ETHICAL AND SOCIAL
RESPONSIBILITIES OF THE
ENTREPRENEUR
What is Business Ethics?
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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.
What is Business Ethics?

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.
What is Business Ethics?

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
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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
employment
practices;
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
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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
Factors Influencing Ethical Behavior
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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.
Factors Influencing Ethical Behavior
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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; and
6.
Top management support.
How Ethical Behavior Is Encouraged
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.
How Ethical Behavior Is Encouraged
Rewards, Punishment, and Ethical Behavior
If the entrepreneurship wants to have some measure of
control over the behavior of its personnel, a system of
reward and punishment must be instituted.
How Ethical Behavior Is Encouraged
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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.
How Ethical Behavior Is Encouraged
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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.
How Ethical Behavior Is Encouraged
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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.
How Ethical Behavior Is Encouraged
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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
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Entrepreneurships face ethical questions on a daily
basis. This spring from the following relationships:
Between the company and the customers;
Between the company and its personnel and
employees;
Between the company and its business associates; &
Between the company and the investors and the
financial community.
Ethical Issues Facing Entrepreneurs
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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.
Ethical Issues Facing Entrepreneurs
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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.
Ethical Issues Facing Entrepreneurs
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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)
Ethical Issues Facing Entrepreneurs
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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.
Ethical Issues Facing Entrepreneurs
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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.
Ethical Issues Facing Entrepreneurs
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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.
Ethical Issues Facing Entrepreneurs
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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.
Ethical Issues Facing Entrepreneurs
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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:
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Workplace safety;
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Quality of life issues;
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Avoiding discrimination; and
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Preventing sexual harassment
Ethical Issues Facing Entrepreneurs
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.
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Ethical Issues Facing Entrepreneurs
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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.
Ethical Issues Facing Entrepreneurs
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.
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Ethical Issues Facing Entrepreneurs
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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:
Issue a specific policy statement prohibiting sexual harassment;
Develop a complaint procedure for employees to follow;
Create a work environment that encourages sexually harassed
employees to report their experiences;
Establish a committee to investigate sexual harassment claims; and
Ethical Issues Facing Entrepreneurs
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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.
Ethical Issues Facing Entrepreneurs
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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.