Chapter 2: Integrity & Ethics: Foundations for success in Small Business – Flashcards
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Integrity
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A general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing, regardless of the circumstances.
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Ethical issues
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questions of right and wrong
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Economic, Legal, Ethical, Discretionary
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Types of responsibility in small business (4)
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Owners, Customers, and Employees
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"Big Three" Primary Stakeholders
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Ethical Issues in Business Operations
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-Income and expense reporting (tax fraud) -"Truth in advertising"—persuasion and deception -Bribing customers and rigging bids -Direct selling—pyramid schemes, bait-and-switch selling -Effects of owners' ethics on their employees -Accurately reporting financial information
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Ethical Issues and Employees
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-"To do an honest day's work" -Fraudulent workers' compensation claims -Theft of company property and embezzlement of funds -Violation of personal ethics to make a sale
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Social Responsibility
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The firm's ethical obligations as a good citizen to its community.
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Social Responsibility
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Regarded as the price of freedom to operate in a free economic system.
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Social Responsibility
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Frequently takes the form of personal contributions, volunteerism and the contribution of services by the firm and its employees.
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Social Responsibilities of Small Firms
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1. Environmental Protection 2. Consumerism 3. Support of Education 4. Compliance with Government Regulations 5. Response to Community Needs 6. Contributions to Community Organizations 7. Obligations to Stakeholders
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Integrity Edge
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-Exhibiting integrity in business may actually boost a firm's performance. -Greatest benefit of integrity is the trust it generates.
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Small Companies and the Legitimacy Lie
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-Limited resources tempt small firms to misrepresent facts and cut ethical corners if an issue affects profits. -PRO Levers: products, representatives, organization
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Integrity and Internet
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-Risks of buying and selling on the Internet -Maintenance of personal privacy -Protection of intellectual property rights
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Human Rights and the Abuse of Workers
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-Illegal immigrants and forced labor -Outsourcing into "cheap" labor markets
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Ethical Imperialism
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The belief that the ethical standards of one's own country are superior and can be applied universally.
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Ethical Relativism
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The belief that ethical standards are subject to local interpretation and application.
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Benefits of Ethical Business Practices
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1. Improved financial performance 2. Increased sales & customer loyalty 3. Better recruitment & reduced turnover 4. Improved access to capital 5. Fewer regulatory inspections & less paperwork 6. Improved productivity & quality 7. Enhanced brand image & reputation
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Underlying values
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unarticulated ethical beliefs that provide a foundation for ethical behavior in a firm
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Underlying values
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-Are based on personal views of the universe and mankind. -Strongly held views can lead to tough choices. -Ethics of the firm affect how outsiders view of the firm and their decisions about the firm.
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Leading with Integrity
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-Owner/leaders and their ethics have more direct and pronounced effects in small firms. -Owner/leaders can insist that ethical principles be followed by employees.
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Code of ethics
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-Firm's official standards of employee behavior. -The foundation for ethical conduct by employees -Clarifies the rules and gives guidance to employees
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Full commitment to ethical conduct by the firm, Strong, ethical managerial leadership
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Building an ethical culture requires:
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Purpose, Pride, Patience, Persistence, Perspective
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Fundamental Principles for Ethical Policy Making (5)
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Better Business Bureaus (BBB)
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-Providing consumers with free information to help them make informed decisions when dealing with a company -Creating an incentive for businesses to adhere to proper business practices & earnestly address customer complaints -Resolving questions or disputes concerning purchases through mediation or arbitration.
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Ethical Decision-Making Process
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1. Define the problem 2. Identify alternative solutions to the problem 3. Evaluate the identified alternatives 4. Make the decision 5. Implement the decision. 6. Evaluate the decision.
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Treat others as you would want to be treated.
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Golden Rule
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Sustainable Small Business
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A profitable company that responds to customers' needs while showing reasonable concern for the environment.
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Environmentalism
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Is the effort to protect and preserve the environment.
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Environmentalism
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Can result in regulations that adversely affect some small firms and create opportunities for others.
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Environmentalism
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Promotes win-win eco-friendly business practices that reduce costs and save energy.
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Goals for Sustainable Business Practices
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1. Save the planet 2. Hold down costs 3. Attract customers 4. Create shareholder value
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intellectual property
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Original intellectual creations, including inventions, literary creations, and works of art, that are protected by patents, copyrights, trademarks, design rights, and trade secrets.
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stakeholders
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Individuals or groups who either can affect or are affected by the performance of the company.
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C
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Integrity is best defined as: a. Always maintaining the appearance of being a good person. b. Recognizing that rules take precedence over results in business. c. A general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing, regardless of the circumstances. d. Following strict utilitarian principles when making business decisions.
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A
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Which of the following best describes the difference between integrity and ethics? a. Integrity is based on internal principles that guide behavior; ethics is based on external guides to behavior. b. Integrity refers to intangible values; ethics refers to hard rules of conduct. c. Integrity is based on internal principles that guide behavior; ethics is a rules-based (formalist) approach. d. Integrity requires adherence to a documented code of values; ethics is a more loosely defined concept based on abstract norms.
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B
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Which of the following is NOT one of the "Big Three" stakeholders? a. Employees b. Government regulators c. Owners d. Customers
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C
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Which of the following is foundational to a company's ability to satisfy its stakeholders? a. Supporting community groups b. Philanthropy c. Being profitable d. Conforming to popular notions of propriety
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A
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The most accurate statement concerning socially responsible actions and firm profitability is: a. Evidence concerning the link between social responsibility and profit is mixed. b. Firms that act in socially responsible ways nearly always make more profit. c. Firms that act in socially responsible ways nearly always make less profit. d. Profit should be sacrificed for the sake of being socially responsible.
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D
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Social entrepreneurship is best defined as: a. A more profitable and more ethical approach to founding a company. b. Leveraging social media to build a customer base. c. A more enlightened way to do business. d. Applying already established principles of good business to social problems.
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Integrity
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_____________ is acting in ways that are congruent with the values you espouse. Options: -Integrity -Ethically -Goodness -Virtue
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Legitimacy
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________ lies are those that are specifically designed to make a new business look bigger and busier than it really is. Options: -White -Permissible -Legitimacy -Founders
