King Saud University -- Kent State University
Partners in Entrepreneurship
Survey of Entrepreneurship
Workshop
Integrity and Ethics
In Entrepreneurship
1
Slide 1
Integrity and Ethics
Question to start the class:
The collapse of the USA’s financial markets have been said to have caused the
global recession of 2007 to 2009. Further, the greed on USA’s Wall Street has
been said to have caused the collapse of the USA’s financial markets.
Question: is greed a display of integrity and ethics?
Alternative question to start the class:
Question: What does the Quran say about integrity and ethics?
Slide 2
Integrity and Entrepreneurship
• What is integrity?
• What one believes to be right and
proper
• Values such as honesty, reliability
and fairness
2
Key Points:
There is clearly no one commonly accepted “definition” of the term integrity, although there are
dictionary definitions.
The entrepreneur and small business owner will face ethical dilemmas or at least problems on a
daily basis. They could be big or small, but will be an ethical dilemma nonetheless. The point is
that the individual must have clearly identified his/her individual beliefs and convictions in order
to have a basis upon which to act in a manner that is consistent with his/her ethical beliefs and
convictions.
Definitions: (Provided as a starting point to stimulate discussions on what participants think)
Integrity: steadfast adherence to a strict moral or ethical code; the state of being unimpaired;
soundness; the quality or condition of being whole or undivided; completeness.
Beliefs: the mental act, condition, or habit of placing trust or confidence in another; mental
acceptance of and conviction in the truth, actuality, or validity of something.
Convictions: A fixed or strong belief; opinion (Note: in some circles, a conviction is viewed as
much stronger, deeper, or intense than a belief. In such a case, a belief can change, but a
conviction could not. This is how the two terms would be differentiated.)
Values: worth in usefulness or importance to the possessor; utility or merit; a principle, standard,
or quality considered worthwhile or desirable; something of an ethical nature which a person
holds that is very important.
Norms: a fixed or ideal standard; an authoritative rule or standard by which something is judged,
and on that basis is approved or disapproved; standards of ethical right and wrong.
Slide 3
Integrity and Entrepreneurship
• Doing the right thing
• Ethical issues involve questions of right and
wrong,
• Self-interest versus the needs of others
• It may not pay to be ethical, at least in the
short run
3
Key Points:
Ethical issues involve questions of right and wrong. In everyday business, there are more often
than not, gray areas. In some cases, integrity is viewed as doing the right thing, for the right
reason. This is because politicians often do the right thing, but it’s for political reasons (such
as getting re-elected), as opposed to the right reasons.
In very many cases, self-interest rises to the top as THE key reason why people make decisions.
This, after all, is understandable given the Darwinian principle of survival of the fittest and
self-preservation.
It may not pay to be ethical, at least in the short run. This is especially at start-up where the
entrepreneur will have much personal investment tied up in the business. Would it be a wise
move to sacrifice one’s life savings for an action that may be ethically correct, but from a
practical/business standpoint, insignificant, minor, or otherwise not relevant? This is the
proverbial gray area.
Why even discuss the point of Integrity and Entrepreneurship? Simply because ethics or right
and wrong issues drives Social Entrepreneurship, a subject that was brought up in Day 2 of
this workshop.
Demonstrating ethics in business is likely to boost the image and performance of a company.
The greatest benefit of integrity is the trust it generates.
Slide 4
Difficult Ethical Issues Facing the
Entrepreneur /
Small Business Owner
• Relationships with customers,
clients, and competitors
• Human Resource decisions
• Employee obligations to employer
• Management processes and
relationships
4
Key Points:
For a small business, the typical and frequent ethical issues commonly arise out of relationships
with customers, clients, and competitors. These involve relationships with outside parties in
the marketplace. And why is this perhaps the most common? Quite simply because they do
involve business relationships where there is money to be made; when a gain or a loss can
occur; or when there is a win or a lose situation that is being faced.
There are also Human Resource decisions that are very frequently ethical dilemmas, especially
when they deal with employment and promotional opportunities. Law suits by females and
workforce minorities (most frequently by age, skin color, or national origin) abound in the
USA work place.
Employee responsibilities or obligations to the employer and actions that in some way conflict
with the best interests of the employer is another source of ethical dilemmas. Let’s take the
purchasing agent who accepts free tickets from a supplier to a World Cup football game; or a
sales person who gives a valued client a 3 day retreat at a resort (all expenses paid).
Management processes and relationships are a fourth source of ethical dilemmas. Superior –
subordinate relationships are particularly touchy in this regard. An example is when a
suggestion is made to a subordinate that “the Boss would like to ……”, with the inference
that it would be in the subordinate’s best interest to make it happen, without the Boss saying
so and a potential ethical question is involved where propriety is in question.
Slide 5
Difficult Ethical Issues Facing the
Entrepreneur /
Small Business Owner
• Governmental obligations and
relationships
• Relationships with suppliers
• Environmental and social
responsibilities
5
Key Notes:
Other types of relationships include governmental obligations and relationships, including their
suppliers and compliance with governmental requirements and reporting to government
agencies; specific relationships with suppliers that involve practices and activities that
involve deceptions which might defraud suppliers; and environmental and social
responsibilities, which principally are business obligations to society and the environment.
The groups discussed in the preceding two charts are basically stakeholder groups to the
entrepreneur’s company.
Examples of ethical issues in USA business that the entrepreneur might face include:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Income and expense reporting fraud (ie, income tax fraud)
“Truth in advertising” fraud (ie, deceptive advertising)
Bribing customers and rigging bids
Direct selling: Pyramid schemes and bait-and-switch sales techniques)
The effect of the owner’s personal ethics on how company business is done, and its effect
on the employees’ actions (assuming they want to keep their jobs)
Accuracy of financial reporting of company information (the root cause for business
failures such as Enron)
Fraudulent worker’s compensation claims
Theft of company property and embezzlement of company funds
Violation of personal ethics to make a sale
The limited resources of a small company often tempts it to cut ethical corners to make money.
Slide 6
Ethical vignettes
After months of negotiating, your company has just signed a very large contract with another company. The deadlines for perf ormance are
strict and failure to meet them could, in the best case, result in loss of the contract along with many jobs, including yours, and, in the
worst case, loss of the company. You are the project manager for the initial portion of the contract and you know that getting started will
be your most difficult task, because it depends on governmental approval, which is often slow. However you have also heard t hat the
responsible official can be “encouraged” to respond quickly by making a ‘gift’ to his family. Making such gifts is against company policy,
although you could do it in such a way that the company would never know, and loss of the contract would be likely to impact you.
What should you do?
A major company has come to school to recruit new employees. You know that the interviewer's time is limited and many students are
interested I working for the company, but you are not. Still, you need the interview practice so you sign up for an intervie w. Is this
appropriate behavior on your part?
Your company is not doing well. In fact, unless you get skilled technical help, the company is likely to go bankrupt. Unfortunately skilled help
is very unlikely to want to work for your company because it is not doing well. So, you decide to tell everyone that the estimates of
profitability are good. Then, when you've hired help and your business is back on track, your profits will be accurate. Were your actions
correct?
Your business has a major competitor who is going after the same contract you are. An employee who you hired from a third co mpany
comes to you and says that he has made a study of your competitor's bidding practices, gathering information as he could and he know
how they bid on contracts such as the one you are competing for. If you wish, he will bring the information to your meeting tomorrow.
What do you do with the employee's proposal?
Last night you were called to your company site because a fire broke out. This morning, after the fire was put out, you find that the plant was
completely destroyed. Because you, the owner, listened to your management team, you took out insurance which will pay you a check
for the damage and loss of business. The money is enough to rebuild the plant and keep your employees working. Alternativel y, you
could take the money and retire comfortably, but that would put all your employees, including your management team out of wor k. What
will you do?
Your business has been going well, but lately you've noticed a slow down. Looking around you've observed your employees spen ding
computer time looking at web sites not related to the business and sending personal emails. To stop the waste of time, you d ecide to
block all web sites such as “You Tube”, “Facebook”, etc. Your employees are upset and want to the sites restored. What will you do?
Instructor Notes:
Activities for this class involve ethical vignettes for activity / discussion in class
After months of negotiating, your company has just signed a very large contract
with another company. The deadlines for performance are strict and failure to meet
them could, in the best case, result in loss of the contract along with many jobs,
including yours, and, in the worst case, loss of the company. You are the project
manager for the initial portion of the contract and you know that getting started
will be your most difficult task, because it depends on governmental approval,
which is often slow. However you have also heard that the responsible official can
be “encouraged” to respond quickly by making a ‘gift’ to his family. Making such
gifts is against company policy, although you could do it in such a way that the
company would never know, and loss of the contract would be likely to impact
you. What should you do?
A major company has come to school to recruit new employees. You know that the
interviewer's time is limited and many students are interested I working for the
company, but you are not. Still, you need the interview practice so you sign up for
an interview. Is this appropriate behavior on your part?
Your company is not doing well. In fact, unless you get skilled technical help, the
company is likely to go bankrupt. Unfortunately skilled help is very unlikely to
want to work for your company because it is not doing well. So, you decide to tell
everyone that the estimates of profitability are good. Then, when you've hired help
and your business is back on track, your profits will be accurate. Were your
actions correct?
Your business has a major competitor who is going after the same contract you are.
An employee who you hired from a third company comes to you and says that he
has made a study of your competitor's bidding practices, gathering information as
he could and he know how they bid on contracts such as the one you are competing
for. If you wish, he will bring the information to your meeting tomorrow. What do
you do with the employee's proposal?
Last night you were called to your company site because a fire broke out. This
morning, after the fire was put out, you find that the plant was completely
destroyed. Because you, the owner, listened to your management team, you took
out insurance which will pay you a check for the damage and loss of business. The
money is enough to rebuild the plant and keep your employees working.
Alternatively, you could take the money and retire comfortably, but that would put
all your employees, including your management team out of work. What will you
do?
Your business has been going well, but lately you've noticed a slow down.
Looking around you've observed your employees spending computer time looking
at web sites not related to the business and sending personal emails. To stop the
waste of time, you decide to block all web sites such as “You Tube”, “Facebook”,
etc. Your employees are upset and want to the sites restored. What will you do?
Appendix
Supplemental material follows for use in
lectures, as desired.
Slide 7
A Framework for Integrity in
Entrepreneurship
•
•
•
•
•
Promoting the Owners’ Interest
Respecting Customers
Valuing Employees
Social Responsibility
Government Laws and Regulations
7
Instructor Notes:
Some key elements that must be addressed in establishing a framework for integrity in
your business:
How to Promote the Owners’ Interest;
Respecting Customers;
Valuing Employees;
Keeping up with Government Laws and Regulations;
Social Responsibility
Slide 8
The Challenges and Benefits of
Acting Ethically
The Vulnerability of Small Companies
•
•
•
•
Many small firms are vulnerable to temptation
because of marginality.
Bribery may be rationalized as an effort to
create a level playing field.
Responses to vignettes compare the ethics of
entrepreneurs and others.
Entrepreneurs were less moral on some issues
but more moral on others.
8
Key notes:
Small businesses owned by sole proprietors have no “conscience” except for that
of the owner. It’s easier to take the path of the easier wrong than the harder right.
This is what marginality refers to.
Small businesses can more easily be susceptible to bending the rules since there’s
only the Big Boss to look out for, not layers of supervisors and managers to hide
from. It is easier to rationalize your individual actions because the business is
smaller.
Slide 9
The Challenges and Benefits of
Acting Ethically
The Vulnerability of Small…continuation
• Ethical issues abound in the Internet
world.
• Using personal information—the privacy
issue
• Respecting intellectual property rights
• Is it okay to monitor employees’ email?
9
The Vulnerability of Small . . . continuation
Ethical issues abound in the Internet such as privacy for both consumers and
employees, and respecting intellectual property rights.
A good discussion can be an activity around the issue of monitoring employee’s email.
Slide 10
The Challenges and Benefits of
Acting Ethically
The Integrity Edge
• Integrity is crucial to small business
success.
• Firms perform better when they focus in
the needs of all stakeholders
• Greatest benefit of integrity is the trust it
generates.
10
The Integrity Edge. Integrity is crucial to small business success, because firms perform better
when they focus in the needs of all stakeholders by generating trust, the greatest benefit.
Slide 11
The Challenges and Benefits of
Acting Ethically
International Issues of Integrity
•
Some countries face higher levels of
unethical behavior than others.
•
Determining what constitutes ethical
behavior is more difficult across different
cultures.
11
International Issues of Integrity. Some countries face higher levels of unethical behavior than
others, particularly across different cultures.
Slide 12
The Challenges and Benefits of
Acting Ethically
International Issues of Integrity . . .
continuation
•
Ethical relativism is troublesome.
•
*Ethical imperialism—impose US
standards on other societies
12
International Issues of Integrity . . . continuation
Ethical relativism and Ethical imperialism are troublesome
Slide 13
Building a Business with Integrity
1. A Strong Foundation
*The personal Integrity of the founder or owner is key to a firm’s ethical
performance
2. Leading with integrity in our actions
*The underlying values that govern the integrity of business practices
are often based on religious foundations or personal values.
3. A Supportive Organizational Culture
4. An Ethical Decision-Making Process
13
It requires a Strong Ethical Foundation by the owner, which tends to be a reflection of his
religious and personal values. Thus conductive to a Supportive Organizational Culture and
An Ethical Decision-Making Process.
Slide 14
Class Activities
(Group analysis and discussions of
ethical dilemma situations)
1. Give an example of an unethical business practice that you have personally
encountered.
2. Based on your experience as an employee, customer, or observer of some
particular small business, how would you rate its ethical performance? On what
evidence or clues do you base your opinion?
3. What are some of the advantages of conducting business with integrity?
Some people say they have no responsibility beyond maximizing the value of
the firm in financial terms-can this position be defended? If so, how?
4. Develop a mission and values statements for an entrepreneurial venture
business that your group selects.
5. Develop a Code of Business Conduct for Western Instructors at King Saud
University
14
Instructor notes:
There are five activities that could be conducted in this class.
Students will give an example of an unethical business practice;
explain some of the advantages of conducting a business with integrity;
develop a mission and values statements for an entrepreneurial venture
develop a Code of Business Conduct for Western Instructors at King Saud
University (Comment: this code of business conduct topic might be the most
interesting choice)