One whose track record gives evidence of honest business practices. Your Money, Your Life, LATEST LISTS Sustaining ethical values. The company’s shares fell nearly 14 percent after the announcement, but few expect Equifax managers to be held liable for their mistakes, face any regulatory discipline, or pay any penalties for profiting from their actions. While it remains with the courts to determine the underlying intent, legal implications, and consequences of Shkreli’s decision, evidence from this and other case studies shows that some corporate leaders have not developed ethical capabilities, or they have not internalized a moral compass that enables them to differentiate between right and wrong. This could be as simple as using company time or resources to work on a personal project that has not been sanctioned and will not add value to the company. Although the ethics of social entrepreneurship is relatively unexplored, Zahra et al. The Hippocratic Oath, for example, is embraced by most professionals in healthcare today as an appropriate standard always owed to patients by physicians, nurses, and others in the field. • Ethics refers to standards of behavior that tell us how human beings ought to act in many situations in which they find themselves as parents, children, friends, business people, professionals etc. Full course description. IP can take the form of a patent, a copyright, a trademark, or a variation thereof called a trademark secret. The second entrepreneurial opportunity is with a nonprofit recognized for a very different culture based on its compassionate approach to employee work-life balance. To develop and internalize a moral compass, an entrepreneur and the members of the organization need to continually exercise and develop their ethical “muscles.” These ethics-based muscles include qualities such as trust, truthfulness, respect, responsibility, commitment, care, love, and justice. 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. -Timothy Schmidt, WebsiteRescue Ethical reasoning often is more topical and reflects the changes in consciousness that individuals and society undergo. Perform a knockout search before choosing a business name. Examples include the design of a new font, a soft drink bottle, or the design features of Apple’s iPhone. Some entrepreneurs stay the ethical course. chapter preparing the proper ethical and legal foundation main topics of this chapter: most important initial ethical and legal issues facing new firm (incl. From a technical aspect, there are two different types of patents: utility and design patents (Figure 3.3). However, consumers are getting smarter at identifying fake reviews, so getting caught is real and has very negative consequences. Legal issues examples for an entrepreneur. To make amends to customers and clients in the aftermath of the hack, the company offered free credit monitoring and identity-theft protection. Integrity: hen it comes to integrity, it is impossible to avoid sounding preachy or parental. 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. This responsibility will enable the entrepreneur to develop a sustained competitive advantage. What are the steps we need to take to get protection? This is a great site for help with understanding legal requirements and regulatory compliance. Which elements illustrate acting legally but not ethically? Copyrights and trademarks are also protected IP (Figure 3.4). Without it, our society would be in chaos. Ethical acts are generally considered voluntary and personal—often based on our individual perception of what is right and wrong. The antitrust concept is important to the entrepreneur’s ability of entrepreneurs to form new startup businesses that are able to compete with larger, more established corporations (which may try to discourage competition). Was Shkreli aware of all aspects (ethical, legal, financial, reputational, and political) of the decision he made? Often, ethical thought precedes and sets the stage for changes in the law. Ethical start-ups recognize the ethical dilemmas that surround them in the first few months. This fundamental question raises a number of related questions about the ethics of the situation. This also means that the organization, as a total system, provides consistent, meaningful, and timely consequences for unethical behavior and irresponsible actions. “The World’s Most Ethical Companies: Does the Fame Translate into Gain?” Presented to the European Financial Management Association (EMFA). Antitrust laws (or competition laws) were developed to ensure that one competitor does not abuse its position and power in the market to exclude or limit competitor access to the market. 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.. He also discusses the human ability to rationalize our behavior to justify it to ourselves. Patent laws are strictly enforced and are intended to protect inventions. Common examples of normative ethical theories are utilitarianism, duty-based ethics (also known as Kantian ethics and/or deontology), and virtue ethics. To develop a sustained competitive advantage, an entrepreneur is responsible to protect, provide the needed safeguards, and continually grow a firm’s IP. But it is more than just consistency of character. The entrepreneur herself is likely overwhelmed with her many roles at the c… Perhaps you want to start your own CPA accounting firm, or CFP financial advisory firm, or IT consulting firm. If the decision to raise the price adds value and usefulness for shareholders, then that decision should be made. Many small business owners may get paid in cash for jobs or projects. This obligation traces its lineage to ancient Greece and the physician Hippocrates. However, Edison preferred DC technology and was not supportive of Tesla’s ideas. By the end of this section, you will be able to: What does it mean to be both ethical and socially responsible as an entrepreneur? The earnings plan with the first opportunity pays 20 percent more per year. Being a good entrepreneur takes more than a creative idea and a superior work ethic. This concept refers to proprietary information, processes, or other internal knowledge that contribute to an organization’s competitive advantage in a market. This action is unethical since you are not giving the employer what they are due, which are your time, talents, and services in exchange for agreed-upon compensation. As a result, it is necessary for an entrepreneur to thoroughly review the legal issues involved to make sure that a costly mistake isn’t made. Fairness deals with doing what is right, just, and equitable. It also requires understanding the importance of ethical business practices, giving back to your community and running your business in a way that minimizes harm to others and the environment. This means you should not be satisfied with an occasional spark of creativity from a designated individual, department, or functional area within your organization (such as research and development). Question: Does it appear that Shkreli, in the preceding pharmaceutical example, considered all the stakeholders as the Business Roundtable Statement recommends, or did he follow the older shareholder primacy doctrine approach? Which elements of this case might involve issues of legal compliance? There are multiple reasons why an entrepreneur should be aware of intellectual property rights under the law. However, he was criticized for routinely covering stories about the companies he invested in and consulted for. On September 15, 2017, the company’s chief information officer and chief of security retired. Not only is it unethical to hire a less qualified candidate purely because of their relationship to you, you also do your company a disservice by not hiring the best person for the job. • Kuratko and Hodgetts, (2004)- ethics … Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide healthcare; generate and deliver energy; and offer financial, communications and other services that underpin economic growth. Related Courses. Read the following statement on the purpose of a corporation from Business Roundtable: The law is needed to establish and maintain a functioning society. “Equifax to Pay at Least $650 Million in Largest-Ever Data Breach Settlement.”, Ira Basen. A legal patent gives an exclusive right to its patent holder or proprietor to use the invention in any shape or form they deem necessary. Is IP law relevant to my business, and if so, how can it help me? Acting with integrity means we adhere strongly to a system of ethical values. Legal Issues in Entrepreneurship. However, these concepts are not interchangeable and call for different standards of behavior. Equifax will pay at least $650 million, with the possibility of more, to resolve most claims stemming from the data breach. Please check back soon. | Ethical Issues for the Entrepreneur | What is Ethics? Ideally, you should use written contracts whenever you enter into a substantial transaction with another party. the nature of entrepreneurship and explore the unique ethical issues present in entrepreneurial activities. Table 3.1 summarizes the contributions of these acts to supporting antitrust efforts. are licensed under a, Ethical and Legal Issues in Entrepreneurship, Frameworks to Inform Your Entrepreneurial Path, The Ethical and Social Responsibilities of Entrepreneurs, Corporate Social Responsibility and Social Entrepreneurship, Developing a Workplace Culture of Ethical Excellence and Accountability, Creativity, Innovation, and Invention: How They Differ, Developing Ideas, Innovations, and Inventions, Researching Potential Business Opportunities, Problem Solving and Need Recognition Techniques, Problem Solving to Find Entrepreneurial Solutions, Telling Your Entrepreneurial Story and Pitching the Idea, Clarifying Your Vision, Mission, and Goals, Developing Pitches for Various Audiences and Goals, Protecting Your Idea and Polishing the Pitch through Feedback, Entrepreneurial Marketing and the Marketing Mix, Market Research, Market Opportunity Recognition, and Target Market, Marketing Techniques and Tools for Entrepreneurs, Marketing Strategy and the Marketing Plan, Overview of Entrepreneurial Finance and Accounting Strategies, Developing Startup Financial Statements and Projections, Launching the Imperfect Business: Lean Startup, Why Early Failure Can Lead to Success Later, The Challenging Truth about Business Ownership, Managing, Following, and Adjusting the Initial Plan, Avoiding the “Field of Dreams” Approach, Business Structure Options: Legal, Tax, and Risk Issues, Business Structures: Overview of Legal and Tax Considerations, Additional Considerations: Capital Acquisition, Business Domicile, and Technology, Using the PEST Framework to Assess Resource Needs, Managing Resources over the Venture Life Cycle, Making Difficult Business Decisions in Response to Challenges, Now What? Legal Issues in Entrepreneurship. For this reason, we use the words ethics and morals interchangeably in our discussion. The story of Nikola Tesla—a Serbian-American inventor, engineer, and physicist—offers a cautionary tale for why entrepreneurs need to be attuned to both the technical aspects of a venture’s IP and its culture of creativity. These and other actions begin to help individuals develop and internalize an ethical compass. But ignoring ethics will always come back to bite you, no matter how far ahead you get. 4.0 and you must attribute OpenStax. If you find yourself wanting to use something that you didn’t create yourself, it’s important to get permission from the rightful owner. The first is with a startup known to value a hard-nosed, no-nonsense business culture in which keeping long hours and working intensely are highly valued. then you must include on every digital page view the following attribution: Use the information below to generate a citation. It is an all-too-common situation that could have serious liability consequences for an entrepreneurial business if adequate insurance is not procured. Finally, there is a special category of IP known as a trade secret. Thus, business ethics guides the conduct by which entrepreneurs and their companies abide by the law and respect the rights of their stakeholders, particularly their customers, clients, employees, and the surrounding community and environment. Successful entrepreneurs and the companies they represent will take pride in their enterprise if they engage in business with transparency, intentionality, and integrity. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses. It also offers the chance to pursue your own professional interests or volunteerism during a portion of every workday. Second, we want to enable entrepreneurs to develop a moral compass that allows them to lead their business organization in a manner consistent with ethical and legal principles. “Why Transparency Is Not Enough: The Case of Mr. Mike.”, Food and Drug Administration. What central point might constitute such a code? Essentially, a commitment to treat with honesty and integrity customers, clients, employees, and others affiliated with a business. In the US, design patents are typically protected for a period of fourteen years. Most employers understand they run a risk that their employees may commit a tort, and that they are responsible when employees cause harm to others (customers or coworkers) while on duty, working on company property, and using company equipment. Being successful as an entrepreneur may therefore consist of much more than simply making money and growing a venture. Entrepreneurs should pay especially close attention to the legal implications of how patent law can affect a business. This may be due to a variety of reasons, including what researchers term a positive effect on business culture, stakeholders, and reputation.6 In other words, being ethical beneficially influences employees, investors, and customers. Major Ethical Issues in Entrpreneurship Group 3 M12E Major Ethical Issues Major Ethical Issues Ethical Issue - is a problem or situation that requires a person or organization to choose between alternatives that must be evaluated as right (ethical) or wrong (unethical). The primary issue is commingling of assets and properly attributing expenses across personal and business. citation tool such as. not be reproduced without the prior and express written consent of Rice University. #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. (credit (a): modification of modification of "US Patent US381968A" by Nikola Tesla/Google Patents, Public Domain; credit (b): modification of “Coke bottle patent” by Unknown/Wikimedia Commons, Public Domain), (a) Published texts and artwork are granted a copyright, which will expire over time (usually a long period), as is the case with Thomas Paine’s seminal work. Women of Power Summit Many people confuse ethical and legal compliance. We are committed to transparency and effective engagement with shareholders. This book is Creative Commons Attribution License cnx({ The settlement covers 147 million consumers, just under one-half of the population of the United States.8. When you’re considering job candidates, it’s important that nepotism doesn’t drive hiring … We recommend using a Nearly all systems of moral, ethical, spiritual, and/or religious beliefs stress the building blocks of engaging others with respect, empathy, and honesty. It can be said that these individuals possess a good character, are able to earn trust, and have qualities that are deemed necessary for leadership. An example of an ethical business organization is one that follows the Statement of Purpose by the Business Roundtable. You may decide, as well, that while you are pursuing profit in your business, you will not require that all the money earned comes your way. IP law also helps establish brand awareness and secure secondary revenue streams. Read the Ten Principles of the United Nations Global Compact that urges corporations to develop a “principled approach to doing business.” The principles cover human rights, labor, the environment, and corruption. 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. If you don’t get expensing right you can end up in trouble with local, state, and federal tax authorities. Legal and ethical issues confront entrepreneurs and freelancers on a regular basis; learning how to handle them is vital to business success. About 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. To return to the case of Martin Shkreli, let’s examine it through some foundational theoretical lenses, based on ethical theories. Privacy Policy Discrimination and Harassment In Small Business. This requires a very high duty of conduct and full disclosure, one that prohibits being involved in both sides of a transaction. Yet this represents only a baseline minimum. This includes the ability to recognize and identify both ethical dilemmas and legal issues that might arise. Serving the needs of the shareholders, as perhaps Shkreli thought he was doing, is based on a limited view of organizational purpose. The law is typically indebted to tradition and precedent, and compelling reasons are needed to support any change. A professional must be very cautious about conflicts of interest, especially in areas in which you owe a fiduciary duty to your clients. BusinessCollective, launched in partnership with Citi, is a virtual mentorship program powered by North America’s most ambitious young thought leaders, entrepreneurs, executives and small business owners. Our mission is to improve educational access and learning for everyone. Partnership Solutions “Massive Data Breach at Equifax: As Many As 143 Million Social Security Numbers Hacked.”, Stacy Cowley. Although Shkreli’s decision to raise prices was within legal limits, his actions were critically judged in the court of public opinion. This is especially true for the concept of vicarious liability, which is the area of the law that imposes responsibility upon one person for the failure of another, with whom the person has a special relationship (e.g., employer and employee) to exercise reasonable care. This starts with compensating them fairly and providing important benefits. Delivering value to our customers. Arrington became the go-to source for tech enthusiasts and investors. Tesla had to quit, teaming up with Westinghouse to open the Tesla Electric Light company, bringing his valuable creativity and ideas with him to his new venture.9 Eventually, Tesla’s AC became the American standard, not Edison’s DC. Develop and sustain a sense of ethical values. The … 668 (1919). In 2017, from mid-May to July, hackers gained unauthorized access to servers used by Equifax, a major credit reporting agency, and accessed the personal information of nearly one-half of the US population.7 Equifax executives sold off nearly $2 million of company stock they owned after finding out about the hack in late July, weeks before it was publicly announced on September 7, 2017, in potential violation of insider trading rules. Ethical entrepreneurs consistently strive to apply ethics-based concepts in practice, including truthfulness and full disclosure. Management You may also choose never to defraud or mislead your business partners. We introduce students to some conceptual issues, beginning with the question of whether ethics even bears upon entrepreneurship. On September 26, 2017, the CEO resigned, days before he was to testify before Congress about the breach. However, it’s important to implement a transparent system and ensure taxes are paid and revenue is reported accurately. 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. And what type of firm has long-term customers and employees? These foundational beliefs, in turn, prepare us for the codes of ethical behavior that serve as ideal guides for business. Instead, there might be sufficient profits to distribute a portion of them to other stakeholders in addition to yourself—for example, those who are important because they have helped you or are affected one way or another by your business. Change, or it consulting firm are utilitarianism, duty-based ethics ( also known as Kantian and/or... 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