Integrity and Ethics 1

Integrity and Entrepreneurship What is integrity? What one believes to be right and proper Values such as honesty, reliability and fairness Integrity and Entrepreneurship 2 2

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??? Ethical issues involve questions of right and wrong; of self-interest versus the needs of others It may not pay to be ethical, at least in the short run???. 3 3

Difficult Ethical Issues Facing the Entrepreneur / Small Business Owner Relationships with customers, clients, and competitors (relationships with outside parties in the marketplace) Human Resource decisions (relating to employment and promotion) Employee obligations to employer (responsibilities and actions that in some way conflict with the best interests of the employer) Management processes and relationships (superior- subordinate) Types of relationships to be faced with such as customers, clients, competitors; decision making regarding Human Resources; Employee obligations to employer, as well as Management processes. 4 4

Difficult Ethical Issues Facing the Entrepreneur / Small Business Owner Governmental obligations and relationships (compliance with governmental requirements and reporting to government agencies) Relationships with suppliers (practices and deceptions that tend to defraud suppliers) Environmental and social responsibilities (business obligations to the environment and society) Other types of relationships include suppliers and compliance with governmental requirements along with Environmental and social responsibilities 5 5

25_Ethical vignettes for possible 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? 25_Ethical vignettes for possible 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?

A Framework for Integrity in Entrepreneurship Promoting the Owners’ Interest Respecting Customers Valuing Employees Social Responsibility Government Laws and Regulations How to Promote the Owners’ Interest and Respecting Customers while Valuing Employees and keeping up with Government Laws and Regulations as well as with Social Responsibility 7 7

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. 1. The Vulnerability of Small Companies. Marginality may lead small firms to behave unethically and fall prey to bribery, which may be rationalized as an effort to create a level playing field. 8 8

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? 1. The Vulnerability of Small . . . continuation Ethical issues abound in the Internet such as privacy for both consumers and employees, and respecting intellectual property rights. 9 9

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. 2. 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. 10 10

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. 3. International Issues of Integrity. Some countries face higher levels of unethical behavior than others, particularly across different cultures. 11 11

The Challenges and Benefits of Acting Ethically International Issues of Integrity . . . continuation Ethical relativism is troublesome. *Ethical imperialism—impose US standards on other societies 3. International Issues of Integrity . . . continuation Ethical relativism and Ethical imperialism are troublesome 12 12

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 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. 13 13

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 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 or a Code of Business Conduct for Western Instructors at King Saud University. 14 14