2. After studying this chapter, you should be able to…
Define integrity, and understand its importance to small businesses.
Explain how integrity applies to various stakeholder groups, including owners, customers, employees, the community, and the government.
Identify challenges to integrity that arise in small businesses, and explain the benefits of integrity to small firms.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

3. After studying this chapter, you should be able to…
Describe the impact of the Internet and globalization on the integrity of small businesses.
Suggest practical approaches for building a business with integrity.
Define sustainable small business, and describe the influence this trend is having on the management of small companies and startup opportunities.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

4. Integrity and Entrepreneurship
What Is Integrity?
An uncompromising adherence to doing what is right and proper
Honesty, reliability, and fairness in business practices
An essential element of successful business relationships
Is as much about what to do as it is who to be.
Doing the Right Thing
Ethical issues—questions of right and wrong
Legal and ethical considerations
Conflicts of self-interest
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

5. EXHIBIT 2.1 The Most Challenging Ethical Issues for Small Businesses
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

6. EXHIBIT 2.2
Juggling the Interests of Stakeholder Groups and the Government
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

7. A Framework for Integrity
Promoting the Owners’ Interests
Caring about Customers
Managerial Integrity
Valuing Employees
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

8. Kinds of Ethical Issues
Ethical Issues in Business Operations
Income and expense reporting (tax fraud)
“Truth in advertising”—persuasion and deception
Bribing customers and rigging bids
Direct selling—pyramid schemes, bait-and-switch selling
Effects of owners’ ethics on their employees
Accurately reporting financial information
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

9. Kinds of Ethical Issues (cont’d)
Ethical Issues and Employees
“To do an honest day’s work”
Fraudulent workers’ compensation claims
Theft of company property and embezzlement of funds
Violation of personal ethics to make a sale
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

10. Social Responsibilities and Small Business
Social Responsibility
The firm’s ethical obligations as a good citizen to its community.
Regarded as the price of freedom to operate in a free economic system.
Frequently takes the form of personal contributions, volunteerism and the contribution of services by the firm and its employees.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

11. Social Responsibility and Small Business
Environmental Protection
Obligations to Stakeholders
Consumerism
Social Responsibilities of Small Firms
Contributions to Community Organizations
Support of Education
Response to Community Needs
Compliance with Government Regulations
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

12. The Challenges and Benefits of Acting with Integrity
Small Companies and the Legitimacy Lie
Limited resources tempt small firms to misrepresent facts and cut ethical corners if an issue affects profits.
Levers: products, representatives, the organization
The Integrity Edge
Exhibiting integrity in business may actually boost a firm’s performance.
Greatest benefit of integrity is the trust it generates.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

13. Benefits of Social Responsibility
Improved financial performance
Enhanced brand image and reputation
Increased sales and customer loyalty
Benefits of Ethical Business Practices
Improved productivity and quality
Better recruitment and reduced turnover
Fewer regulatory inspections and less paperwork
Improved access to capital
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

14. Integrity and the New Economy
Integrity and the Online World
Risks of buying and selling on the Internet
Maintenance of personal privacy
“Cookies” to profile customers’ usage of the Web
Monitoring employees’ and Internet access.
Protection of intellectual property rights
Misappropriation of content providers’ original intellectual creations, including inventions, literary creations, and works of art, that are protected by patents or copyrights
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

15. International Business and Integrity
Human Rights and the Abuse of Workers
Illegal immigrants and forced labor
Outsourcing into “cheap” labor markets
Bribery versus customary local business practices
Application of the U.S. Foreign Corrupt Practices Act
Ethical Imperialism
The belief that the ethical standards of one’s own country are superior and can be applied universally.
Ethical Relativism
The belief that ethical standards are subject to local interpretation—“When in Rome, do as Romans do”
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

16. Building a Business with Integrity
The Foundations of Integrity
Underlying values: unarticulated ethical beliefs that provide a foundation for ethical behavior in a firm.
Are based on personal views of the universe and mankind.
Strongly held views can lead to tough choices.
Ethics of the firm affect how outsiders view of the firm and their decisions about the firm.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

17. Building a Business with Integrity (cont’d)
Leading with Integrity
Owner/leaders and their ethics have more direct and pronounced effects in small firms.
Owner/leaders can insist that ethical principles be followed by employees.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

18. Building a Business with Integrity (cont’d)
An Ethical Organizational Culture
Building an ethical culture requires:
Full commitment to ethical conduct by the firm
Strong, ethical managerial leadership
Code of ethics
Firm’s official standards of employee behavior.
The foundation for ethical conduct by employees
Clarifies the rules and gives guidance to employees
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

19. Fundamental Principles for Ethical Policy Making
Purpose
Perspective
Pride
Persistence
Patience
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20. Better Business Bureaus (BBB)
A BBB encourages ethical practices by:
Providing consumers with free information to help them make informed decisions when dealing with a company
Creating an incentive for businesses to adhere to proper business practices and earnestly address customer complaints
Resolving questions or disputes concerning purchases through mediation or arbitration.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

21. The Ethical Decision-Making Process1 2
Define the problem 3
Identify alternative solutions to the problem 4
Evaluate the identified alternatives 5
Make the decision 6
Implement the decision.
Evaluate the decision.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

22. Small Business and the Natural Environment
Sustainable Small Business
A profitable company that responds to customers’ needs while showing reasonable concern for the environment.
Environmentalism
Is the effort to protect and preserve the environment.
Can result in regulations that adversely affect some small firms and create opportunities for others.
Promotes win-win eco-friendly business practices that reduce costs and save energy.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

23. social responsibilities intellectual property ethical imperialism
integrity
ethical issues
stakeholders
social responsibilities
intellectual property
ethical imperialism
ethical relativism
underlying values
code of ethics
sustainable small business
environmentalism
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.