Chapter 2 notes: Packet Flashcards Preview

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Flashcards in Chapter 2 notes: Packet Deck (39):

An uncompromising adherence to doing what is right and proper.

  • Honesty, relabilty, and fairness in business practices.
  • An essential element of successful business relationships
  • Is as much about what to do as it is who to be.



Ethical issues- questions of right and wrong.

  • Legal and ethical considerations
  • Conflicts of self-interest

Doing the Right Thing


  • Relationships with customers, clients, and competitors
  • Human resource decisions
  • Employee obligations to employer
  • Management processes and relationships
  • Governmental obligations and relationships
  • Relationships with suppliers
  • Environmental and social responsibilties

Difficult Ethical Issues Facing Small Firms


Relationships with outside parties in the marketplace.

Relationships with customers, clients, and competitors.


Decisions relating to employment and promotion.

Human Resource Decisions


Employee responsibilities and actions that in some way conflict withthe best interests of the business.

Employee Obligations to Employer


Superior-subordinate relationships.

Management processes and relationships


Compliance with governmental requirements and reporting to governmental agencies.

Governmental obligations and relationships


Practices and deceptions that tend to defraud suppliers.

Relationship with suppliers


Business obligations to the environment and society.

Environmental and social responsibilities


  • Personal integrity of the owner.
  • Respecting customers
  • valuing employees

Managerial Integrity


Social responsibility for all stakeholders versus a narrow focus on using the firm's resources only for honest profit making.

Personal Integrity of the owner


Service orientation and respect in the treatment of customers is both ethical and profitable.

Respecting Customers


Fair and honest treatment of employees is a sign of managerial integrity.

Valuing Employees


  • Ethical issues in business operations
  • Ethical issues and employees

Kinds of Ethical Issues


  • 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.

Ethical Issues in Business Operations


  • "To do an honest day's work"
  • Fradulent worker' compensation claims
  • Theft of company property and embezzlement of funds
  • Violation of personal ethics to make a sale

Ethical Issues and Employees


The role of a small business (firm's ethical obligations) as a good citizen to its community.

  • Regarded as the price of freedom to operate in a free economic system.
  • Frequently takes the form of personal contributions, volunteerism and the contribution of services by the frm and it's employees.

Social Responsibility


  • Environmental protection
  • Obligation to stakeholders
  • Contributions to community organizations
  • Response to the community needs
  • Compliance with government regulations
  • Support of education
  • Consumerism

Social Responsibilities of Small Firms


  • The vulnerability of small companies
  • The integrity edge

The Challenges and Benefits of Acting Ethically


Limited resources tempt small firms to cut eithical corners if an issues affects profits.

The Vulnerability of Small Companies


  • Exhibiting integrity in businesses may actually boost a firm's performance.
  • Greatest benefit of integrity is the trust it generates. (intangible)

The Integrity Edge


  • Risks of buying and selling on the internet
  • Maitenance of personal privacy
    • "Cookies" to profile customer's useage of the Web
    • Monitoring employee's e-mail and Internet access.

Internet Ethics


  • Misappropriation of content providers' original intellectual creations that are protected by patents and copyrights:
    • inventions
    • Literary creations
    • Works of art 

Protection of Intellectual Property Rights


  • Illegal immigrants and forced labor in sweatshops
  • Outsourcing into "cheap" labor markets
  • Application of Federal Corrupt Practices Act
    • Bribery vs customary local business practices.

Protection of Intellectual Property Rights


The belief that the ethical standards of one's own country are superior and can be applied universally.

Ethical Imperialism


The belief that ethical standards are subject to local interpretation.

"When in Rome, do as the Roman's do"

Ethical Relativism


Unarticulated ethical beliefs that provide a foundation for ethical behavior in a firm.

  • are based on personal view of the universe and mankind.
  • Strongly held views can lead to tough choices.
  • Ethics of the firm affect how outsiders view the firm and their decisions about the firm.

Underlying Values


  • Owner/leaders and their ethics have more direct and pronounced effects in small firms.
  • Owner/leaders can insist that ethical principals be followed by employees.

Leading with Integrity


Building an ethical culture requires:

  • Full commitment to ethical conduct by the firm
  • Strong, ethical managerial leadership


A supportive Organizational Culture


  • Firm's official standards of employee behavior set by the firm.
  • The foundation for ethical conduct by employees.
  • Clairifies the rules and gives guidance to employees.

Code of Ethics


  • Purpose
  • Perspective
  • Persistence
  • Patience
  • Pride

Fundamental Principals for Ethical Policy Making


Encourages ethical practices by:

  • Providing customers with free information to help them make informed decisions when dealing with a company.
  • Creaing an incentive for businesses to adhere to proper business practices and earnestly address customer complaints.
  • Resolving questions or disputes concerning purchases through mediation or arbitration.

Better Business Bereaus (BBB)


  1. Define the problem
  2. Identify alternate solutions to the problem
  3. Evaluate the identified alternatives
  4. Make the decision
  5. Implement the decision
  6. Evaluate the decision

An Ethical Decision Making Process


Entrepreneural activity with an embedded social purpose (goal) of finding innovative solutions to:

  • Social needs
  • problems, and
  • opportunities

Social Entrepreneurship


  • People
  • Profits
  • Planet (environment)

Triple Bottom Line


The effort to protect and preserve the environment.



  • Cost of updating and modifying facilities
  • Compliance with government regulations
  • Lawsuits

Adverse Impact of Environmentalism


  • Enhances firm's image with customers
  • Improves firm's image on the community
  • Provides business opportunities (e.g. recycling)

Potential of Environmentalism