Kathleen R. Allen
LAUNCHING NEW
VENTURES – AN
ENTREPRENEURIAL
APPROACH, 7E
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Incorporating Ethics and Social
Responsibility into the Business
Chapter 15
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service or otherwise on a password-protected website for classroom use.
Chapter Objectives
Explain the role of ethics in
entrepreneurship
 List the types of ethical situations
entrepreneurs may face
 Discuss how entrepreneurs can
demonstrate social responsibility
 Describe how an entrepreneur’s vision and
values contribute to the culture of the new
venture

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service or otherwise on a password-protected website for classroom use.
Chapter Objectives

Discuss the relationship of core values to success
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service or otherwise on a password-protected website for classroom use.
Incorporating Ethics and Social
Responsibility into the Business

Shareholder value is often considered more
important than basic human values
◦ The pressure to achieve unattainable goals and
sustain a business in a chaotic environment causes
stress, which leads to unwise decisions
◦ The global economy easily navigated via the
Internet puts us in contact with cultures that may
define morality differently
◦ Yet we expect our employees to navigate this
environment through the lens of the company’s
ethics
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service or otherwise on a password-protected website for classroom use.
Incorporating Ethics and Social
Responsibility into the Business

Most entrepreneurs, executives and
employees are not inherently unethical, but
are often placed in situations that ignore or
reward unethical behavior; consider:
◦ We set goals and incentivize employees based on those
goals, but this may encourage bad behavior
◦ We pretend there is no unethical behavior if it serves our
interests
◦ We don’t see unethical behavior if it comes on gradually
◦ We tend to ignore unethical behavior when the outcome is
positive
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service or otherwise on a password-protected website for classroom use.
15.1
Ethics

Ethics is the moral code by which we live and
conduct business
◦ The concept of right and wrong which derives
from the cultural, social, political and ethnic
norms with which we were raised as children
◦ We don’t often reflect on our value system, we
act instinctively based on it
◦ Many believe that following the Golden Rule
keeps them safe from ethical dilemmas
 This is not true
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service or otherwise on a password-protected website for classroom use.
15.1
Ethics

Ethics is the moral code by which we live and
conduct business
◦ Most ethical dilemmas are not huge scandals
involving criminal conduct, but small, common
dilemmas encountered regularly
◦ Avoiding criminal acts is not the same as acting
ethically
◦ Being ethical is about doing the right thing all
the time – and being proud of acting honorably
◦ But the business environment has many “gray
areas”
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service or otherwise on a password-protected website for classroom use.
15.1
Ethics
Most ethical dilemmas require balancing
conflict among ideals, duty, and utility
 As this is difficult, many avoid it by adopting:

◦ 1. Dogmatism: “I simply will never lie or cheat or
steal.”
◦ 2. Egoism: “Everyone needs to look out for
himself.”
◦ 3. Relativism or situational: “When in Rome, do
what the Romans do.”
◦ 4. Subjectivism: “Ethics is simply a point of view.”
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service or otherwise on a password-protected website for classroom use.
Figure 15.1- The Elements
of Ethical Action
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service or otherwise on a password-protected website for classroom use.
15.1a

Conflicts of Interest
Occurs when a person’s private or personal
interests clash with his or her professional
obligations
◦ an independent observer might reasonably
question whether the person’s actions are
influenced by personal gain

An online firm can track and gather
information about customers, profile them,
and share this information with others
◦ See the example of Facebook
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service or otherwise on a password-protected website for classroom use.
15.1b
Survival Tactics
Many are the stores of entrepreneurs who did
whatever it took to survive, even violating
their own standards to do it
 When it comes to survival, ethics are tested
 Sticking to an ethical code is critical, because
what you do today out of desperation will
follow you for the rest of your business career

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service or otherwise on a password-protected website for classroom use.
15.1c

Responding to Incentives
Sometimes entrepreneurs inadvertently make
it easy for their employees to participate in
unethical behavior
◦ An unintended consequence of badly designed
incentives
◦ Have procedures in place that make it difficult for
employees to act unethically

What is considered unethical differs between
Western and Eastern cultures, and by those
who work in the private and public sectors
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service or otherwise on a password-protected website for classroom use.
15.1d

Stakeholder Pressure
Stakeholders include investors, shareholders,
suppliers, customers, employees and others
◦ Stakeholders may want you to take an action you
are not certain is right for the company

Research has revealed that the most healthy
outcome is realized when you hold to your
code of ethics and base decisions on it, not on
the personal agendas of stakeholders
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service or otherwise on a password-protected website for classroom use.
15.1e
Pushing the Legal Limit
Some entrepreneurs seek ways to bend the
law without breaking it
 But those who play too close to the edge are
caught and the price is high

◦ Loss of the business
◦ Loss of their reputations

Your reputation must be protected at all costs;
without it, chances are there will be no
business
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service or otherwise on a password-protected website for classroom use.
Learning from
Real-Life Dilemmas
15.1f

There is no better way to understand the role
of ethics in any business than to encounter
real-world dilemmas and think about how you
might deal with them
◦ See the examples in the text, numbered 1-5
Small businesses are as guilty as
multinationals of ethical missteps
 Aristotle said that courage is the first of the
human virtues because without it, the others
are not possible

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service or otherwise on a password-protected website for classroom use.
The Importance of Developing
a Code of Ethics
15.1g
The ethical behavior of employees is much
influenced by the code of ethics of the firm
 When a code of ethics is spelled out, written
down, people in the firm take it more seriously

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service or otherwise on a password-protected website for classroom use.
The Importance of Developing
a Code of Ethics
15.1g

The Process of Developing a Code of Ethics
◦ Begin with self-examination to identify values
◦ The founding team should discuss how issues
should be dealt with
◦ Consider the values represented in Table 15.1
◦ For an ethical decision to be made, ask:
 1. Will the actions taken result in the greatest good for all
parties involved?
 2. Will the actions respect the rights of all parties?
 3. Are the actions just? Will anyone be hurt?
 4. Would I be proud of my actions if reported in the news?
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service or otherwise on a password-protected website for classroom use.
Table 15.1Character Counts Inventory
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service or otherwise on a password-protected website for classroom use.
15.2
Social Responsibility

Social responsibility:
◦ It is not enough to have a successful business and
make a profit
◦ Many would argue that the business must give
something back to the communities in which it
does business, and to society at large

Acting in a socially responsible manner
means exceeding the ethical, legal,
commercial and public expectations society
has of a business
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service or otherwise on a password-protected website for classroom use.
15.2
Social Responsibility

Some entrepreneurs have chosen to make
social responsibility the reason for the
existence of the business
◦ They are faced with different challenges as they
seek resources to fund and sustain the business
◦ Their rewards derive not only from profits but also
from the social value they create
◦ This is known as a triple bottom line strategy:
 People, planet, profit
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service or otherwise on a password-protected website for classroom use.
Effective Ways to Become
Socially Responsible
15.2a
◦ Target disadvantaged markets
◦ Employ disadvantaged individuals
◦ Procure products and supplies from emerging
economies, from environmentally conscious
sources
◦ Create products or services that have social value
◦ Donate products, services or revenues
◦ Donate expertise
◦ Produce for social good
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service or otherwise on a password-protected website for classroom use.
11.3
Vision and Values
Every great company begins with the
entrepreneur’s vision of what it will become
 It is difficult, if not impossible to become a
great company without a vision

◦ The number one company in any industry
outperformed its next competitor significantly,
because of their strong vision and core values
◦ Performance suffered when they strayed from
those core values
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service or otherwise on a password-protected website for classroom use.
Figure 15.2- The Components of
Company Vision
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service or otherwise on a password-protected website for classroom use.
15.3a
Core Values
These are the fundamental believes a
company holds about business and life
 They are based on the personal values and
beliefs of the founder or the founding team
 These tell the world who the firm is and what
it stands for
 Because they are so fundamental to its
existence, core values rarely change over
time, and they endure beyond the founder

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service or otherwise on a password-protected website for classroom use.
15.3b

Purpose
This is your company’s fundamental reason
to be in business
◦ Why does the business exist?
◦ Not necessarily a unique characteristic of the
business
◦ What is crucial is that the purpose be authentic,
must mean what it says
◦ A properly conceived purpose will be broad,
enduring and inspiring, and allow the company to
grow and diversity
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service or otherwise on a password-protected website for classroom use.
15.3c

Mission
This brings everyone together to achieve a
common objective; closely related to purpose
◦ A mission is an overriding objective that mobilizes
everyone to achieve it; examples include:
 Starbucks: “Our mission: to inspire and nurture the
human spirit – one person, one cup and one
neighborhood at a time.”
 Facebook: “Giving people the power to share and make
the world more open and connected.”
 Leader to Leader Institute: “To strengthen the leadership
of the social sector.”
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15.3d

Strategies and Tactics
Once goals are set, develop strategies, the
plans for achieving goals, and ultimately,
accomplishing the mission
◦ Tactics, which are the means to execute
strategies, should also be put in place
◦ You will need to choose a variety of tactics, or
ways to implement your strategies

Merely setting a goal is not enough; a plan for
achieving the goal is required
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service or otherwise on a password-protected website for classroom use.
15.4
Core Values and Success

Your personal definition of success – what it
means to be successful – is a function of the
core values and vision you have for your life
◦ The success of a business can be measured in total
revenues, etc., but you don’t typically measure
your personal success solely in these terms
◦ Research has shown that the personal rewards
that motivate entrepreneurs to start businesses
are independence and freedom
 Being one’s own boss; being in control of one’s destiny
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15.4a

Constants of Success
There are four constants that seem to
permeate everyone’s definition of success:
◦
◦
◦
◦

Purpose
Failure
Sense of satisfaction with work
No free lunch
Firm core values and ethics plus a socially
responsible business can lead to the kind of
success that is meaningful to most
entrepreneurs
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service or otherwise on a password-protected website for classroom use.
New Venture Action Plan
Identify the core values held by the
founding team
 Develop an initial code of ethics for the
business
 List possible ways your business can be
socially responsible
 Define what success means to you

–© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.