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UNIVERSITY OF PANGASINAN-PHINMA
HOSPITALITY MANAGEMENT
CHAPTER 3: THE ETHICAL AND SOCIAL RESPONSIBILITIES OF THE
ENTREPRENEUR
Every now and then, newspapers file reports on corruption, deception, and illegality committed by various personalities including entrepreneurs. A very common topic of conversation is the involvement of contractors and suppliers in anomalous transactions with government personnel. There are indications that the practice has a tendency to become more intense and destructive. This should not be tolerated for it will ruin the society that provides everyone with a sense of security in an environment of peaceful coexistence. Yet, the said practice is only one of the many that are committed in the quest for improving one’s lot, financially or otherwise. The concern for society’s survival brought into the fore the to adapt ethical standards and socially responsible actions. The role of the entrepreneur in propagating ethics and social responsibility in business cannot be overemphasized. WHAT IS BUSINESS ETHICS? Ethics is the study of moral obligation involving the distinction between right and wrong. As a consequence, the study of ethics paved the way for the adaption of the general rules of conduct in society. The rules about how entrepreneurs out to behave are referred to as business ethics. The ethical behavior required of entrepreneurs is determined by the following:
- the public;
- interest groups like the Society of Prevention of Cruelty to Animals;
- business organizations; and
- the individual’s personal morals and values. Adherence to ethical standards contributes to the smooth flow of business exchanges. It establishes trust between buyers and sellers and between lenders and borrowers. Figure 5 on the next page illustrates on the effect of adherence to ethical standards. FACTORS INFLUENCING ETHICAL BEHAVIOR Ethical behavior, whether by a person or a business entity, is influenced by any or a combination of the following:
- situation;
- reward system;
- individual differences; and
- other factors. Circumstances vary, and the reactions of firms or individuals also vary. For instance, a firm that behaves ethically during prosperous times may act unethically in times of financial hardships. By Entrepreneurs – between buyers and sellers
- between lenders and borrowers Adherence to Ethical Standards Establishment of Trust Smooth Flow of Business Exchanges
- top management support. CODE OF ETHICS The code of ethics is a formal document indicating the entrepreneurship’s adapted principles of appropriate behavior. A code of ethics is very useful to the firm espousing ethical behavior. It serves as a basic reference for employees who make big or small decisions. For example, an employee is confronted with a job offer from a rival company and he thinks he is not ready to respond correctly to this type of situation. Although this does not happen often, few persons are equipped with sufficient skills to deal with it. If, on the other hand, the company has code of ethics, the affected employee will have some basis for his action. A code of ethics can be made effective if the following requirements are met:
- it should refer to specific unethical practices like receiving gifts, avoiding warranty claims,, big-rigging, making fictitious claims, among others; and
- it must be supported by top management. Support comes in various forms such as providing sufficient funds for its implementation and assigning specific employees to handle ethical infractions of other employees, and the like. Ethical behavior of personnel occurs only when the entrepreneur develops a code of ethics and successfully implements it. REWARDS AND PUNISHMENTS CONCERNING ETHICAL BEHAVIOR A code of ethics is sufficient form some people of ethical behavior is required. For many people, however, this may not be enough to motivate them to act ethically. If the entrepreneurship wants to have some measure of control over the behavior of its personnel, a system of reward and punishment must be instituted.
Punishments could take the form of dismissal, demotion, suspension, or reprimand. Rewards may be given in the form of cash gifts, promotion, or citation. INTERNAL PROGRAMS FOR RESOLVING CONFLICTS Conflicts arise, even when ethical conduct of personnel is concerned. For example, a subordinate may think his superior is acting unethically regarding promotions. The subordinate may harbor ill feelings toward his superior if the subordinate is not provided with a means to ventilate his grievance. It is important for entrepreneurs to adapt a program of resolving conflicts. For instance, a subordinate may appeal a superior’s decision without exposing him to the concerned superior. Later, a meeting between management and the subordinate is arranged. ETHICS REVIEW COMMITTEES To encourage ethical behavior, the entrepreneurship may create an ethics review committee. The committee is usually composed of company employees as well as soke who are not employed by the company. These persons have undergone special training in ethics. The committee provides advice to the entrepreneur and his staff concerning sensitive ethical issues. Ethics review committees are not yet popular in Philippine entrepreneurship, but it is slow adapted by government corporations like state colleges and universities. This is not a bad option if the entrepreneur wants ethical conduct from his employees. PROVISION OF TRAINING IN ETHICS FOR EMPLOYEES Company personnel who are exposed to activities that are ethically charged must be provided with sufficient training in ethics. Such training should make sufficiently prepared to deal with various ethical issues they would encounter in their respective workplaces.
Entrepreneurs are expected by society to treat their customers fairly and not to act in ways that will be harmful to them. Entrepreneurs should provide support for consumer rights which are as follows:
- the right to be safe;
- the right to be informed;
- the right to choose; and
- the right to be heard. The Right to Be Safe. Consumers expect that the products and services that they buy will do them no harm. They also expect to be free from bodily harm when they are inside the entrepreneur’s business premises. This concern brought about the passage of laws intended to protect the consumer. For example, manufactured drugs intended for sale to the general public must first pass the standard requirements of the Food and Drugs Administration. The purpose is to provide some guarantee to the public that the drugs are safe to use. The Right to Be Informed. Consumers make purchasing decisions often. The quality of their decisions, however, will depend on whatever or not they are properly informed. Advertisements and information printed on labels are some of the ways of providing information to consumers about products and services. The requirement for indicating dates of manufacture and expiry on labels is a result of legislation intended to inform the consumer. The Right to Choose. Firms that intended to adhere to business ethics should strive to protect consumers’ right to choose, what products and services they need and intend to purchase. However, some traders would violate this right to make huge profits. An example is the trader who concerned the year’s supply of a certain brand of cigarettes. Nobody could buy that brand except from him and he was able to make huge profits by selling at a high price.
Another “hot issue” in the Philippine is the question on the right of consumers to choose between branded and generic drugs. The Right to Be Heard. Customers have the right to communicate their concerns to entrepreneurships they patronize. This right may be used to express appreciation about what the company is doing, or to provide information about defects in the products the customer bought. To support the customer’s right to be heard, some companies install a system of receiving and processing complaints. An example is the information printed on the products label indicating contact numbers where complaints may, be relayed. RELATIONS WITH PERSONNEL AND EMPLOYEES There is always the possibility that business firms, including entrepreneurships , will commit unethical acts toward their employees. Since entrepreneurs and their staff make decisions on various business activities like hiring, promotion, transfer, compensation, and dismissal, it is not uncommon for ethical lapses to happen every now and then. An example is the ethical question faced by a manager in deciding whether or not to give hiring preference to a relative of his superior. Good ethical conduct requires entrepreneurs to be aware of their responsibilities to employees. These are the following:
- workplace safety;
- quality of life issues;
- avoiding discrimination; and
- preventing sexual harassment.
PREVENTING SEXUAL HARASSMENT. Sexual harassment refers to unwelcome sexual advances, requests for sexual favors, and other verbal or physical contact of a sexual nature. Entrepreneurs have the moral responsibility of keeping the workplace free from sexual harassment and where everybody is treated fairly. In preventing sexual harassment, the entrepreneur needs to do the following:
- issue a specific policy statement prohibiting sexual harassment
- develop a complaint procedure for employees to follow;
- create a work environment that encourages sexually harassed employees to report their experiences.
- Establish a committee to investigate sexual harassment claims; and
- Take disciplinary actions against harassers. RELATIONS WITH BUSINESS ASSOCIATES Entrepreneurships operate in conjunction with the efforts of suppliers, agents, and various types of middlemen. In the course of business transactions between the players mentioned and the firms, some ethical questions may come into fore. A supplier who badly needs a contract, for instance, may attempt to bribe the company’s purchasing officer Another example would be the company’s sales manager extending favors to a trader by giving priority to delivery of orders, in exchange for personal favors. The practices like those stated above are unethical and must not be allowed to happen in a company that upholds good ethical conduct. RELATIONS WITH INVESTORS AND THE FINANCIAL COMMUNITY The country’s financial system survives partly because investors and the other players have placed a certain degree of trust in firms they deal with. The degree of trust is maintained
at a high level if the investors and the financial community feel that business firms practice good business ethics, especially thinks that their investments are well protected. If that is so, the desired level of investment is maintained. Trust and confidence, however, are eroded by wrongdoings of some firms. The investment scams perpetrated by some scheming persons do not provide good examples of ethical firms. It is to the best interest of companies including entrepreneurships to continue to be blessed with a stable financial system. This will only be possible if companies behave ethically. Misrepresentation concerning the financial health of firms, land swindles, embezzlement and misleading reports about non-existent assets are only some of the unethical and illegal practices that undermine our country’s financial stability.
