Academic journal article Journal of Applied Management and Entrepreneurship

The Ethical Perspectives of Entrepreneurs: An Examination of Stakeholder Salience

Academic journal article Journal of Applied Management and Entrepreneurship

The Ethical Perspectives of Entrepreneurs: An Examination of Stakeholder Salience

Article excerpt

Executive Summary

Over the last twenty years, the study of the importance companies place on stakeholders in the way they manage their strategies and operations has garnered increasing attention from scholars and practitioners. However, no one has empirically examined the salience of a wide range of stakeholder relationships for entrepreneurial firms. Previous studies, such as Waddock and Graves (1997) and Agle, Mitchell, and Sonnenfeld (1999) have only studied large corporations. This paper addresses this gap in the management literature by providing a study of 401 entrepreneurs, their stakeholder relationships, and their ethical perspectives. Specifically, the paper examines which stakeholder groups that entrepreneurs consider primary, the impact this relationship has on the degree of acceptability of unethical practices, and the entrepreneur's level of satisfaction with these stakeholder relationships.


Entrepreneurs are challenged by the need to make business decisions each day to keep the company solvent. As Cadbury (1987) observed, "There is no simple universal formula for solving ethical problems. We have to choose from our own codes of conduct whichever rules are appropriate to the case in hand; the outcome of these choices makes us who we are." In the broadest sense, ethics can provide the basic rules or parameters for conducting any activity in an "acceptable" manner. More specifically, ethics represent a set of principles prescribing a behavioral code that explains what is good and right or bad and wrong; ethics may, in addition, outline moral duty and obligations (Henderson, 1982). The problem with most definitions of the term is not in the description but rather in the implications for implementation. The definition is a static description that implies society agrees on certain universal principles. With society operating in a dynamic and ever-changing environment, however, such a consensus does not exist (Evans, 1991). In fact, continual conflict over the ethical nature of decisions is quite prevalent. Ethics is extremely difficult to define, codify, and implement because of its surfacing of personal values and morality.

Yet the importance of ethics when initiating new enterprises is critical because unethical behavior does take place. A few possible explanations for the misdeeds include: (1) greed; (2) distinctions between activities at work and activities at home; (3) a lack of a foundation in ethics; (4) survival (bottom-line thinking); and (5) a reliance on other social institutions to convey and reinforce ethics. Whatever the reasons, ethical decision-making is a challenge that confronts every businessperson involved in large or small enterprises (Stoner, 1989). Even though ethics present complex challenges for entrepreneurs, the value system of an owner-entrepreneur is the key to establishing an ethical organization (Teal & Carroll, 1999). An owner has the unique opportunity to display honesty, integrity, and ethics in all key decisions. The owner's actions serve as a model for all other employees to follow. In small businesses the ethical influence of the owner is more powerful than in larger corporations because his or her leadership is not diffused through layers of management. Owners are easily identified, and usually employees constantly observe them in a small business. Therefore, entrepreneurs possess a strong potential to establish high ethical standards in all business decisions; and it has been suggested that entrepreneurs' personal integrity and ethical example will be the key to their employees' ethical performance, because their values can permeate and characterize the organization. This unique advantage creates a position of ethical leadership for entrepreneurs. (Serwinek, 1992; Kuratko, 1995).

Today's entrepreneurs are faced with specific ethical dilemmas that, depending on the course of action or inaction, will signal to others in the company how they should handle similar circumstances should they occur again. …

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