Ethical behavior of personnel occurs only when the entrepreneur develops a code of ethics and successfully implements it. ETHICAL ISSUES FACING ENTREPRENEURSHIPS Entrepreneurship face ethical questions on a daily basis. These springs from the following relationships: 1. 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. 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:...