Topic 2

Ethics in Entrepreneurship
Description

In real life, entrepreneurs encounter ethical problems all the time. This is why it is good to
discuss ethics early on in the budding entrepreneur’s life. Entrepreneurs are faced with
complex moral problems related to basic fairness, costing and pricing dilemmas, distribution
choices, and even personal relationships. Although it is difficult to give clear-cut and outright
answers to these ethical questions, airing these ethical dilemmas would be a good first step to
making the students aware of what they will encounter in real life.

Objectives

This topic will enable the students to:

• explain how ethics is a key ingredient to their success as entrepreneurs

• discuss examples of unethical practices that can undermine their entrepreneurial careers

• discuss why socio-economic development must happen in an ethical way

The Importance of Ethics in Business

David McClelland (McClelland, D.C.: 1961, The Achieving Society, D. Van Nostrand, New York)
was among the first contemporary scholars to ask serious ethical questions about
entrepreneurship issuing a call for more study. McClelland observed, “We do not know at the
present time what makes an entrepreneur more or less ethical in his dealings but obviously
there are few problems of greater importance for future research.”

Entrepreneurs are today urged to look seriously into ethics because more and more people
realize that the saying, “We are our brother’s keeper” is true. Capital and money in the
enterprise becomes depleted but the character of the entrepreneur outlasts these material
resources.

Ethics is internally imposed by the character of the entrepreneur. Honesty cannot be imposed
from outside the person; honesty is part of the person’s character, carried over from the
person’s upbringing and character development.

Without ethics the person will fall under the weight of corruption, which in some readings, is
termed lack of conscience or lack of character.

Government can impose laws and organizations can draw up a code of conduct for the
employees. But these are intended for people who violate them. Those who have integrity
obey these laws and ordinances as part of their character, of who they are.

Doing the right thing works from an internal core and forms an upright character. External
codes and laws can fore people to do right but fail to change the internal core of one’s
character.

Reasons why Ethical Entrepreneurs are

Important for the Right and Sustainable
Development of a Country
We do not only want to grow and develop; but to grow and develop in the right way, which is
the sustainable way. Sustainable development is centered not on science, not on technology
but on man. Human beings (employees, customers, suppliers, the members of the community
where the business is located) need to live healthy, dignified, and productive lives in harmony
with nature.

Thus, an entrepreneur must run his business taking into account his responsibilities not only
towards himself but also towards others and towards the gifts of nature that he often utilizes
for his business.

In other words, he must run his business based on high ethical standards.

Consider an entrepreneur who exploits his employees, overworks them, under-pays them. Will
these workers give their best efforts in producing goods and services? Will they serve
customers efficiently and cheerfully? How long will they stay in their jobs?

Or take a quick-buck operator, a businessperson out to earn a lot of money in one or two deals
by cheating customers through overpricing and deceptive product information. Do you think
such an entrepreneur will thrive in business for long? How can that be possible when buyers
eventually lose their interest due to the poor quality of the goods being sold, failure to deliver
on promises, shoddy service, short-lived demand, and other negative reasons?

Again, consider an entrepreneur who makes profit at the expense of environmental

degradation. He may be a fisherman who uses dynamite, a logger who depletes the forest
cover, a manufacturer who has no qualms throwing chemical waste by the riverside. If the law
does not catch up with him, nature has a way of claiming retribution. Soon, there will be no fist
to catch, no trees to cut, and no customers to buy what they say. Soon, people will be angry
with the entrepreneur for the pollution (land disease) he has caused.

Doing business the ethical way builds consumer loyalty, keeps good employees and makes
them happy and productive, and creates a stable environment that minimizes unexpected
problems.

A country, whose base of job-generating, income-producing entrepreneurs stick to high

standards of conduct, is likely to sustain its socio-economic growth because it maximizes the
country’s prosperity, harmony, productivity, and natural resources.