LEGAL ASPECTS AND

ETHICS IN BUSINESS
CHAPTER 8
 Introduction

 Ethics are broadly applied social

standards for what is right or wrong in a
particular situation, or process for setting
those standards.
 Definition

 Business Ethics:
 The principles and standards that define
acceptable conduct in business (Ab. Aziz
yusof, selvan Perumal & Faizuniah Pangil, 2005)
 Ethics -
A set of principles prescribing a behavioral
code that explains what is good and right or
bad and wrong. ( Kuratko & Hodgetts, 2007)
 Ethics and Business
Decisions
 In addition to the normal challenges of
business decisions, the entrepreneur is
faced with specific ethical dilemmas.
Figure 1 illustrates four main themes of
ethical dilemmas:
i. conflict of interests
ii. Personality traits
iii. Responsibility to stakeholders
iv. Level of openness
The conflict of interests

 It involve the constant tension of trying to

separate the “person” from the ‘business
decisions”.
 It also concerning morality and economic
trade-offs.
 Personality Traits

 Relate more specifically to relationships

and personal issues.
 In many instances, the personal issues or
individual personalities cause the
dilemma.
Social Responsibility to
Stakeholder
 Theme incorporates the pressure of
managerial rationalization and
emphasizes the important of having a
code of conduct.
 Level of Openness

 Suggests that entrepreneurs need to be

more public about their values and
expectations.
Complexity of Decisions

 The business decisions of entrepreneurs are

highly complex for five reasons:
1. Ethical decisions have extended
consequences. They often have a ripple effect
in that the consequences are felt by others
outside the venture. For example, the decision
to use inexpensive but unsafe products in
operations will affect both workers and
consumers of the final good.
Complexity of Decisions
cont…
2. Business decision involving ethical
questions have multiple alternatives. It is
not always “do” or “don’t do.” Many
decisions have a wide range of
alternatives that may allow a mixture of
less important decisions. In reference to
the first example about the use of unsafe
products, the entrepreneur may have the
alternative of using still less expensive
but nevertheless safe products.
Complexity of Decisions
cont…
3. Ethical business decisions often have
mixed outcomes. Social benefits as well
as cost are involved with every major
business decision, as are financial
revenues and expenses.
Complexity of Decisions
cont…
4. Most business decision have uncertain
ethical consequences. It is never
absolutely certain what actual
consequence(s) a decision will have
even when it appears logical; in other
words, a decision is never without ethical
risk.
Complexity of Decisions
cont…
5. Most ethical business decisions have
personal implications. It is difficult for an
entrepreneur to divorce himself or herself
from a decision and its potential
outcome.
The Importance of Ethics

1. Responsibility to society.
2. Committed to the profession
3. Time management
4. Willing to take the initiative
5. Continuous improvement