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The cost-of-living crisis continues to affect people across the UK, and it is at these times that the topic of ethics in business comes up frequently: “How ethical is it for energy companies to make record breaking profit while people cannot afford to keep the heating on?”, “How ethical is it for supermarkets to force staff to discard food products at the end of the day into locked bins whilst people starve?” . More companies are putting ethical trade principles into practice by aiming to reduce their carbon footprints, commit to fair trade, use resources more wisely, and donate to charities. The need to minimise any negative effects from their activities while still having a positive impact on the neighbourhood is understood to be higher on the priority list of late. Is it feasible to run a successful business and to continue uphold moral principles? Let’s find out!
Can Ethics and Entrepreneurship be Combined?
Well, to answer this question is important to understand what do we mean by ethics?
Ethics means good actions. To do what is good means that one must have to be in a rational state to make what one believes is justifiable right decisions.
Actions have repercussions. Immanuel Kant (1949), a proponent of deontology, holds that moral behaviour triumphs over consequences. He thinks that being ethical requires doing what is right and having good intentions. The categorical imperatives were developed by Kant and contain the three formulations: universal law, end in itself, and kingdom of ends. This concluded that one should not act unless they are okay with everyone else acting the same way all the time. Kant, who believed in the concept of duty, distinguished between two types of duties: perfect duties, which are morally wrong to ignore, and imperfect duties, which, even if broken, do not result in contradictions. On the other side, utilitarianism is studied by John Stuart Mill (1989). Mill supports taking measures that will maximise their usefulness. He strives to alleviate suffering and provide the most happiness for as many people as possible. Unlike Kant, who believes in duty, Mill thinks that activities should only be judged by their results.
Entrepreneurship is the first step in ethical behaviour, which is choosing to do what is right as opposed to what is wrong. A company is shaped from the start by the owner’s personal ideals. Every decision they make, every policy they write, and every action they do reflect their values and beliefs, which also affect how they run their businesses.
Entrepreneurs draw on a range of values and principles to direct their ethical behaviour, including those from their families, their religious traditions, their mentors, and the communities they grew up in. Entrepreneurs who incorporate their personal values into their business decisions and activities are more likely to behave honourably. Entrepreneurs that have integrity always act morally, regardless matter the situation.
Business ethics refers to the core moral principles and conduct expectations that serve as a guide for employees of an organisation as they make choices and deal with stakeholders.
Every businessperson deal with ethical issues on a regular basis since they affect most decisions in some way. Entrepreneurs have the chance to exercise their ethical muscles and do what is right by making difficult ethical decisions.
Why do ethical lapses occur?
Like every profession, Entrepreneurs sometimes find themselves caught in ethical dilemmas where they are forced to make decisions about what is right and wrong. KPMG Integry survey identifies the primary causes of misconduct in businesses. Some of the causes are:
Competitive pressures- If competition is so intense that a company’s survival is threatened, managers may begin to view what were once unacceptable options as acceptable.
Opportunity pressures- When the opportunity to “get ahead” by taking some unethical actions present itself, some people cannot resist the temptation. The greater the reward or the smaller the penalty for unethical acts make such behaviour more likely to occur.
Globalization of business. Companies has discovered that no single standard of ethical behaviour applies to all business in the international arena. Practises that are illegal in one country may be perfectly acceptable, or even expected in another.
But why entrepreneurs should behave ethically?
Society is constantly redefining it expectations of business and now holds companies of all sizes to high standards of ethics and social responsibility. Companies must go beyond “doing well” – simply by earning profit – to “doing good”- living up to their social responsibility.
In a free enterprise system, companies that fail to respond to their customers’ needs and demands soon go out of business. Today, customers are increasingly looking for companies that supports a social or an environmental cause. A study by Penn Schoen Berland et al 2010, reports that more than 75 percent of consumers say social responsibility is important in their purchasing decisions. The survey finds that 55 percent of consumers are more likely to choose a product that supports a certain cause when choosing between similar products and that 38 percent are willing to pay more for products with added social benefits. Other studies conclude that when price, service, and quality are equal among competitors, customers buy from the company that has the best reputation for social responsibility.
What are the benefits of behaving ethically?
Although behaving ethically has value in itself, there are many other benefits to companies that adhere to ethical standards. First, companies avoid damaging fallout from unethical behaviour on their reputations. Unethical businesses usually gain only short-term advantages.
Second, businesses with solid reputations as ethical companies find it easier to attract and retain quality workers.
Third, ethical behaviour has a positive impact on a company’s bottom line. Research on the relationship between ethics and financial performance suggest that companies that outperform their competitors ethically also outperform them financially due to the strong employee commitment that an ethical culture creates. However, financial rewards should never become motivating force behind acting ethically. Entrepreneurs must strive to do the right thing simply because it is the right thig to do.
In summary, research connecting entrepreneurship and ethics is extremely rich and varied. However, managing in an ethical and socially responsible manner presents tremendous challenge, Entrepreneurs must do more than merely earn profits: they must act ethically and in a socially responsible manner.
Ethics and entrepreneurship. 2009. Journal of Business Venturing, [online] 24(5), p.2.
Kant, I., 1949. The philosophy of Kant: Immanuel Kant’s moral and political writings.
Katz, J.A. and Green, R.P. 2007, Entrepreneurial Small Business, McGraw‐Hill, New York, NY.
KPMG Integrity Survey 2013, p.12
Longenecker, J.G., Moore, C.W., Petty, J.W. and Palich, L.E. 2006, Small Business Management: An Entrepreneurial Emphasis, 13th ed., Thomson South‐Western, Mason, OH.
Scarborough, Norman M., and Jeffrey R. Cornwall. Essentials of Entrepreneurship and Small Business Management, Global Edition, Pearson Education Limited, 2018.
Skorupski, J., 1989. John Stuart Mill (p. 276). London: Routledge.
Survey conducted by Penn Schoen Berland, in conjunction with Burson-Marsteller and Landor, from interviews conducted February 10-12,2010.
Timmons, J.A. and Spinelli, S. 2007, New Venture Creation: Entrepreneurship for the 21 Century, 7th ed., McGraw‐Hill, New York, NY.
- Alstete, J. 2008. Aspects of entrepreneurial success. Journal of Small Business and Enterprise Development, p.2.
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