ETHICAL AND SOCIAL

RESPONSIBILITIES OF THE
ENTREPRENEUR
 What is Ethics?

 Ethics is the study of moral obligation involving the

distinction between right and wrong.
 Difference of Ethics and Morality
 Distinction between Ethics and Morality
 Ethics is the science of morality
 Morality is the action of ethics
 Ethics is the guide for man to act on/behave
 Morality is the application of what is desired
 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
• 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
 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

nal environment and the organization

visory behavior, peer group norms and behavior, and
y statements and written rules.

rnal environment
Government laws and regulations, societal norms and
s, and competitive climate in an industry.
 Factors Influencing Ethical
Behavior
 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
 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
 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
 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
 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
 Entrepreneurships face ethical questions on a daily
basis. This spring from the following relationships:
1. Between the company and the customers;
2. Between the company and its personnel and
employees;
3. Between the company and its business associates; &
4. Between the company and the investors and the
financial community.
 Ethical Issues Facing
Entrepreneurs
 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
 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
 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
 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
 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
 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
 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
 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:
 Workplace safety;
 Quality of life issues;
 Avoiding discrimination; and
 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.
 Ethical Issues Facing
Entrepreneurs
 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.
 Ethical Issues Facing
Entrepreneurs
 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:

1. Issue a specific policy statement prohibiting sexual harassment;

2. Develop a complaint procedure for employees to follow;
3. Create a work environment that encourages sexually harassed employees to report
their experiences;
4. Establish a committee to investigate sexual harassment claims; and
5. Take disciplinary actions against harassers
 Ethical Issues Facing
Entrepreneurs
 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
 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.