ethical and legal issues in entrepreneurship

Legal Issues in Entrepreneurship. (b) The design of the Coca-Cola soft drink bottle was granted a design patent. 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. In this perspective, if the price hike is fair and equitable, if it is responsible to behave in this way, and if it does not cause harm to the society, then the price should be raised. Most employers understand they run a risk that their employees may commit a tort, and that they are responsible when employees cause harm to others (customers or coworkers) while on duty, working on company property, and using company equipment. (2017).Values, Ethics, and Legal Issues. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses. To develop a sustained competitive advantage, an entrepreneur is responsible to protect, provide the needed safeguards, and continually grow a firm’s IP. 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. In 2017, from mid-May to July, hackers gained unauthorized access to servers used by Equifax, a major credit reporting agency, and accessed the personal information of nearly one-half of the US population.7 Equifax executives sold off nearly $2 million of company stock they owned after finding out about the hack in late July, weeks before it was publicly announced on September 7, 2017, in potential violation of insider trading rules. For example, an action may be legal that we personally consider unacceptable (consider how many viewed Shkreli’s legal price hike). 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. Still, we need not subscribe to any particular faith to hold that ethical behavior in business is necessary. 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. There should also be clearly set consequences for what happens when these policies are violated. In effect, these laws make it illegal for a competitor to make agreements that would limit competition in the market. 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. The following answers are provided by members of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. SistersInc. Serving the needs of the shareholders, as perhaps Shkreli thought he was doing, is based on a limited view of organizational purpose. These responsibilities include understanding, differentiating between, and dealing with the different types and technical aspects of a firm’s IP. 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. An example of illegal competition would be the competition and patent war between Intel Corporation and American Micro Devices (AMD). Contact 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. The enrollment period is currently closed. An individual who is being truthful is exercising the capability of being factual about a subject matter, dealing with reality, and aware of evidence. However, he viewed his position as responsible behavior that served the best interests of his company and his shareholders. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. Full course description. A few examples of antitrust laws are the Sherman Act, the Clayton Act, the Federal Trade Commission Act, and the Bayh-Dole Act. 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. • Ethics refers to standards of behavior that tell us how human beings ought to act in many situations in which they find themselves as parents, children, friends, business people, professionals etc. 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. The easy fix is to not commingle, but at every step you should seek the advice of an experienced accountant. the nature of entrepreneurship and explore the unique ethical issues present in entrepreneurial activities. This includes the ability to recognize and identify both ethical dilemmas and legal issues that might arise. (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. In the US, design patents are typically protected for a period of fourteen years. not be reproduced without the prior and express written consent of Rice University. chapter preparing the proper ethical and legal foundation main topics of this chapter: most important initial ethical and legal issues facing new firm (incl. Partnership Solutions Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 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 A large corporation that has been operating for many years and has hired a Corporate Compliance Officer (CCO) with a budget and monitoring authority and dedicated staff can strive in an organized manner for ethical compliance, or at least seek to do so. 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. Women of Power Summit About The pressure to create a new venture, within constraints and limitations, inspires entrepreneurs to find innovative ways to meet potential market demands. Success may also mean treating employees, customers, and the community at large with honesty and respect. Creative Commons Attribution License 4.0 license. Many businesses creating an online presence are approached by third parties offering positive online reviews in exchange for cash. This action is unethical since you are not giving the employer what they are due, which are your time, talents, and services in exchange for agreed-upon compensation. However, it’s important to implement a transparent system and ensure taxes are paid and revenue is reported accurately. Disclosure describes sharing the needed facts and details about a subject in a transparent and truthful way. The earnings plan with the first opportunity pays 20 percent more per year. Numerous government investigations and hundreds of private lawsuits have been filed as a result of the hack. © 1999-2021, Rice University. 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. For this reason, we use the words ethics and morals interchangeably in our discussion. When you’re considering job candidates, it’s important that nepotism doesn’t drive hiring … However, consumers are getting smarter at identifying fake reviews, so getting caught is real and has very negative consequences. To protect those rights, it is important that a firm meticulously and immediately document each IP, the process and timeline by which each IP was developed, the resources used to develop the IP, the details of who owns and has access to the IP, and how others can obtain and use the IP. There are multiple reasons why an entrepreneur should be aware of intellectual property rights under the law. Nearly all systems of moral, ethical, spiritual, and/or religious beliefs stress the building blocks of engaging others with respect, empathy, and honesty. 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. Common examples of normative ethical theories are utilitarianism, duty-based ethics (also known as Kantian ethics and/or deontology), and virtue ethics. Do not lie, … Ethical acts are generally considered voluntary and personal—often based on our individual perception of what is right and wrong. The primary issue is commingling of assets and properly attributing expenses across personal and business. Perform a knockout search before choosing a business name. IP law also helps establish brand awareness and secure secondary revenue streams. Anyone with a good memory for business and who has taken a course in business ethics … 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. However, Edison preferred DC technology and was not supportive of Tesla’s ideas. “Massive Data Breach at Equifax: As Many As 143 Million Social Security Numbers Hacked.”, Stacy Cowley. OpenStax is part of Rice University, which is a 501(c)(3) nonprofit. “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. Legal and ethical issues confront entrepreneurs and freelancers on a regular basis; learning how to handle them is vital to business success. Key Words: Ethics, Ethical challenges, Social Entrepreneurship My PhD research aims to investigate the ethics in social entrepreneurship and to explore answers to the following questions: 1. However, these concepts are not interchangeable and call for different standards of behavior. Being successful as an entrepreneur may therefore consist of much more than simply making money and growing a venture. }).render('36f26b9bfc7c4b75b62dd096b3ffa5ae'); Ethics involves the study of moral issues and choices (Kinicki, 2009). INFORMATION These virtues consist of trust and derivatives of trust such as truthfulness. Patent laws are strictly enforced and are intended to protect inventions. This creative work can result in a product idea, a new invention, an innovative pivot, or an improvement in an existing product or service. Small businesses sometimes ask too much of their employees without noticing. 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. The company’s shares fell nearly 14 percent after the announcement, but few expect Equifax managers to be held liable for their mistakes, face any regulatory discipline, or pay any penalties for profiting from their actions. Success may lie in knowing the profit we make does not come from shortchanging others. -Timothy Schmidt, WebsiteRescue Although Shkreli’s decision to raise prices was within legal limits, his actions were critically judged in the court of public opinion. It could be a personal, internal code of conduct, or an official code adopted by a business organization. Masthead, ← [Passion to Purpose] Meet Pro Athlete Turned Pro Mentor Marcus Allen, ← Top 10 Interview Questions You Must Be Prepared to Answer, 100 Founders of Change by American Express, Chasing Success Podcast by JP Morgan Chase, Elevate Black Podcast sponsored by Fifth Third Bank, Commitment Counts Podcast sponsored by Fifth Third Bank, [Passion to Purpose] Meet Pro Athlete Turned Pro Mentor Marcus Allen, Top 10 Interview Questions You Must Be Prepared to Answer. 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. 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. The temptation is high as online reviews can go a long way in building a brand. Privacy Policy When starting a business, there are numerous ethical and legal issues that must be considered by a business owner. If you are redistributing all or part of this book in a print format, We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses. Being a good entrepreneur takes more than a creative idea and a superior work ethic. In addition to the marketing, financial, human resources and other challenges small-business owners face, legal and ethical issues of operating a business loom as another stumbling block. 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. Your Money, Your Life, LATEST LISTS How could he simultaneously be both an investor and an independent journalist blogging about the very companies in which he had a financial interest? Likewise, most businesses are likely to have some involvement with tort law: that area of law that protects the rights of people not to be harmed physically, financially, or in any other way, such as a breach of privacy. And don’t avoid or ignore doing proper payroll or paying quarterly taxes. Which elements illustrate acting legally but not ethically? A design patent protects the ornamental aspects of a product idea. • Kuratko and Hodgetts, (2004)- ethics … Fairness deals with doing what is right, just, and equitable. 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? cnx({ Every entrepreneur enters into contracts, usually on a regular basis, and thus should have an understanding of basic contract concepts. Legal and Ethical Issues for Entrepreneurs is a Course Legal and Ethical Issues for Entrepreneurs Self-paced Sorry! Legal Issues in Entrepreneurship Legal risks faced by entrepreneurs. From a technical aspect, there are two different types of patents: utility and design patents (Figure 3.3). If the decision to raise the price adds value and usefulness for shareholders, then that decision should be made. You need to nurture an environment in which every member of your organization is able to be creative, add value, and be engaged in the continuous improvement of the firm. Examples include the design of a new font, a soft drink bottle, or the design features of Apple’s iPhone. Acting with integrity means we adhere strongly to a system of ethical values. 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. Integrity in business brings many advantages, not the least of which is that it is a critical factor in allowing businesses and society to function properly. These and other actions begin to help individuals develop and internalize an ethical compass. A copyright grants the creator of a work the exclusive right to reproduction of the work for a specified period of time (usually the life of the author plus seventy years). Keep your business finances separate from your personal finances. The law is needed to establish and maintain a functioning society. Arrington became the go-to source for tech enthusiasts and investors. This view, known as the “shareholder primacy” doctrine, stems from a famous Michigan Supreme Court case involving the Ford Motor Company and two shareholders named the Dodge brothers (who would go on to form the Dodge Motor Company).3 This case established a precedent that lasted for decades, built on the premise that the only thing that should matter to a CEO and their company is shareholder profits.

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