ethical and legal issues in entrepreneurship

However, as you will learn, an entrepreneur needs to first provide the organizational framework and foundation in which individuals and business units regularly exercise these qualities. Harvard Business School published a paper estimating 1 in 5 Yelp reviews is fake. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. Masthead, ← [Passion to Purpose] Meet Pro Athlete Turned Pro Mentor Marcus Allen, ← Top 10 Interview Questions You Must Be Prepared to Answer, 100 Founders of Change by American Express, Chasing Success Podcast by JP Morgan Chase, Elevate Black Podcast sponsored by Fifth Third Bank, Commitment Counts Podcast sponsored by Fifth Third Bank, [Passion to Purpose] Meet Pro Athlete Turned Pro Mentor Marcus Allen, Top 10 Interview Questions You Must Be Prepared to Answer. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses. In one instance, this company admitted in court that they had illegally marketed Zyprexa, which was primarily intended and approved by the US Food and Drug Administration office (FDA) to treat depression, to be used for off-label (not cleared by FDA to market and advertise) ailments such as sleep disorders, Alzheimer’s disease, and dementia. Less formally, the development of a culture of creativity and innovation is one of the most important responsibilities of an entrepreneur. Employees, for example, have an interest in producing expected work for their employer. Then, we ex - plore ways to convince students of the relevance of ethics to entrepreneurship. You may also choose never to defraud or mislead your business partners. You need to nurture an environment in which every member of your organization is able to be creative, add value, and be engaged in the continuous improvement of the firm. Or it could be an external code based on one’s profession (e.g., CPAs, attorneys, CFPs, and others have professional codes of ethics), or a more broadly applicable external code such as that of the Business Roundtable or Business for Social Responsibility. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. The underlying facts, reality, and evidence behind something are the truthfulness of a matter. The idea of social entrepreneurship has been around since the 1960s, becoming more popular in the 1990s. !function(n){if(!window.cnx){window.cnx={},window.cnx.cmd=[];var t=n.createElement('iframe');t.display='none',t.onload=function(){var n=t.contentWindow.document;c=n.createElement('script'),c.src='//cd.connatix.com/connatix.player.js',c.setAttribute('async','1'),c.setAttribute('type','text/javascript'),n.body.appendChild(c)},n.head.appendChild(t)}}(document); Unlike working in a large corporate environment with an established structure, entrepreneurs often create and operate a new business venture by their own rules. Proponents of virtue ethics claim that ethics consists of a series of innate but latent virtues that an individual needs to develop over time. The law is typically indebted to tradition and precedent, and compelling reasons are needed to support any change. Nepotism. not be reproduced without the prior and express written consent of Rice University. The easy fix is to not commingle, but at every step you should seek the advice of an experienced accountant. These two concepts are not only part of an ethical approach to doing business but are also underlying requirements of several areas of law including fraud. These acts were created to encourage competition and provide options for consumers. If the decision to raise the price adds value and usefulness for shareholders, then that decision should be made. (b) The design of the Coca-Cola soft drink bottle was granted a design patent. Do not lie, … INFORMATION Many new business owners are consciously unaware when they’re infringing on the copyrights of other creatives, especially when it comes to using images and “everyone knows it” content. Potential Legal or Ethical Issues Business Owners Face. #1: Moral Marketing Compass: This is especially important in economic downturns, when unethical practices become tempting.#2: Win-win Marketing: The focus on customer value will increase company value.#3: Keeps marketing legal: Reduces the risk of cutting corners and turning a blind eye.#4: Goodwill: Goodwill and strong reputation among clients and associates are the benefits which companies cannot afford to overlook. Legal and Ethical Issues for Entrepreneurs is a Course Legal and Ethical Issues for Entrepreneurs Self-paced Sorry! We recommend using a A large corporation that has been operating for many years and has hired a Corporate Compliance Officer (CCO) with a budget and monitoring authority and dedicated staff can strive in an organized manner for ethical compliance, or at least seek to do so. The pressure to create a new venture, within constraints and limitations, inspires entrepreneurs to find innovative ways to meet potential market demands. chapter preparing the proper ethical and legal foundation main topics of this chapter: most important initial ethical and legal issues facing new firm (incl. Think of examples for each scenario. How important an attribute is income, and at what point would a higher income override for you the nonmonetary benefits of the lower-compensated opportunity? At the end of each year, the company plans to donate to numerous social and environmental causes. An example of illegal competition would be the competition and patent war between Intel Corporation and American Micro Devices (AMD). “The World’s Most Ethical Companies: Does the Fame Translate into Gain?” Presented to the European Financial Management Association (EMFA). Taking legal and ethical issues into account in the beginning of your business doesn’t only ensure your quick progress but it also provides your business with long-term benefits.. Integrity—that is, unity between what we say and what we do—is a highly valued trait. • Kuratko and Hodgetts, (2004)- ethics … It also means that the entrepreneur should be concerned with the nontechnical aspect of IP, which is to develop a culture of creativity that enables the organization to deliver a continuous stream of new IP. This also means that the organization, as a total system, provides consistent, meaningful, and timely consequences for unethical behavior and irresponsible actions. That would severely curtail the entrepreneur’s ability to make money off a product that s/he invented. ABOUT Table 3.1 summarizes the contributions of these acts to supporting antitrust efforts. This concept refers to proprietary information, processes, or other internal knowledge that contribute to an organization’s competitive advantage in a market. Registry of Corporate Directors. This obligation traces its lineage to ancient Greece and the physician Hippocrates. Legal Issues in Entrepreneurship Legal risks faced by entrepreneurs. However, these concepts are not interchangeable and call for different standards of behavior. Truthful individuals earn a level of credibility and reliability over time because what they say and what they do are in alignment. As an example of this new awareness, the Business Roundtable, a group of CEOs from the biggest and most successful companies in the US, recently released a new statement addressing business ethics. In 2009, AMD filed a suit against Intel claiming that the company had used “leveraging dominance” to exclude AMD from effectively competing in the marketplace through exclusionary pricing, discounts, and similar practices. Read the following statement on the purpose of a corporation from Business Roundtable: This includes the ability to recognize and identify both ethical dilemmas and legal issues that might arise. This responsibility will enable the entrepreneur to develop a sustained competitive advantage. This group of stakeholders might include employees (profit sharing), shareholders (dividends), the local community (time), and social causes or charities (donations). Ideally, you should use written contracts whenever you enter into a substantial transaction with another party. However, this concept has gradually been replaced by a more progressive viewpoint, mandating the consideration of all stakeholders when making key business decisions that have potentially far-reaching consequences. A white-collar criminal convicted of fraud, this interview with Mark Faris shows his admission that greed, arrogance, and ambition were motivating factors in his actions. Essentially, a commitment to treat with honesty and integrity customers, clients, employees, and others affiliated with a business. 3.1 Ethical and Legal Issues in Entrepreneurship SBREFA Small Business Resource Center. However, consumers are getting smarter at identifying fake reviews, so getting caught is real and has very negative consequences. Therefore, compliance generally refers to the extent to which a company conducts its business operations in accordance with applicable regulations, statutes, and laws. “Massive Data Breach at Equifax: As Many As 143 Million Social Security Numbers Hacked.”, Stacy Cowley. Openness and honesty help ensure a good fit. He also discusses the human ability to rationalize our behavior to justify it to ourselves. Sustaining ethical values. Ethics in Social Entrepreneurship Kidder (1995), states that if a situation is not a clear cut case of right vs. wrong then there are four ethical dilemma paradigms, truth vs. loyalty, short term vs. long term, justice vs. mercy, self vs. community. Ethical entrepreneurs consistently strive to apply ethics-based concepts in practice, including truthfulness and full disclosure. This lecture focuses on the ethical and legal challenges involved with starting a firm. The following list of ethical dilemmas, organized by the 14 stages of the Startup Lifecycle, are the product of the Markkula Center's Startup Ethics Online Community, The Ethical Startup, and roundtable discussions of prominent entrepreneurs and venture capitalists in the Markkula Center's network. A major challenge is dealing with and determining a code of ethics. BLACK ENTERPRISE is the premier business, investing, and wealth-building resource for African Americans. You may be asking, “What are some examples of ethical and legal issues in business that I should look out for as an entrepreneur?” While this list is by no means comprehensive, it does highlight some of the larger issues that entrepreneurs frequently overlook or encounter themselves. Legal risks faced by entrepreneurs. Want to cite, share, or modify this book? This aids in team building and strengthening interpersonal relationships. For example, if an employer asks an employee to drop something off at FedEx or UPS after work hours, and that employee negligently causes an auto accident, even if the employee is driving their personal vehicle and not a company car, the employer could be liable for damages. From the standpoint of application, the quality of being truthful forms the foundation for fairness. Intellectual property (IP) rights are created by federal law and protect small businesses from problems such as this. Disclosure describes sharing the needed facts and details about a subject in a transparent and truthful way. For example, if a new startup business comes up with a unique invention, it is important to protect that intellectual property. Torts are a potential area of risk for entrepreneurs. One whose track record gives evidence of honest business practices. A few examples of antitrust laws are the Sherman Act, the Clayton Act, the Federal Trade Commission Act, and the Bayh-Dole Act. When Martin Shkreli decided to increase the price overnight of a lifesaving HIV drug from $13.50 to $750 per pill, the public immediately characterized his actions as unethical. If we violate these standards, we are subject to punishment as established by the law. An example of an ethical business organization is one that follows the Statement of Purpose by the Business Roundtable. Just by virtue of being human, we all share obligations to one another, and principal among these is the requirement that we treat others with fairness and dignity, including in our commercial transactions. The ethical entrepreneur thinks and talks about the ethical values that matter at any given opportunity. Small businesses sometimes ask too much of their employees without noticing. But this kind of behavior is dangerous and represents a slippery slope. 15.2: Ethical and Legal Issues in Entrepreneurship 15.3: Corporate Social Responsibility and Social Entrepreneurship 15.4: Developing a Workplace Culture of Ethical Excellence and Accountability A conflict of interest occurs when an individual (or company) has interests in multiple areas (financial investments, work obligations, personal relationships), and the interests may conflict with each other. A few examples of utility patents would be Nikola Tesla’s electric magnetic motor, dynamo-electric machine, electrical transmission of power, and his system of electrical distribution patents. You may decide you should always tell the truth to family, friends, customers, clients, and stakeholders, and if that is not possible, you should have very good reasons why you cannot. Ethical 2 the nature of entrepreneurship and explore the unique ethical issues present in entrepreneurial activities. cnx({ Was Shkreli aware of all aspects (ethical, legal, financial, reputational, and political) of the decision he made? (2017).Values, Ethics, and Legal Issues. That way, if a dispute arises, you’ll have documentation to fall back on. This protection is afforded because a continuous stream of innovations can be a major source of revenue for a firm as well as a vehicle for developing a sustained competitive advantage. The ethical behavior required of entrepreneurs is determined by the following: Ethics must begin at the top of an organization it is a leadership issue and a chief executive must set an example. Imagine that upon graduation, you have the good fortune to face two entrepreneurial opportunities. A comprehensive view of business and entrepreneurial ethics requires an understanding of the difference between shareholders, a small group who are the owners (or stockholders), and stakeholders, a large group that includes all those people and organizations with a vested interest in the business. Without such protection, any competitor can legally, even if not ethically, copy the invention, put their own name or company brand on it, and sell it as if it were their own. The … Be optimistic but realistic with where challenges might occur. May also mean treating employees, customers, clients, employees, and equitable too much their! 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