Unethical Business Practices

The question of ethical business practice is a widely debatable subject.

  • Profit and morality are incompatible. For instance the pursuit of wealth is a barometer of success yet it is popularly believed that wealth tends to corrupt individuals.
  • All ethical problems have simple solutions i.e. right or wrong. This is a misconception based on the assumption that there is an absolute standard for judging moral conduct.
  • Ethics is simply a matter of compliance with laws and regulation

Despite these misconceptions, unethical behaviour is inherent in many entrepreneurs. This happens because of:

  • Greed
  • Inability to distinguish activities at work and at home
  • Survivalist thinking
  • Lack of foundation in the study of ethics etc.

However, some studies on ethical practices have shown that entrepreneurs have different concerns regarding specific business issues. Etc.

Issues that entrepreneurs believe require a strong ethical position Issues that entrepreneurs view with greater tolerance in regard to ethical position

Ø  Evaluating faulty investment advice

Ø  Favourism in promotion

Ø  Reporting dangerous design flaws

Ø  Misleading financial reporting

Ø  Misleading advertising

Ø  Cigarette smoking on the job

Ø  Tax evasion

Ø  Collision on bidding

Ø  Insider trading

Ø  Discrimination against women

Ø  Copying an idea etc.


Code of Conduct

The code of conduct within a business is a statement of ethical practices or guidelines to which an enterprise adheres. A variety of such codes exist; some relate to the business at large and some relate to corporate conduct. The codes cover subjects such as misuse of corporate assets, conflict of interest, use of inside information, equal employment practices, falsification of books and records etc. The codes of conduct are normally written and distributed to everyone in the business to read and follow.

Crime and the Small business

The cost of crime has become a major cause of small business failure all over the world. Crime in the business may be internal i.e. employee dishonesty or external i.e. robberies which sometimes may even be in collision with employees. The entrepreneur should be aware of such crime possibilities and make adequate provision for tackling them as they may lead to bankruptcy.


Fraud is very common and popular with the use of credit cards. The use of credit cards has grown tremendously in the recent past and the front-line defence in the small business can be salespeople and cashiers. They should have the knowledge and means to discover this type of crime effectively.

The following precautions can help reduce credit card fraud:

  1. Scrutinise Signatures – compare signature on sales ship to that on the card.
  2. Get Credit Authorisation – only one person whose signature is on the card is authorised to use it.
  3. Ask for additional identification etc.

Cheque Deception

Sometimes small businesses pass bad cheques which costs them million of shillings. The entrepreneur needs to establish a firm cheque cashing policy and procedure. This can be done by:

  • Supervisor approval
  • Photographs of customers
  • Cheque cashing limit
  • Intensive identification etc.


This is a crime involving the loss of stealing merchandise and this causes great loss to small businesses. In many cases, shoplifting is done by outsiders themselves, in collusion employeese or outsiders themselves.

To deal with this problem, the entrepreneur should make employees aware of this problem and minimise opportunities for shoplifting.  For instance customers who visit the business more often arrange the merchandise or send sales people away, bears watching. Employees should also watch customers wearing loose clothing. Opportunities for shop lifting can be minimised by checking customers at entry points when entering and leaving etc. However, when shoplifting occurs,, the culprit should be arrested and prosecuted under the law.

Internal Theft

Internal theft is also very common in small business. The Presence or increase in internal theft may be attributed to poor hiring practices where the entrepreneur does not take due attention to the background of employees, poor employer- employee relationships, presence of theft opportunities, economic conditions etc.

The internal theft can be reduced by reduction of theft opportunities i.e. controlling keys – who should keep them, use of designated entry and exit points, signing in and out of employees etc


This is a fraudulent appropriation by a person to whom it has been entrusted. In most cases and embezzler is an employee of higher position of trust and confidence.

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