Importance of Ethics for Entrepreneurs

by Sam Ashe-Edmunds, Demand Media
    Professional ethics go beyond the personal values.

    Professional ethics go beyond the personal values.

    A politician once joked, “I’ve got all kinds of ethics. I just never use them.” Having a personal code of behavior is admirable, but putting your values into your work life isn’t always simple. Professional values can cost you money in the short term, but pay big dividends over the course of your career. Entrepreneurs working with small budgets might be tempted to take ethical shortcuts, but it can bite you in the behind in the long term. Planning for dicey situations can help prevent you from making mistakes that damage your reputation and relationships in your marketplace.

    Business Ethics

    Ethics can be very personal, but in some instances, your behavior should be guided by its affect on your business. For example, you might be asked to give a job reference for a friend who’s clearly not qualified for the job. Does loyalty include hurting another business owner by sending a bad employee her way? Write a list of situational ethics and divide them into those that affect your personal life and your work situation. Determine if you need to act differently as a business owner than you do a private person. Include situations such as fair hiring and firing, quality control of your product, gossip, honoring verbal and written contracts, corporate social responsibility, taxes and advertising.

    Cutting Corners

    If you’re starting a company on a tight budget, you might be tempted to cut corners on quality, offer contractors wages you wouldn’t take yourself, understaff to try and get more work out of fewer workers and make promises you’re not 100 percent sure you can keep. Think of the long-term damage you can do versus the benefit you get from cutting corners. Making a cheaper product, even temporarily, to get much-needed cash can sour customers on you, damaging your reputation and making it harder to grow in the future. Don’t ask contractors or employees to work hours you wouldn’t work yourself or take pay you wouldn’t accept -- they may desert you at the first opportunity.

    Meeting Obligations

    Not honoring certain contracts might not get you in legal trouble, but can scare away even your closest allies if word gets around. If you’re in a bind and honestly can’t meet the terms of a contract, explain the situation to your employee, customer, partner or supplier and try to work out terms that will let you prevent damaging them. This might mean paying a bill over time and offering to pay more than the agreed-upon amount. During your time as a business owner, contractors and suppliers might not deliver on what they promised, but if there’s any question, consider the ramifications of not paying. For example, if a vendor under-delivers an order by 5 percent, you might not be obligated to accept the order, but if they’ve been a good supplier, you might want to give them the benefit of the doubt.


    Talking down competitors, no matter if what’s being said is true, often comes back to haunt entrepreneurs. If the information gets back to your competition, it might motivate them to respond, creating a he said/she said scenario in the minds of your suppliers, vendors, retailers and customers. It might also motivate your competitors to go after you more aggressively with their marketing. Gossip also tells the person who’s listening that you might be trashing her to others.


    If you try to dodge your tax liability, you make others pay a larger share for things such as roads, schools, police and fire service and government agencies. Taking or giving payments in cash to avoid taxes puts the people you do business with at risk, as well. You might never get caught under-reporting income or inflating expenses, but people who see you do that will wonder what other dishonest business practices you have, or at the very least, get ticked that you’re making them shoulder more of the tax burden.

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