He was in a classic conflict of interest position.10 Similar cases involving business reporters and potential conflicts of interest include The Wall Street Journal, Business Week, Time magazine, and the L.A. Herald Examiner. By the end of this section, you will be able to: What does it mean to be both ethical and socially responsible as an entrepreneur? citation tool such as. However, this concept has gradually been replaced by a more progressive viewpoint, mandating the consideration of all stakeholders when making key business decisions that have potentially far-reaching consequences. The law is typically indebted to tradition and precedent, and compelling reasons are needed to support any change. Which elements illustrate acting legally but not ethically? Ethical Issues In Entrepreneurship Ethical Issues Organizations today are faced with many issues. Table 3.1 summarizes the contributions of these acts to supporting antitrust efforts. Office of Criminal Investigations of the US Department of Justice. n.d. https://efmaefm.org/0efmameetings/efma%20annual%20meetings/2012-Barcelona/papers/EFMA2012_0401_fullpaper.pdf, Tyler Durden. 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). These businesses often outperform their market expectations, both in periods of market growth and decline. A code of ethics acts to guide conduct and may be derived from a variety of sources. But ignoring ethics will always come back to bite you, no matter how far ahead you get. 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. It also means that the entrepreneur should be concerned with the nontechnical aspect of IP, which is to develop a culture of creativity that enables the organization to deliver a continuous stream of new IP. 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.. Serving the needs of the shareholders, as perhaps Shkreli thought he was doing, is based on a limited view of organizational purpose. BLACK ENTERPRISE is the premier business, investing, and wealth-building resource for African Americans. Being a good entrepreneur takes more than a creative idea and a superior work ethic. To develop a sustained competitive advantage, an entrepreneur is responsible to protect, provide the needed safeguards, and continually grow a firm’s IP. Success may also mean treating employees, customers, and the community at large with honesty and respect. Privacy Policy However, as you will learn, an entrepreneur needs to first provide the organizational framework and foundation in which individuals and business units regularly exercise these qualities. The idea of social entrepreneurship has been around since the 1960s, becoming more popular in the 1990s. Want to cite, share, or modify this book? Whenever you think about the behavior you expect of yourself, in both your professional and personal life, you are engaging in a philosophical dialogue with yourself to establish the standards of behavior you choose to uphold—that is, your ethics. Therefore, compliance generally refers to the extent to which a company conducts its business operations in accordance with applicable regulations, statutes, and laws. A few-hundred-dollar investment with an IP lawyer will potentially saveyou from realizing a major mistake down the road, like infringing upon another company’s trademark. 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. Unlike working in a large corporate environment with an established structure, entrepreneurs often create and operate a new business venture by their own rules. Discrimination and Harassment In Small Business. Martin Shkreli, an aspiring pharmaceutical entrepreneur and former hedge fund manager, made headlines in 2015 when he capitalized on a profitable and controversial business opportunity. Legal Issues in Entrepreneurship Legal risks faced by entrepreneurs. Imagine that upon graduation, you have the good fortune to face two entrepreneurial opportunities. 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. Equifax will pay at least $650 million, with the possibility of more, to resolve most claims stemming from the data breach. Another situation in which potential conflicts arise is in the area of professional services, which attracts many young potential business owners. That would severely curtail the entrepreneur’s ability to make money off a product that s/he invented. “Equifax to Pay at Least $650 Million in Largest-Ever Data Breach Settlement.”, Ira Basen. 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. This protection is afforded because a continuous stream of innovations can be a major source of revenue for a firm as well as a vehicle for developing a sustained competitive advantage. Copyrights and trademarks are also protected IP (Figure 3.4). B.E. Our mission is to improve educational access and learning for everyone. For example, if the decision to raise the price of a lifesaving drug by 5,000 percent is moral and if it is intended to add value, then an individual is obligated to raise the price. These ethical theories, discussed in the following paragraph, provide a systematic means of examining and evaluating business conduct. For this reason, we use the words ethics and morals interchangeably in our discussion. 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. This is a great site for help with understanding legal requirements and regulatory compliance. Such values often serve as the foundation for the creation of ethical codes, or codes of conduct. The second entrepreneurial opportunity is with a nonprofit recognized for a very different culture based on its compassionate approach to employee work-life balance. Acting with integrity means we adhere strongly to a system of ethical values. A design patent protects the ornamental aspects of a product idea. Businesses are different in not having a mutually shared standard of ethics. These beliefs have many points in common, and their shared content may eventually produce a code universally claimed by business practitioners. This responsibility will enable the entrepreneur to develop a sustained competitive advantage. Although he provided full disclosures of his interests, rival critics challenged his conflicts of interest. However, consumers are getting smarter at identifying fake reviews, so getting caught is real and has very negative consequences. We foster diversity and inclusion, dignity and respect. Ethical reasoning often is more topical and reflects the changes in consciousness that individuals and society undergo. As an entrepreneur, should Shkreli’s concerns be with ensuring the sustainability of his business or with providing patients with a more affordable (less profitable) lifesaving drug? The underlying facts, reality, and evidence behind something are the truthfulness of a matter. Most entrepreneurs overestimate their knowledge of the legal issues involved with starting and running a business. Bountain, D.M. Regardless of its type, a firm has the exclusive rights to the ownership of its IP. An individual who is being truthful is exercising the capability of being factual about a subject matter, dealing with reality, and aware of evidence. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all. }); EVENTS These two concepts are not only part of an ethical approach to doing business but are also underlying requirements of several areas of law including fraud. We recommend using a Legal and Ethical Issues for Entrepreneurs is a Course Legal and Ethical Issues for Entrepreneurs Self-paced Sorry! A professional must be very cautious about conflicts of interest, especially in areas in which you owe a fiduciary duty to your clients. These responsibilities include understanding, differentiating between, and dealing with the different types and technical aspects of a firm’s IP. For example, if you hire someone for marketing, don’t just push them into a different department because you need support there; it’s not what they signed up for. From a technical aspect, there are two different types of patents: utility and design patents (Figure 3.3). | Ethical Issues for the Entrepreneur | What is Ethics? On September 15, 2017, the company’s chief information officer and chief of security retired. 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. Partnership Solutions Predictable ethical questions that arise in startups. 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