668 (1919). Fundament als of Nursing Human He alth. These two concepts are not only part of an ethical approach to doing business but are also underlying requirements of several areas of law including fraud. On September 15, 2017, the company’s chief information officer and chief of security retired. Without it, our society would be in chaos. This period of protection ranges from fourteen to twenty years, and is essentially a government-granted monopoly, after which, protection usually expires and competition is opened up to anyone (e.g., generic drugs). In what ways might individual contributions be more powerful? This book is Creative Commons Attribution License Legal Issues in Entrepreneurship. Fairness deals with doing what is right, just, and equitable. 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. And don’t avoid or ignore doing proper payroll or paying quarterly taxes. Privacy Policy Full course description. You may also choose never to defraud or mislead your business partners. This claim was later settled by the two firms and resulted in Intel paying AMD $1.25 billion in damages. To develop a sustained competitive advantage, an entrepreneur is responsible to protect, provide the needed safeguards, and continually grow a firm’s IP. Yet, startups have no similar framework within which to address ethical issues in business and challenges. From an ethical theory perspective, Kantian or duty-based ethics emphasizes the underlying intent or reason behind a decision and whether that decision is good or bad. The easy fix is to not commingle, but at every step you should seek the advice of an experienced accountant. 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. The enrollment period is currently closed. Ethical reasoning often is more topical and reflects the changes in consciousness that individuals and society undergo. © Dec 15, 2020 OpenStax. 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. A trade secret is dependent on being kept a secret by the business that owns it and is enforced through contract law. Truthful individuals earn a level of credibility and reliability over time because what they say and what they do are in alignment. Compliance with legal standards is mandatory. 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. Common areas rife with potential legal issues include contracts, torts, employment, intellectual property, conflicts of interest, full disclosure/truthfulness in product or service claims and performance, and antitrust/competition law (Figure 3.2). An entrepreneur should consider these questions when growing and protecting a firm’s IP. When you’re considering job candidates, it’s important that nepotism doesn’t drive hiring practices. After immigrating to the United States, Tesla was employed by the Continental Edison Company and began to develop AC technology. However, he was criticized for routinely covering stories about the companies he invested in and consulted for. It also offers the chance to pursue your own professional interests or volunteerism during a portion of every workday. You either lose credibility/trust later on or commit yourself to an unrealistic timeline that will only frustrate those who have bought into your dream. not be reproduced without the prior and express written consent of Rice University. Read the Ten Principles of the United Nations Global Compact that urges corporations to develop a “principled approach to doing business.” The principles cover human rights, labor, the environment, and corruption. Be reasonable with your expenses. Some professions, such as medicine and the law, have traditional and established codes of ethics. Such values often serve as the foundation for the creation of ethical codes, or codes of conduct. A professional must be very cautious about conflicts of interest, especially in areas in which you owe a fiduciary duty to your clients. 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. Essentially, a commitment to treat with honesty and integrity customers, clients, employees, and others affiliated with a business. Delivering value to our customers. As an Amazon Associate we earn from qualifying purchases. If you find yourself wanting to use something that you didn’t create yourself, it’s important to get permission from the rightful owner. Read the following statement on the purpose of a corporation from Business Roundtable: You may decide, as well, that while you are pursuing profit in your business, you will not require that all the money earned comes your way. This may be due to a variety of reasons, including what researchers term a positive effect on business culture, stakeholders, and reputation.6 In other words, being ethical beneficially influences employees, investors, and customers. Entrepreneurs today need to focus not only on complying with the letter of the law but also on going above and beyond that basic mandatory requirement to consider their stakeholders and do what is right. It could be a personal, internal code of conduct, or an official code adopted by a business organization. (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. Employees, for example, have an interest in producing expected work for their employer. The following list of ethical dilemmas, organized by the 14 stages of the Startup Lifecycle, are the product of the Markkula Center's Startup Ethics Online Community, The Ethical Startup, and roundtable discussions of prominent entrepreneurs and venture capitalists in the Markkula Center's network. Legal Issues in Entrepreneurship. Integrity—that is, unity between what we say and what we do—is a highly valued trait. The progress made in social entrepreneurship research has not been matched by a robust analysis from the ethics perspective (Cornelius et al. An individual who is being truthful is exercising the capability of being factual about a subject matter, dealing with reality, and aware of evidence. Numerous government investigations and hundreds of private lawsuits have been filed as a result of the hack. These acts were created to encourage competition and provide options for consumers. 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 3.1 Ethical and Legal Issues in Entrepreneurship SBREFA Small Business Resource Center. But they seem at times to be the exceptions. You may be asking, “What are some examples of ethical and legal issues in business that I should look out for as an entrepreneur?” While this list is by no means comprehensive, it does highlight some of the larger issues that entrepreneurs frequently overlook or encounter themselves. This creative work can result in a product idea, a new invention, an innovative pivot, or an improvement in an existing product or service. The earnings plan with the first opportunity pays 20 percent more per year. This means creating a business environment in which each member of the organization is encouraged, enabled, and supported to develop the ethical capabilities to habitually and systematically differentiate between right or wrong. Potential Legal or Ethical Issues Business Owners Face. As a small business owner, the most challenging thing to get right is tax accounting. Office of Criminal Investigations of the US Department of Justice. Or as a financial advisor, are you getting commissions on both ends of a transaction? 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. are licensed under a, Ethical and Legal Issues in Entrepreneurship, Frameworks to Inform Your Entrepreneurial Path, The Ethical and Social Responsibilities of Entrepreneurs, Corporate Social Responsibility and Social Entrepreneurship, Developing a Workplace Culture of Ethical Excellence and Accountability, Creativity, Innovation, and Invention: How They Differ, Developing Ideas, Innovations, and Inventions, Researching Potential Business Opportunities, Problem Solving and Need Recognition Techniques, Problem Solving to Find Entrepreneurial Solutions, Telling Your Entrepreneurial Story and Pitching the Idea, Clarifying Your Vision, Mission, and Goals, Developing Pitches for Various Audiences and Goals, Protecting Your Idea and Polishing the Pitch through Feedback, Entrepreneurial Marketing and the Marketing Mix, Market Research, Market Opportunity Recognition, and Target Market, Marketing Techniques and Tools for Entrepreneurs, Marketing Strategy and the Marketing Plan, Overview of Entrepreneurial Finance and Accounting Strategies, Developing Startup Financial Statements and Projections, Launching the Imperfect Business: Lean Startup, Why Early Failure Can Lead to Success Later, The Challenging Truth about Business Ownership, Managing, Following, and Adjusting the Initial Plan, Avoiding the “Field of Dreams” Approach, Business Structure Options: Legal, Tax, and Risk Issues, Business Structures: Overview of Legal and Tax Considerations, Additional Considerations: Capital Acquisition, Business Domicile, and Technology, Using the PEST Framework to Assess Resource Needs, Managing Resources over the Venture Life Cycle, Making Difficult Business Decisions in Response to Challenges, Now What? This is changing, however, as evidenced by the array of codes of conduct and mission statements many companies have adopted over the past century. In 2009, AMD filed a suit against Intel claiming that the company had used “leveraging dominance” to exclude AMD from effectively competing in the marketplace through exclusionary pricing, discounts, and similar practices. Utilitarian ethics focuses on the usefulness or utility of the decision. Perhaps you want to start your own CPA accounting firm, or CFP financial advisory firm, or IT consulting firm. Investing in our employees. Keep your business finances separate from your personal finances. In the US, design patents are typically protected for a period of fourteen years. In that event, you should at least follow-up with all parties via traditional mail or email to document the key terms of your agreement. Women of Power TECH, PODCASTS A legal patent gives an exclusive right to its patent holder or proprietor to use the invention in any shape or form they deem necessary. Ethical entrepreneurs consistently strive to apply ethics-based concepts in practice, including truthfulness and full disclosure. Ethical 2 Being a professional of integrity means consistently striving to be the best person and professional that you can be in all your interactions with others. However, these concepts are not interchangeable and call for different standards of behavior. Yet this represents only a baseline minimum. Success may come from the sense of pride felt when engaging in honest transactions—not just because the law demands it, but because we demand it of ourselves. chapter preparing the proper ethical and legal foundation main topics of this chapter: most important initial ethical and legal issues facing new firm (incl. “The World’s Most Ethical Companies: Does the Fame Translate into Gain?” Presented to the European Financial Management Association (EMFA). Finally, there is a special category of IP known as a trade secret. Relations with Investors and the Financial Community Code of Ethics A Code of ethics Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. However, he viewed his position as responsible behavior that served the best interests of his company and his shareholders. 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. As a result, it is necessary for an entrepreneur to thoroughly review the legal issues involved to make sure that a costly mistake isn’t made. Torts are a potential area of risk for entrepreneurs. Which elements illustrate acting legally but not ethically? 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. n.d. https://efmaefm.org/0efmameetings/efma%20annual%20meetings/2012-Barcelona/papers/EFMA2012_0401_fullpaper.pdf, Tyler Durden. These ethical theories, discussed in the following paragraph, provide a systematic means of examining and evaluating business conduct. What central point might constitute such a code? Instead, there might be sufficient profits to distribute a portion of them to other stakeholders in addition to yourself—for example, those who are important because they have helped you or are affected one way or another by your business. Consider the example of Mike Arrington, a Silicon Valley lawyer and entrepreneur who created a blog called TechCrunch. Ethical acts are generally considered voluntary and personal—often based on our individual perception of what is right and wrong. Some areas of the business world involve a combination of tort law and contract law, such as litigation involving the wrongful termination of an employee. How to plan for and avoid legal problems including forming the business, legal liability, and protecting assets. It can be very tempting to slightly exaggerate things while on the hunt for investment and it is a very slippery slope with no real upside. When individuals are able to act in an ethical manner systematically, habitually, and without struggling to decide how to act or what to do in difficult situations, they have internalized that moral compass. The underlying facts, reality, and evidence behind something are the truthfulness of a matter. The … !function(n){if(!window.cnx){window.cnx={},window.cnx.cmd=[];var t=n.createElement('iframe');t.display='none',t.onload=function(){var n=t.contentWindow.document;c=n.createElement('script'),c.src='//cd.connatix.com/connatix.player.js',c.setAttribute('async','1'),c.setAttribute('type','text/javascript'),n.body.appendChild(c)},n.head.appendChild(t)}}(document); As a result, in 2009, Eli Lilly was fined $1.4 billion by the office of criminal investigation of the US Department of Justice.11. This requires a very high duty of conduct and full disclosure, one that prohibits being involved in both sides of a transaction. Nepotism. You may decide you should always tell the truth to family, friends, customers, clients, and stakeholders, and if that is not possible, you should have very good reasons why you cannot. These responsibilities include understanding, differentiating between, and dealing with the different types and technical aspects of a firm’s IP. 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. Management Ideally, you should use written contracts whenever you enter into a substantial transaction with another party. The first is with a startup known to value a hard-nosed, no-nonsense business culture in which keeping long hours and working intensely are highly valued. 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. A few-hundred-dollar investment with an IP lawyer will potentially saveyou from realizing a major mistake down the road, like infringing upon another company’s trademark. Unlike working in a large corporate environment with an established structure, entrepreneurs often create and operate a new business venture by their own rules. A conscious or deliberate attempt to avoid, ignore, or marginalize that which is rightfully due an employer by addressing other interests would be a conflict of interest. Anyone with a good memory for business and who has taken a course in business ethics … For example, an action may be legal that we personally consider unacceptable (consider how many viewed Shkreli’s legal price hike). Many people confuse ethical and legal compliance. At the end of each year, the company plans to donate to numerous social and environmental causes. Behaving ethically requires that we meet the mandatory standards of the law, but that is not enough. A moral compass is a state of mind where an individual has developed the needed capabilities to differentiate between right and wrong, or between just and unjust in challenging circumstances. 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