CHAPTER 9:

MAJOR ETHICAL ISSUES IN

ENTREPRENEURSHIP
 CHAPTER OUTLINE :
• A. BASIC FAIRNESS
• B. PERSONNEL AND CUSTOMER RELATIONS
• C. DISTRIBUTION DILEMMAS
• D. FRAUD
• E. UNFAIR COMPETITION
• F. UNFAIR COMMUNICATION
• G. NON-RESPECT OF AGREEMENTS
• H. ENVIRONMENT DEGRADATION
• I. CONTRACTUALIZATION
• J. INTERNATIONAL ETHICAL ISSUES
AN ETHICAL ISSUE IS A PROBLEM OR SITUATION THAT REQUIRES A PERSON
OR ORGANIZATION TO CHOOSE BETWEEN ALTERNATIVES THAT MUST BE
EVALUATED AS RIGHT (ETHICAL) OR WRONG (UNETHICAL).
MANY COMPANIES AND INDIVIDUALS GET INTO TROUBLE WITH THE
SIMPLIFIED VIEW THAT CHOICES ARE GOVERNED BY EITHER LAW OR FREE
CHOICE. AN ETHICAL DILEMMA ARISES IN A SITUATION CONCERNING RIGHT
AND WRONG WHEN VALUES ARE IN CONFLICT. THIS WAY OF THINKING
LEADS PEOPLE TO MISTAKENLY ASSUME THAT IF ITS NOT ILLEGAL, IT MUST BE
ETHICAL.
 1. UNETHICAL BUSINESS PRACTICES

ETHICS ARE BEYOND LEGAL AND DOING RIGHT WHETHER OR NOT

ANYONE IS LOOKING. AS FOR UNETHICAL BUSINESS PRACTICES, THESE
BUSINESS ACTIONS USUALLY DON’T MEET THE STANDARDS OF ACCEPTABLE
BUSINESS OPERATION, OR EMPLOYEES THAT AREN’T DOING THE RIGHT
THING. IT MAY BE AN INDIVIDUAL WHO IS UNETHICAL OR THE ENTIRE
CORPORATE CULTURE IN THE CASE OF THE CORRUPT BUSINESSES. KEEP IN
MIND THAT UNETHICAL ACTIONS ARE NOT ALWAYS ILLEGAL, BUT THEY
WILL HURT SOCIETY.
 A. BASIC FAIRNESS

ETHICAL DECISION-MAKING PROCESSES SHOULD CENTER ON PROTECTING

EMPLOYEE AND CUSTOMER RIGHTS, MAKING SURE ALL BUSINESS
OPERATIONS ARE FAIR AND JUST, PROTECTING THE COMMON GOOD AND
MAKING SURE INDIVIDUAL VALUES AND BELIEFS OF WORKERS ARE
PROTECTED.
1. PARTNERS
2. GROSS NEGLIGENCE
 B. PERSONNEL AND CUSTOMER RELATIONS

1. MISTREATING EMPLOYEES
2. DISCRIMINATION AND HARASSMENT IN THE WORKPLACE
3. FAMILY-RUN BUSINESSES
4. EMPLOYEE BEHAVIOR
5. EMPLOYEE WORKING CONDITION
6. SIDE DEALS AND SUB-STANDARD WORK
 C. DISTRIBUTION DILEMMAS

ETHICS IS A PRIME CONCERN IN MARKETING, AND THE AREAS OF PRICE, PLACEMENT, AND
PROMOTION ARE NOT EXCEPTION. PRICING REFERS TO THE WAY IN WHICH PRICES ARE SET FOR
CONSUMERS, CONSIDERING THE COST OF INPUTS, DISTRIBUTION, AND OVERHEAD. PLACEMENT
INVOLVES THE STRATEGIC POSITIONING OF THE PRODUCT WITHIN RETAIL STORES. PROMOTION
INVOLVE SHORT-TERM PRICE DISCOUNTS OR GIVEAWAYS. EACH OF THESE AREAS PRESENTS ITS
OWN SET OF ETHICAL DILEMMAS, CHALLENGES, AND LEGAL GUIDELINES TO NAVIGATE.
 DISTRIBUTION DILEMMAS

1. PRICING STRATEGY ETHICS

2. PRODUCT PLACEMENT ETHICS
3. ETHICS AND PROMOTIONS
4. OTHER ETHICAL CONSIDERATIONS
 D. FRAUD

FRAUD IN BUSINESS TAKES UP SO MANY FORMS AND SIZES. IT CAN BE IN THE

FORM OF FINANCIAL MISCONDUCT OR MISREPRESENT.
 E. UNFAIR COMPETITION

UNFAIR COMPETITION OR DISTORTION OF COMPETITION IS A SITUATION IN

WHICH COMPETITORS COMPETE ON UNEQUAL TERMS BECAUSE OF
FAVORABLE OR DISADVANTAGEOUS CONDITIONS ARE APPLIED TO SOME
COMPETITORS BUT NOT TO OTHERS.
 UNFAIR COMPETITION
1. ANTITRUST LAW OR COMPETITION LAW
2. TRADEMARK INFRINGEMENT
3. MISAPPROPRIATION OF TRADE SECRETS
4. TRADE LIBEL
5. TORTIOUS INTERFERENCE
6. ANTI-COMPETITIVE PRACTICES
7. DUMPING
8. EXCLUSIVE DEALING
9. PRICE FIXING
10. REFUSAL TO DEAL
11. DIVIDING TERRITORIES
 UNFAIR COMPETITION
12. LIMIT PRICING
13. TYING
14. RESALE PRICE MAINTENANCE
15. RELIGIOUS/MINORITY GROUP DOCTRINE
16. ABSORPTION OF A COMPETITOR OR COMPETING TECHNOLOGY
17. SUBSIDIES FROM THE GOVERNMENT
18. REGULATIONS
19. PROTECTIONISM, TARIFFS, AND QUOTAS
20. PATENT MISUSE AND COPYRIGHT MISUSE
21. DIGITAL RIGHTS MANAGEMENT
22. ENCHANCING THE ADDICTIVENESS
 F. UNFAIR COMMUNICATION
HERE ARE SOME EXAMPLES ON UNFAIR COMMUNICATION IN BUSINESS PRACTICES.

1. MATTHIAS RATH
2. AUSTRALIA AND NEW ZEALAND BANKING GROUP
3. PARMALAT
4. ARTHYR ANDERSEN
5. ENRON
6. BRE-X
7. FANNIE MAE
8. COMMONWEALTH BANK OF AUSTRALIA
9. PHAR-MOR COMPANY
10. RADIOSHACK
 G. NON-RESPECT OF AGREEMENTS

NON-RESPECT OF AGREEMENTS IS A BREACH OF CONTRACT. A BREACH OF CONTRACT IS A

LEGAL CAUSE OF ACTION IN WHICH A BINDING AGREEMENT OR BARGAINED FOR EXCHANGE IS
NOT HONORED BY ONE OR MORE OF THE PARTIES TO THE CONTRACT BT NON-PERFORMANCE
OR INTERFERENCE WITH THE OTHER PARTYS PERFORMANCE. IF THE PARTY DOES NOT FULFILL HIS
CONTRACTUAL PROMISE OR HAS GIVEN INFORMATION TO THE OTHER PARTY THAT HE WILL NOT
PERFORM HIS DUTY AS MENTIONED IN THE CONTRACT OR IF BY HIS ACTION AND CONDUCT HE
SEEMS TO BE UNABLE TO PERFORM THE CONTRACT, HE IS SAID TO BREACH THE CONTRACT .
 H. ENVIRONMENTAL DEGRADATION

ENVIRONMENTAL DEGRADATION IS THE DETERIORATION OF THE

ENVIRONMENT THROUGH DEPLETION OF RESOURCES SUCH AS AIR, WATER,
AND SOIL; THE DESTRUCTION OF ECOSYSTEM AND THE EXTINCTION OF
WILDLIFE. IT IS DEFINED AS ANY CHANGE OR DISTURBANCE TO THE
ENVIROMENT PERCEIVED TO BE DELETERIOUS OR UNDESIRABLE.
 I. CONTRACTUALIZATION

CONTRACTUALIZATION OR LABOR CONTRACTUALIZATION IS THE REPLACING OF REGULAR

WORKERS WITH TEMPORARY WORKERS WHO RECEIVE LOWER WAGES WITH NO OR LESS
BENEFITS. THESE TEMPORARY WORKERS ARE ALSO KNOWN AS SOMETIMES CALLED
CONTRACTUALS, TRAINEES, APPRENTICES, HELPERS, CASUALS, PIECE RATERS, AGENCY-HIRED, AND
PROJECT EMPLOYEES, AMONG OTHERS. THEY DO THE WORK OF REGULAR WORKERS FOR A
SPECIFIED AND LIMITED PERIOD OF TIME. USUALLY LESS THAN SIX MONTHS.
WHILE CONTRACTUAL EMPLOYMENT IS ALLOWED UNDER ARTICLE 106 OF THE LABOR CODE OF
THE PHILIPPINES, THIS CAUSE HAS BEEN USED AND ABUSED OVER TIME AND LED TO THE
CONTRACTUALIZATION OF LABOR.
 CONTRACTUALIZATION OF LABOR IS FAVORABLE TO THE EMPLOYER:

1. UNION AND STRIKES ARE PREVENTED AS WORKERS AS STRICTLY THEY ARE

NOT EMPLOYEES OF THE EMPLOYER OR PRINCIPAL. A FIVE-MONTH OR
LESS CONTRACT ALSO DOES NOT GIVE THE EMPLOYEES A CHANCE TO
ORGANIZE.
2. CONTRACTUAL WORKERS REPLACED RETRENCHED REGULAR WORKERS.
3. CONTRACTUAL WORKERS DO NOT HAVE BENEFITS SUCH AS PHILHEALTH
AND SSS.
 J. INTERNATIONAL ETHICAL ISSUES
1. THE SEARCH FOR UNIVERSAL VALUES AS A BASIS FOR INTERNATIONAL COMMERCIAL BEHAVIOR.
2. COMPARISON OF BUSINESS ETHICAL TRADITIONS IN DIFFERENT COUNTRIES, WITH COMPARISONS
MADE ON THE BASIS OF THEIR RESPECTIVE GDP AND CORRUPTION RANKINGS.
3. COMPARISON OF BUSINESS ETHICAL TRADITIONS FROM VARIOUS RELIGIOUS PERSPECTIVE.
4. ETHICAL ISSUES ARISING OUT OF INTERNATIONAL BUSINESS TRANSACTION.
5. ISSUES, SUCH AS GLOBALIZATION AND CULTURAL IMPERIALISM.
6. VARYING GLOBAL STANDARDS.
7. THE WAY IN WHICH MULTINATIONALS TAKE ADVANTAGE ON INTERNATIONAL DIFFERENCES,
SUCH AS OUTSOURCING PRODUCTION AND SERVICE TO LOW-WAGE COUNTRIES.
8. THE PERMISSIBILITY OF INTERNATIONAL COMMENCE WITH EMBARGOED STATES.