Ethics in Entrepreneurship
Class 11 Entrepreneurship — Understanding business ethics and moral character
What are Ethics?
“Business ethics comprises the study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities. Business ethics are often guided by law, while other times provide a basic framework that businesses may choose to follow in order to gain public acceptance.”
The Three Character Types — A Moral Framework
Carly — The Entrepreneur
Carly worked hard, got good grades, took a job while saving money and working on her business plan. When ready, she started her own business, developed it successfully, and sold it for $10 million a few years later. She now lives the good life — travel, dream home, family, managing investments.
What kind of person is Carly?
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Carly is the prototypical entrepreneur — representative of a self-realization, egoistic ethic. She creates value, trades with others, and lives her dream life. Yet she is not discussed in business ethics literature — she is "the invisible woman." The character traits and value-producing activities of entrepreneurs implicitly inform an ethic of creation and voluntary exchange.
Key Insight:
She creates value, trades with others, and lives her dream life — yet is rarely discussed in ethics literature.
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Tonya — The Predator
Tonya also worked hard, took a job at a financial institution. She discovered a flaw in funds-routing procedures and anonymously diverted $10 million through Caribbean and Swiss banks to an account only she knows. One year later, she resigned and now lives in discreet luxury somewhere in Europe.
What kind of person is Tonya?
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Tonya is representative of a predatory ethics. She harms others and uses the proceeds to benefit herself. She represents the zero-sum, gain-at-the-expense-of-others practices widely condemned in business ethics literature. This is the unethical extreme — creating no value, only extracting it from others.
Key Insight:
She represents the zero-sum, gain-at-the-expense-of-others practices — creating no value, only extracting it.
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Jane — The Altruist
Jane graduated with a good degree. Her parents died suddenly that summer, leaving her $10 million. Jane immediately donated $9.9 million to charities for the homeless, flood victims, and rainforest conservation. She invested the remaining $100,000 in a CD earning 8% annually, enabling her to live frugally.
What kind of person is Jane?
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Jane is representative of an altruistic ethic. She is selfless and places what she has at the disposal of others, keeping only the minimum for herself. She represents the "social justice" practices widely praised in business ethics literature.
Key Insight:
She is selfless — placing everything she has at the disposal of others, keeping only the minimum.
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The Ethics Question:
Which of the three is the most moral? Whom should we uphold as the ideal? All three require strength: it is not easy to build a successful business (Carly), figure out a con (Tonya), or give away all of one's money (Jane).
Why is Ethics Important to an Entrepreneur?
The Story of Amal and Kamal:
Amal and Kamal, father and son, had built a thriving retail grocery shop in Haldwani (Uttaranchal). A supplier delivered a large consignment of rice and sugar and left the bill with Kamal, who kept it in a cabinet. Both forgot about it. Eight months later, Amal discovered the unpaid bill while clearing backlogs and asked Kamal to contact the supplier and clear the dues. Kamal replied: 'No Father, it is the supplier's duty to remember and collect his dues. Why should we chase him?' Amal replied: 'Son, that is not the way honourable people do business.' — It is the innermost belief, i.e., sense of values and business ethics, which guided Amal to pay what is due to the supplier.
Key Takeaways
- Providing quality and correct quantity of goods to consumers.
- Keeping in mind environmental issues during production.
- Paying the minimum and correct wages to the workers.
- Not using child labour in production.
- Judicious use of natural resources.