Supporting the communities in which we work. 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. Which of these opportunities would you pursue and why? Compliance with legal standards is mandatory. “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. Related Courses. This includes the ability to recognize and identify both ethical dilemmas and legal issues that might arise. These acts were created to encourage competition and provide options for consumers. We commit to: The aim of this chapter is twofold: first, to assist entrepreneurs in understanding the significance of ethics and the role that entrepreneurs play in developing an ethical and responsible organization. These and other actions begin to help individuals develop and internalize an ethical compass. This claim was later settled by the two firms and resulted in Intel paying AMD $1.25 billion in damages. What central point might constitute such a code? This creative work can result in a product idea, a new invention, an innovative pivot, or an improvement in an existing product or service. playerId: '7a99bbff-ee60-489a-b377-212102e8a9a1' These responsibilities include understanding, differentiating between, and dealing with the different types and technical aspects of a firm’s IP. Sustaining ethical values. “Massive Data Breach at Equifax: As Many As 143 Million Social Security Numbers Hacked.”, Stacy Cowley. This period of protection ranges from fourteen to twenty years, and is essentially a government-granted monopoly, after which, protection usually expires and competition is opened up to anyone (e.g., generic drugs). From a technical aspect, there are two different types of patents: utility and design patents (Figure 3.3). We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. Want to cite, share, or modify this book? You may decide you should always tell the truth to family, friends, customers, clients, and stakeholders, and if that is not possible, you should have very good reasons why you cannot. A conscious or deliberate attempt to avoid, ignore, or marginalize that which is rightfully due an employer by addressing other interests would be a conflict of interest. Intellectual property (IP) rights are created by federal law and protect small businesses from problems such as this. However, he viewed his position as responsible behavior that served the best interests of his company and his shareholders. The … Women of Power Summit Finally, there is a special category of IP known as a trade secret. This requires a very high duty of conduct and full disclosure, one that prohibits being involved in both sides of a transaction. A conflict of interest occurs when an individual (or company) has interests in multiple areas (financial investments, work obligations, personal relationships), and the interests may conflict with each other. 7. This aids in team building and strengthening interpersonal relationships. Common examples of normative ethical theories are utilitarianism, duty-based ethics (also known as Kantian ethics and/or deontology), and virtue ethics. (b) The design of the Coca-Cola soft drink bottle was granted a design patent. But they seem at times to be the exceptions. Potential Legal or Ethical Issues Business Owners Face. In the US, design patents are typically protected for a period of fourteen years. One example of a firm that has repeatedly run into several serious, embarrassing, and costly legal issues is Eli Lilly. From an ethical theory perspective, Kantian or duty-based ethics emphasizes the underlying intent or reason behind a decision and whether that decision is good or bad. The enrollment period is currently closed. Copyrights and trademarks are also protected IP (Figure 3.4). Legal Issues in Entrepreneurship. Some professions, such as medicine and the law, have traditional and established codes of ethics. For certain businesses (like finance), your mission is more than a marketing statement; it’s an ethical code that needs to be upheld at all costs. When individuals are able to act in an ethical manner systematically, habitually, and without struggling to decide how to act or what to do in difficult situations, they have internalized that moral compass. Every entrepreneur enters into contracts, usually on a regular basis, and thus should have an understanding of basic contract concepts. It can be tempting to not report income, to put vacations on your business card, or to tap your business account when you need some extra cash. On September 26, 2017, the CEO resigned, days before he was to testify before Congress about the breach. Being successful as an entrepreneur may therefore consist of much more than simply making money and growing a venture. 2008).There is a presumption that because something is socially-oriented, the motivation is likely to be ethically sound; that it is principled, morally justified and ethically legitimate. The underlying facts, reality, and evidence behind something are the truthfulness of a matter. Thus, business ethics guides the conduct by which entrepreneurs and their companies abide by the law and respect the rights of their stakeholders, particularly their customers, clients, employees, and the surrounding community and environment. The story of Nikola Tesla—a Serbian-American inventor, engineer, and physicist—offers a cautionary tale for why entrepreneurs need to be attuned to both the technical aspects of a venture’s IP and its culture of creativity. Although he provided full disclosures of his interests, rival critics challenged his conflicts of interest. How important an attribute is income, and at what point would a higher income override for you the nonmonetary benefits of the lower-compensated opportunity? These virtues consist of trust and derivatives of trust such as truthfulness. When you’re considering job candidates, it’s important that nepotism doesn’t drive hiring … In 2009, AMD filed a suit against Intel claiming that the company had used “leveraging dominance” to exclude AMD from effectively competing in the marketplace through exclusionary pricing, discounts, and similar practices. Ideally, you should use written contracts whenever you enter into a substantial transaction with another party. Behaving ethically requires that we meet the mandatory standards of the law, but that is not enough. Ethical entrepreneurs consistently strive to apply ethics-based concepts in practice, including truthfulness and full disclosure. When Martin Shkreli decided to increase the price overnight of a lifesaving HIV drug from $13.50 to $750 per pill, the public immediately characterized his actions as unethical. The Hippocratic Oath, for example, is embraced by most professionals in healthcare today as an appropriate standard always owed to patients by physicians, nurses, and others in the field. Was the decision to raise the price of the HIV drug by 5,000 percent in the best interest of the business? Serving the needs of the shareholders, as perhaps Shkreli thought he was doing, is based on a limited view of organizational purpose. ABOUT Antitrust laws (or competition laws) were developed to ensure that one competitor does not abuse its position and power in the market to exclude or limit competitor access to the market. Fairness deals with doing what is right, just, and equitable. 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. In that event, you should at least follow-up with all parties via traditional mail or email to document the key terms of your agreement. To return to the case of Martin Shkreli, let’s examine it through some foundational theoretical lenses, based on ethical theories. Ethical acts are generally considered voluntary and personal—often based on our individual perception of what is right and wrong. If the decision to raise the price adds value and usefulness for shareholders, then that decision should be made. A few examples of antitrust laws are the Sherman Act, the Clayton Act, the Federal Trade Commission Act, and the Bayh-Dole Act. Torts are a potential area of risk for entrepreneurs. This starts with compensating them fairly and providing important benefits. Full course description. Any deliberate attempt to hide, change, or bend the truth is an unethical and irresponsible action subject to criminal investigation. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. And don’t avoid or ignore doing proper payroll or paying quarterly taxes. Partnership Solutions The OpenStax name, OpenStax logo, OpenStax book Still, we need not subscribe to any particular faith to hold that ethical behavior in business is necessary. From the standpoint of application, the quality of being truthful forms the foundation for fairness. However, these concepts are not interchangeable and call for different standards of behavior. A professional must be very cautious about conflicts of interest, especially in areas in which you owe a fiduciary duty to your clients. (2017).Values, Ethics, and Legal Issues. Intellectual property (IP) is the output or result of the creative work of one or more individuals to turn a unique idea into a practical and value-added product/service; this manifestation of original ideas is legally protected. !function(n){if(!window.cnx){window.cnx={},window.cnx.cmd=[];var t=n.createElement('iframe');t.display='none',t.onload=function(){var n=t.contentWindow.document;c=n.createElement('script'),c.src='//cd.connatix.com/connatix.player.js',c.setAttribute('async','1'),c.setAttribute('type','text/javascript'),n.body.appendChild(c)},n.head.appendChild(t)}}(document); Creative Commons Attribution License 4.0 license. Which elements illustrate acting legally but not ethically? “Equifax to Pay at Least $650 Million in Largest-Ever Data Breach Settlement.”, Ira Basen. A utility patent protects a brand-new product idea or invention under US law for a period of twenty years (see the discussion on patents in Entrepreneurial Journey and Pathways. Delivering value to our customers. In what ways might company contributions to a cause carry more power to impact the cause? Numerous government investigations and hundreds of private lawsuits have been filed as a result of the hack. But ignoring ethics will always come back to bite you, no matter how far ahead you get. This concept refers to proprietary information, processes, or other internal knowledge that contribute to an organization’s competitive advantage in a market. Normative theories of ethics are primarily concerned with establishing standards or criteria that delineate what is considered ethical behavior. It also requires understanding the importance of ethical business practices, giving back to your community and running your business in a way that minimizes harm to others and the environment. We recommend using a However, he was criticized for routinely covering stories about the companies he invested in and consulted for. As an Amazon Associate we earn from qualifying purchases. Relations with Investors and the Financial Community Code of Ethics A Code of ethics It could be a personal, internal code of conduct, or an official code adopted by a business organization. (credit (a): modification of modification of "US Patent US381968A" by Nikola Tesla/Google Patents, Public Domain; credit (b): modification of “Coke bottle patent” by Unknown/Wikimedia Commons, Public Domain), (a) Published texts and artwork are granted a copyright, which will expire over time (usually a long period), as is the case with Thomas Paine’s seminal work. Second, we want to enable entrepreneurs to develop a moral compass that allows them to lead their business organization in a manner consistent with ethical and legal principles. Contracts can be formal or informal agreements. It also gives the patent holder the exclusive right to block or withhold access to others, or to sell the right to use the patent. “Why Transparency Is Not Enough: The Case of Mr. Mike.”, Food and Drug Administration. Since 1970, BLACK ENTERPRISE has provided essential business information and advice to professionals, corporate executives, entrepreneurs, and decision makers. Ethical observance builds on this baseline and reveals the principles of an individual business leader or a specific organization. Nearly all systems of moral, ethical, spiritual, and/or religious beliefs stress the building blocks of engaging others with respect, empathy, and honesty. Except where otherwise noted, textbooks on this site Was Shkreli aware of all aspects (ethical, legal, financial, reputational, and political) of the decision he made? How could he simultaneously be both an investor and an independent journalist blogging about the very companies in which he had a financial interest? The temptation is high as online reviews can go a long way in building a brand. Having filed 300 patents, Tesla is considered by many to be one of the fathers of modern electricity. Legal Issues in Social Entrepreneurship admin 2017-12-14T16:28:08+00:00 Legal Issues in Social Entrepreneurship Reflecting the sector convergence in social entrepreneurship is the development of hybrid legal entities focusing on both financial and social return Privacy Policy Investing in our employees. Ethics involves the study of moral issues and choices (Kinicki, 2009). Disclosure describes sharing the needed facts and details about a subject in a transparent and truthful way. Your Money, Your Life, LATEST LISTS cnx.cmd.push(function() { For example, an action may be legal that we personally consider unacceptable (consider how many viewed Shkreli’s legal price hike). 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. Or as a financial advisor, are you getting commissions on both ends of a transaction? On September 15, 2017, the company’s chief information officer and chief of security retired. Regardless of its type, a firm has the exclusive rights to the ownership of its IP. Perhaps you want to start your own CPA accounting firm, or CFP financial advisory firm, or IT consulting firm. The CEOs prefaced this statement saying, “Together with partners in the public, private and non-profit sectors, Business Roundtable CEOs are committed to driving solutions that make a meaningful difference for workers, families, communities and businesses of all sizes.”4. One whose track record gives evidence of honest business practices. This is especially true for the concept of vicarious liability, which is the area of the law that imposes responsibility upon one person for the failure of another, with whom the person has a special relationship (e.g., employer and employee) to exercise reasonable care. “Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans.’”, Nelson Areal and Ana Carvalho. – Andrew Schrage, Money Crashers Personal Finance. Entrepreneurs today need to focus not only on complying with the letter of the law but also on going above and beyond that basic mandatory requirement to consider their stakeholders and do what is right. These ethical theories, discussed in the following paragraph, provide a systematic means of examining and evaluating business conduct. IP law also helps establish brand awareness and secure secondary revenue streams. The law is typically indebted to tradition and precedent, and compelling reasons are needed to support any change. The second entrepreneurial opportunity is with a nonprofit recognized for a very different culture based on its compassionate approach to employee work-life balance. Research on the performance of the World’s Most Ethical Companies (WMEC) indicates a positive association between ethical conduct and successful long-term financial performance. A comprehensive view of business and entrepreneurial ethics requires an understanding of the difference between shareholders, a small group who are the owners (or stockholders), and stakeholders, a large group that includes all those people and organizations with a vested interest in the business. An individual who is being truthful is exercising the capability of being factual about a subject matter, dealing with reality, and aware of evidence. This framework and foundation include that everyone receive the right training, be given the opportunity to identify and close gaps in their behavior, receive recognition and incentives that reinforce good ethical behavior, and receive consistent, timely, and substantial consequences when they fail to act responsibly. Question: Does it appear that Shkreli, in the preceding pharmaceutical example, considered all the stakeholders as the Business Roundtable Statement recommends, or did he follow the older shareholder primacy doctrine approach? Yet this represents only a baseline minimum. While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. If we violate these standards, we are subject to punishment as established by the law. Success may lie in knowing the profit we make does not come from shortchanging others. Legal issues examples for an entrepreneur. Many people confuse ethical and legal compliance. 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 © Dec 15, 2020 OpenStax. It is an all-too-common situation that could have serious liability consequences for an entrepreneurial business if adequate insurance is not procured. A moral compass is a state of mind where an individual has developed the needed capabilities to differentiate between right and wrong, or between just and unjust in challenging circumstances. 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. Without it, our society would be in chaos. In today’s environment, it’s a must that you have guidelines in place as to what constitutes workplace harassment, discrimination, and bullying. }); EVENTS the nature of entrepreneurship and explore the unique ethical issues present in entrepreneurial activities. It is important to note that any deviation from these laws may result in long and costly legal problems. A trademark is a registration that provides the owner the ability to use a name, symbol, jingle, or character in conjunction with a specific product or service, and prevents others from using those same symbols to sell their products. To make amends to customers and clients in the aftermath of the hack, the company offered free credit monitoring and identity-theft protection. }).render('36f26b9bfc7c4b75b62dd096b3ffa5ae'); The pressure to create a new venture, within constraints and limitations, inspires entrepreneurs to find innovative ways to meet potential market demands. Such values often serve as the foundation for the creation of ethical codes, or codes of conduct. 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. Being a good entrepreneur takes more than a creative idea and a superior work ethic. While it remains with the courts to determine the underlying intent, legal implications, and consequences of Shkreli’s decision, evidence from this and other case studies shows that some corporate leaders have not developed ethical capabilities, or they have not internalized a moral compass that enables them to differentiate between right and wrong. In one instance, this company admitted in court that they had illegally marketed Zyprexa, which was primarily intended and approved by the US Food and Drug Administration office (FDA) to treat depression, to be used for off-label (not cleared by FDA to market and advertise) ailments such as sleep disorders, Alzheimer’s disease, and dementia. Black Men XCEL The entrepreneur herself is likely overwhelmed with her many roles at the c… Some areas of the business world involve a combination of tort law and contract law, such as litigation involving the wrongful termination of an employee. Office of Criminal Investigations of the US Department of Justice. 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. Serving as a Mentor, Consultant, or Champion, Business Roundtable Official Statement on the Purpose of a Corporation, There are many legal issues facing entrepreneurs, including intellectual property, contracts, antitrust laws, fraud, employment, and torts. The WMEC list of companies shows an average annual excess return of more than 8 percent higher than expected profitability. BE 100s Yet, startups have no similar framework within which to address ethical issues in business and challenges. OpenStax is part of Rice University, which is a 501(c)(3) nonprofit. If the decision deals with a change that is financially sound and beneficial, if there are an adequate number of customers that need and value the HIV product and are willing to pay that price, then that decision should be made. But it is more than just consistency of character. Truthful individuals earn a level of credibility and reliability over time because what they say and what they do are in alignment. Legal Issues in Entrepreneurship Legal risks faced by entrepreneurs. In what ways might individual contributions be more powerful? The legal issues can always be explored with a legal representative, but the ethical issues add more nuances to working life, and making ethical decisions is not always easy. Ethical reasoning often is more topical and reflects the changes in consciousness that individuals and society undergo. Read the Ten Principles of the United Nations Global Compact that urges corporations to develop a “principled approach to doing business.” The principles cover human rights, labor, the environment, and corruption. Then, we ex - plore ways to convince students of the relevance of ethics to entrepreneurship. 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. Be reasonable with your expenses. “The World’s Most Ethical Companies: Does the Fame Translate into Gain?” Presented to the European Financial Management Association (EMFA). 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. We foster diversity and inclusion, dignity and respect. Management Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide healthcare; generate and deliver energy; and offer financial, communications and other services that underpin economic growth. Develop and sustain a sense of ethical values. BusinessCollective, launched in partnership with Citi, is a virtual mentorship program powered by North America’s most ambitious young thought leaders, entrepreneurs, executives and small business owners. Please check back soon. #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. However, it’s important to implement a transparent system and ensure taxes are paid and revenue is reported accurately. Ethical Issues In Entrepreneurship Ethical Issues Organizations today are faced with many issues. Examples include the design of a new font, a soft drink bottle, or the design features of Apple’s iPhone. Being a professional of integrity means consistently striving to be the best person and professional that you can be in all your interactions with others. Legal and ethical issues confront entrepreneurs and freelancers on a regular basis; learning how to handle them is vital to business success. 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. Often, ethical thought precedes and sets the stage for changes in the law.