ch02 longnecker msb aise ppt

© 2008 Cengage Learning. All rights reserved. 2–1

Managing Small Business, 14e

CHAPTER 2

Integrity and Ethics of Entrepreneurship

Part 1 Entrepreneurship: A World of Opportunity

PowerPoint Presentation by Charlie Cook.

The University of West Alabama.

Entrepreneurship: A World of Opportunity

Moore • Petty • Palich • Longenecker


Looking AHEAD

1. Define integrity and understand its importance to small businesses.

2. Explain how integrity applies to various stakeholder groups, including owners, customers, employees, the community, and the government.

3. Identify challenges to integrity that arise in small businesses and explain the benefits of integrity to small firms.

4. Explain the impact of the Internet and globalization on the integrity of small businesses.

5. Describe practical approaches for building a business with integrity.

6. Describe social entrepreneurship and the costs and opportunities of environmentalism to small businesses.

After you have read this chapter, you should be able to:


Integrity and Entrepreneurship• What Is Integrity?

An uncompromising adherence to doing what is right and properHonesty, reliability, and fairness in business

practicesAn essential element of successful business

relationships Is as much about what to do as it is who to be.

• Doing the Right Thing Ethical issues—questions of right and wrong

Legal and ethical considerationsConflicts of self-interest


Dialogue from The Producers2-1

Bloom: You raised two thousand more than you needed to produce your last play.

Bialystock:So what? What did it get me? I’m wearing a cardboard belt.

Bloom: Ahhhhhh! But that’s where you made your error. You didn’t go all the way. You see, if you were really a bold criminal, you could have raised a million.

Bialystock:But the play only cost $60,000 to produce.

Bloom: Exactly, and how long did it run?

Bialystock:One night.

Bloom: See? You could have raised a million dollars, put on a sixty thousand dollar fl op and kept the rest.

Bialystock:But what if the play was a hit?

Bloom: Oh, you’d go to jail. If the play were a hit, you’d have to pay off the backers, and with so many backers there could never be enough profits to go around, get it?

Bialystock:Aha, aha, aha, aha, aha, aha!! So, in order for the scheme to work, we’d have to fi nd a sure fi re fl op.

Bloom: What scheme?

Bialystock:What scheme? Your scheme, you bloody little genius.

Bloom: Oh, no. No. No. I meant no scheme. I merely posed a little, academic accounting theory. It’s just a thought.

Bialystock: Bloom, worlds are turned on such thoughts!

Bialystock:Don’t you see, Bloom? Darling, Bloom, glorious Bloom, it’s so simple. Step one: We find the worst play in the world—a sure flop. Step two: I raise a million dollars—there’s a lot of little old ladies in this world. Step three: You go back to work on the books. Phoney lists of backers—one for the government, one for us. You can do it, Bloom, you’re a wizard. Step four: We open on Broadway and before you can say “step five” we close on Broadway. Step six: We take our million dollars and fly to Rio de Janiero....

Bloom: But if we’re caught, we’ll go to prison.

Bialystock: You think you’re not in prison now? Living in a grey little room. Going to a grey little job. Leading a grey little life.

Bloom: You’re right. You’re absolutely right. I’m a nothing. I spend my life counting other people’s money—people I’m smarter than, better than. Where’s my share? Where’s Leo Bloom’s share? I want, I want, I want, I want everything I’ve ever seen in the movies! . . . Hey, we’re going up.

Bialystock:You bet your boots, Leo. It’s Bialystock and Bloom—on the rise. Upward and onward. Say, you’ll join me. Nothing can stop us.

Bloom: I’ll do it! By God, I’ll do it!Source: http://www.awesomefilm.com/script/producers.html


Difficult Ethical Issues Facing Small Firms2-2

• Relationships with customers, clients, and competitors (relationships with outside parties in the marketplace)

• Human resource decisions(decisions relating to employment and promotion)

• Employee obligations to employer(employee responsibilities and actions that in some way conflict with the best interests of the employer)

• Management processes and relationships(superior–subordinate relationships)

• Governmental obligations and relationships(compliance with governmental requirements and reporting to government agencies)

• Relationships with suppliers(practices and deceptions that tend to defraud suppliers)

• Environmental and social responsibilities(business obligations to the environment and society)

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 forty-ninth World Conference of the International Council for Small Business, Johannesburg, South Africa, June 2004.


Juggling the Interests of Stakeholder Groups and the Government2-3


A Framework for Integrity

ManagerialIntegrity

ManagerialIntegrity

Promoting the Owners’ Interests

Promoting the Owners’ Interests

Valuing Employees

Valuing Employees

Respecting Customers

Respecting Customers


Kinds of Ethical Issues• Ethical Issues in Business Operations

Income and expense reporting (income tax fraud)

“Truth in advertising”—persuasion and deception

Bribing customers and rigging bids

Direct selling—pyramid schemes, bait-and-switch selling

Effects of owners’ ethics on their employees

Accurately reporting financial information


Kinds of Ethical Issues (cont’d)• Ethical Issues and Employees

“To do an honest day’s work”

Fraudulent workers’ compensation claims

Theft of company property and embezzlement of funds

Violation of personal ethics to make a sale


Social Responsibilities and Small Business• Social Responsibility

The role of a small business as a good citizen in its community in 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.


Social Responsibilities of Small Firms

Environmental

Protection

Environmental

Protection

ConsumerismConsumerism

Support of Education

Support of Education

Compliance with

Government Regulations

Compliance with

Government Regulations

Response to Community

Needs

Response to Community

Needs

Contributions to Community Organizations

Contributions to Community Organizations

Obligations to Stakeholders

Obligations to Stakeholders

Social Responsibili

ties of Small Firms

Social Responsibili

ties of Small Firms


The Challenges and Benefits of Acting 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

firm’s performance. The greatest benefit of integrity is the trust it

generates.


Integrity in an Expanding Economy• Internet Ethics

Risks of buying and selling on the Internet Maintenance of personal privacy

“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 creations, and works of art, that are protected by patents or copyrights.


Integrity in an Expanding Economy (cont’d)• International Issues of Integrity

Illegal immigrants and forced labor in sweatshopsOutsourcing into “cheap” labor markets

Application of Federal Corrupt Practices ActBribery versus customary local business practices

Ethical imperialismThe belief that the ethical standards of one’s 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”


Building a Business with 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 of the firm and their decisions about the firm.


Building a Business with Integrity (cont’d)• 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.


Building a Business with Integrity (cont’d)• 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


Fundamental Principles for Ethical Policy Making

PurposePurpose

PridePride

PersistencePersistence PatiencePatience

PerspectivePerspective


The Ethical Code of The Dwyer Group2-4

CODE OF VALUES

We believe . . .

. . . in superior service to our customers, to our community, and to each other as members of The Dwyer Group family.

. . . in counting our blessings every day in every way.

. . . success is the result of clear, cooperative, positive thinking.

. . . that loyalty adds meaning to our lives.

. . . management should seek out and recognize what people are doing right, and treat every associate with respect.

. . . challenges should be used as learning experiences.

. . . our Creator put us on this earth to succeed. We will accept our daily successes humbly, knowing that a higher power is guiding us.

. . . in the untapped potential of every human being. Every person we help achieve their potential fulfills our mission.

. . . we must re-earn our positions every day in every way.

. . . in building our country through the free enterprise system. We demonstrate this belief by continually attracting strong people in The Dwyer Group.

We live our Code of Values by . . .

Source: Reprinted with permission of The Dwyer Group, Waco, Texas.


Building a Business with Integrity (cont’d)

1

Make the decision.

Identify alternative solutions to the problem.

An Ethical Decision-Making Process

An Ethical Decision-Making Process

Define the problem.

Evaluate the identified alternatives.

2

3

4

Implement the decision.5

Evaluate the decision.6


Social Entrepreneurship: A Fast-Emerging Trend

• Social Entrepreneurship Entrepreneurial activity with an embedded social

purpose (goal) of finding innovative solutions to social needs, problems, and opportunities.

• Triple Bottom Line People Profits Planet (environment)


Environmentalism—Cost or Opportunity• The Burden of Environmentalism

Environmentalism is the effort to protect and preserve the environment.Adverse impact of environmentalism

–Cost of updating and modifying facilities

–Compliance with government regulations

Potential of environmentalism–Enhances firm’s image with customers.

– Improves firm’s image in the community.

–Provides business opportunities (e.g., recycling).


Key TERMS

• integrity• ethical issues• stakeholders• social responsibilities• intellectual property• ethical imperialism• ethical relativism• underlying values• code of ethics• social entrepreneurship• environmentalism

ch02 longnecker msb aise ppt

Business

glorious bloom

producers bloom

cengage learning

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small firms relationships

benefits of integrity

grey little life

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