However, many employers are not aware that employers can actually be liable for harm caused by an employee if that employee caused harm within the scope of his or her job duties. This concept refers to proprietary information, processes, or other internal knowledge that contribute to an organization’s competitive advantage in a market. One whose track record gives evidence of honest business practices. Do not lie, … Normative theories of ethics are primarily concerned with establishing standards or criteria that delineate what is considered ethical behavior. Some entrepreneurs stay the ethical course. #1: Moral Marketing Compass: This is especially important in economic downturns, when unethical practices become tempting.#2: Win-win Marketing: The focus on customer value will increase company value.#3: Keeps marketing legal: Reduces the risk of cutting corners and turning a blind eye.#4: Goodwill: Goodwill and strong reputation among clients and associates are the benefits which companies cannot afford to overlook. Numerous government investigations and hundreds of private lawsuits have been filed as a result of the hack. It also offers the chance to pursue your own professional interests or volunteerism during a portion of every workday. For example, if an employer asks an employee to drop something off at FedEx or UPS after work hours, and that employee negligently causes an auto accident, even if the employee is driving their personal vehicle and not a company car, the employer could be liable for damages. To develop and internalize a moral compass, an entrepreneur and the members of the organization need to continually exercise and develop their ethical “muscles.” These ethics-based muscles include qualities such as trust, truthfulness, respect, responsibility, commitment, care, love, and justice. These virtues consist of trust and derivatives of trust such as truthfulness. Integrity: hen it comes to integrity, it is impossible to avoid sounding preachy or parental. The WMEC list of companies shows an average annual excess return of more than 8 percent higher than expected profitability. Ethics in Social Entrepreneurship Kidder (1995), states that if a situation is not a clear cut case of right vs. wrong then there are four ethical dilemma paradigms, truth vs. loyalty, short term vs. long term, justice vs. mercy, self vs. community. Success may come from the sense of pride felt when engaging in honest transactions—not just because the law demands it, but because we demand it of ourselves. What are the steps we need to take to get protection? Ethical observance builds on this baseline and reveals the principles of an individual business leader or a specific organization. Disclosure describes sharing the needed facts and details about a subject in a transparent and truthful way. However, Edison preferred DC technology and was not supportive of Tesla’s ideas. In addition to the marketing, financial, human resources and other challenges small-business owners face, legal and ethical issues of operating a business loom as another stumbling block. Oral agreements are enforceable in most situations; however, proving their terms can be difficult. When you’re just starting out and have limited resources, it might seem tempting to ignore this to grow quicker and compete with the top players. The entrepreneur herself is likely overwhelmed with her many roles at the c… Make the success of your company your primary goal and nepotism will never be able to get a foothold. SistersInc. Was the decision to raise the price of the HIV drug by 5,000 percent in the best interest of the business? Being successful as an entrepreneur may therefore consist of much more than simply making money and growing a venture. The following answers are provided by members of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. then you must include on every physical page the following attribution: If you are redistributing all or part of this book in a digital format, Investing in our employees. It is an all-too-common situation that could have serious liability consequences for an entrepreneurial business if adequate insurance is not procured. The easy fix is to not commingle, but at every step you should seek the advice of an experienced accountant. IP applies to anything that is the exclusive right of a firm, will help differentiate that organization, and will contribute to a sustained competitive advantage. As a result, it is necessary for an entrepreneur to thoroughly review the legal issues involved to make sure that a costly mistake isn’t made. Likewise, most businesses are likely to have some involvement with tort law: that area of law that protects the rights of people not to be harmed physically, financially, or in any other way, such as a breach of privacy. But it is more than just consistency of character. It could also mean using the tangible and intellectual resources of a company on something that will benefit your private interests instead of your employer’s. However, unlike patents, copyrights, and trademarks, a trade secret is not included as a protected category under federal IP law. That way, if a dispute arises, you’ll have documentation to fall back on. If you are in the midst of a startup, chances are you are moving quickly. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions. Harassment and discrimination are arguably the … The primary issue is commingling of assets and properly attributing expenses across personal and business. Perform a knockout search before choosing a business name. For example, as an IT consultant, do you recommend to a client that they buy a software product, when unknown to them, you own stock in that company? Instead, there might be sufficient profits to distribute a portion of them to other stakeholders in addition to yourself—for example, those who are important because they have helped you or are affected one way or another by your business. A trademark can be protected for an unlimited number of ten-year renewable terms as long as it is still in use. A professional must be very cautious about conflicts of interest, especially in areas in which you owe a fiduciary duty to your clients. The pressure to create a new venture, within constraints and limitations, inspires entrepreneurs to find innovative ways to meet potential market demands. Textbook content produced by OpenStax is licensed under a Copyrights and trademarks are also protected IP (Figure 3.4). Unfortunately, ignorance of the law here can be a costly mistake. 7. Many new business owners are consciously unaware when they’re infringing on the copyrights of other creatives, especially when it comes to using images and “everyone knows it” content. The … In effect, these laws make it illegal for a competitor to make agreements that would limit competition in the market. Ideally, you should use written contracts whenever you enter into a substantial transaction with another party. You may decide, as well, that while you are pursuing profit in your business, you will not require that all the money earned comes your way. However, he was criticized for routinely covering stories about the companies he invested in and consulted for. Acting with integrity means we adhere strongly to a system of ethical values. The idea of social entrepreneurship has been around since the 1960s, becoming more popular in the 1990s. 668 (1919). Tesla had to quit, teaming up with Westinghouse to open the Tesla Electric Light company, bringing his valuable creativity and ideas with him to his new venture.9 Eventually, Tesla’s AC became the American standard, not Edison’s DC. Financial liability often results from the assumption of and exposure to risk; therefore, this is an important issue for entrepreneurs to manage. Although the ethics of social entrepreneurship is relatively unexplored, Zahra et al. Or it could be an external code based on one’s profession (e.g., CPAs, attorneys, CFPs, and others have professional codes of ethics), or a more broadly applicable external code such as that of the Business Roundtable or Business for Social Responsibility. It’s a given that everyone on a small team will have to pull their weight and wear multiple hats, but you need to be conscious of where to draw the line. “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. Relations with Investors and the Financial Community Code of Ethics A Code of ethics If the decision to raise the price adds value and usefulness for shareholders, then that decision should be made. Common areas rife with potential legal issues include contracts, torts, employment, intellectual property, conflicts of interest, full disclosure/truthfulness in product or service claims and performance, and antitrust/competition law (Figure 3.2). An entrepreneur should consider these questions when growing and protecting a firm’s IP. Less formally, the development of a culture of creativity and innovation is one of the most important responsibilities of an entrepreneur. citation tool such as. But ignoring ethics will always come back to bite you, no matter how far ahead you get. are licensed under a, Ethical and Legal Issues in Entrepreneurship, Frameworks to Inform Your Entrepreneurial Path, The Ethical and Social Responsibilities of Entrepreneurs, Corporate Social Responsibility and Social Entrepreneurship, Developing a Workplace Culture of Ethical Excellence and Accountability, Creativity, Innovation, and Invention: How They Differ, Developing Ideas, Innovations, and Inventions, Researching Potential Business Opportunities, Problem Solving and Need Recognition Techniques, Problem Solving to Find Entrepreneurial Solutions, Telling Your Entrepreneurial Story and Pitching the Idea, Clarifying Your Vision, Mission, and Goals, Developing Pitches for Various Audiences and Goals, Protecting Your Idea and Polishing the Pitch through Feedback, Entrepreneurial Marketing and the Marketing Mix, Market Research, Market Opportunity Recognition, and Target Market, Marketing Techniques and Tools for Entrepreneurs, Marketing Strategy and the Marketing Plan, Overview of Entrepreneurial Finance and Accounting Strategies, Developing Startup Financial Statements and Projections, Launching the Imperfect Business: Lean Startup, Why Early Failure Can Lead to Success Later, The Challenging Truth about Business Ownership, Managing, Following, and Adjusting the Initial Plan, Avoiding the “Field of Dreams” Approach, Business Structure Options: Legal, Tax, and Risk Issues, Business Structures: Overview of Legal and Tax Considerations, Additional Considerations: Capital Acquisition, Business Domicile, and Technology, Using the PEST Framework to Assess Resource Needs, Managing Resources over the Venture Life Cycle, Making Difficult Business Decisions in Response to Challenges, Now What? then you must include on every digital page view the following attribution: Use the information below to generate a citation. In 2017, from mid-May to July, hackers gained unauthorized access to servers used by Equifax, a major credit reporting agency, and accessed the personal information of nearly one-half of the US population.7 Equifax executives sold off nearly $2 million of company stock they owned after finding out about the hack in late July, weeks before it was publicly announced on September 7, 2017, in potential violation of insider trading rules. This information should be adequate, timely, and relevant to allow the recipient to understand the purpose and intent behind a product/service and to make a good decision about the value of that product/service. Compliance with legal standards is mandatory. It can be very tempting to slightly exaggerate things while on the hunt for investment and it is a very slippery slope with no real upside. An example of an ethical business organization is one that follows the Statement of Purpose by the Business Roundtable. Table 3.1 summarizes the contributions of these acts to supporting antitrust efforts. The second entrepreneurial opportunity is with a nonprofit recognized for a very different culture based on its compassionate approach to employee work-life balance. The following list of ethical dilemmas, organized by the 14 stages of the Startup Lifecycle, are the product of the Markkula Center's Startup Ethics Online Community, The Ethical Startup, and roundtable discussions of prominent entrepreneurs and venture capitalists in the Markkula Center's network. Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. Legal risks faced by entrepreneurs. Registry of Corporate Directors. Was Shkreli aware of all aspects (ethical, legal, financial, reputational, and political) of the decision he made? Taking legal and ethical issues into account in the beginning of your business doesn’t only ensure your quick progress but it also provides your business with long-term benefits.. Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. This could be as simple as using company time or resources to work on a personal project that has not been sanctioned and will not add value to the company. Discrimination and Harassment In Small Business. To protect those rights, it is important that a firm meticulously and immediately document each IP, the process and timeline by which each IP was developed, the resources used to develop the IP, the details of who owns and has access to the IP, and how others can obtain and use the IP. B.E. However, it’s important to implement a transparent system and ensure taxes are paid and revenue is reported accurately. Harvard Business School published a paper estimating 1 in 5 Yelp reviews is fake. BE 100s Entrepreneurs should pay especially close attention to the legal implications of how patent law can affect a business. You either lose credibility/trust later on or commit yourself to an unrealistic timeline that will only frustrate those who have bought into your dream. Imagine that upon graduation, you have the good fortune to face two entrepreneurial opportunities. Legal and Ethical Issues for Entrepreneurs is a Course Legal and Ethical Issues for Entrepreneurs Self-paced Sorry! What would acting ethically and with personal integrity in this situation look like? These responsibilities include understanding, differentiating between, and dealing with the different types and technical aspects of a firm’s IP. 15.2: Ethical and Legal Issues in Entrepreneurship 15.3: Corporate Social Responsibility and Social Entrepreneurship 15.4: Developing a Workplace Culture of Ethical Excellence and Accountability The first is with a startup known to value a hard-nosed, no-nonsense business culture in which keeping long hours and working intensely are highly valued. 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