Chapter 2: Integrity and Ethics: Foundations for Success in Small Business Flashcards
What is Integrity?
A general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing regardless of the circumstances
Acting with integrity requires that an individual first considers this
the welfare of others
A business owner should strive to live up to the highest standards of these in their business relationships
Honesty, fairness, and respect
Entrepreneurs must often make decisions regarding what is
Respectful and fair
Different groups must be considered while making decisions. These groups are
Owners/Stockholders Customers Employees Community Government
Individuals or groups who either can affect or are affected by the performance of the company
Stakeholders
The big three stakeholders are
Owners, Customers, and Employees
The big three is often referred to as
Primary Stakeholders
Some believe there is only one social responsibility of business, and that is to use its resources and engage in activities designed to increase these
Profits
Profits should be earned
honestly
Owners have a clear and legitimate right to benefit from the
financial profit of the company
These can sometimes be misleading without technically being illegal
Financial Reports
Who must the company please?
Customers
Owners who take customers seriously and care about them as individuals are
Apt to have more of them
Customer satisfaction with excellent products and service leads to
Healthy Sales
These issues are inherent in decisions and practices regarding hiring, promotions, salary increases, dismissals, layoffs, and work assignments
Fairness, honesty, and impartiality
What are employees concerned with that should not be ignored
Privacy, safety, and health issues
With employees, as well as everyone else, what should owners be?
Truthful and fair
What should owners show their employees?
Proper Appreciation
What kind of work employee should an owner create?
a positive one
Lapses in integrity can do this easily
Pass down from superiors to subordinates like a virus
What is a company’s ethical obligations to the community?
Social Responsibilities
Social responsibilities are often referred to as
the price of freedom to operate independently in a free economy
Although companies should not expect a reward from their social contributions, customers often do reward them through these
repeat sales, and a willingness to pay a little more for what they get
Social responsibilities can be seen as this
a luxury that the company simply cannot afford
An owner must limit his social contributions to
what a company can afford
A commitment to the community is not only good ethically, but it can be
good for business
How does the government intervene directly into the economy?
By establishing laws to ensure healthy competition
What are some examples of the government intervening in business matters?
Workplace Safety
Equal Employment
What is it called when a company conceals some income?
Skimming
Paying all forms of required taxes is a
Non-negotiable feature of integrity
Misrepresentation of the facts to mislead others intentionally and earn their confidence is known as
The Legitimacy lie
What does a legitimacy lie do to a company in the eyes of its customers
threatens the reputation and the trust that goes with it
What are some concerns of prospective customers
Will the product serve my needs better than the alternative?
Do the company’s representatives know what they are talking about?
Will the organizations still be around to stand behind its product if I have a problem six months from now?
A small firm’s legitimacy is staked on who?
The reputation of its owner
How must a company be with customers about its practices and its privacy policy?
Honest and transparent
Original intellectual creations, including inventions, literary creations, and works of art that are protected by patents and copyrights
Intellectual Property
The belief that the ethical standards of one’s own country can be applied universally
Ethical Imperialism
The belief that ethical standards are subject to local interpretation
Social Relativism
Long term benefits of adapting ethical and responsible business practices include
Improved financial performance
Enhanced brand image and reputation
Increased sales and customer loyalty
Improved productivity and quality
Better recruitment and reduced employee turnover
Fewer regulatory inspections and less paperwork
Improved access to capital
What is the greatest benefit of integrity in business?
The trust it generates
Beliefs that provide a foundation for ethical behavior in a firm is known as a person or business’
Underlying values
What does business behavior reflect?
The level of a person’s commitment to honesty, respect, truthfulness, etc
The founder must express the importance of integrity by
leading with integrity
What is key to a firm’s ethical performance?
The personal integrity of the founder and/or owner
Integrity in a business requires this
A supportive organizational culture
What are the five fundamental principles for a supportive organizational culture?
Purpose Pride Patience Persistence Perspective
Vision for the company including the founder’s core values are known as
Purpose
This will lead to more ethical behavior in the business
Pride
It is important to not push too hard for short term results
Patience
Stand by your word; do not back down
Patience
It is important to reflect on where your business is going, why it’s going there, and how you plan to get it there
Perspective
The official standards of employee behavior formulated by a business owner is known as a
Code of Ethics
The code of ethics shape and improve organizations by
Defining behavioral expectations
Communicating that those expectations apply to employees to all levels of the business
Helping employees convey the company’s standards of conduct to suppliers and customers
Serving as a tool for handling peer pressure
Providing a formal channel for communicating with superiors without fear of reprisal
Other than expressing the principles that should be followed by employees, what should a code of ethics do?
Provides examples of these principles in action
What does the Better Business Bureau do?
Shapes the conduct of businesses and promote ethical conduct
The BBB promotes ethical behavior by
Providing consumers with information so they can make informed decisions
Creating an incentive for businesses to adhere to proper practices and addressing customer complaints
Resolving questions or disputes through mediation or arbitration
The Ethical Decision Making Process is
Define the problem Identify alternative solutions to the problem Evaluate the identified alternatives Make the Decision Implement the decision Evaluate the decision
A profitable company that responds to customers’ needs while showing reasonable concern for the environment
Sustainable small business
The effort to protect and preserve the environment
Environmentalism
