When Should Entrepreneurs Lie? 5 Common Ethical Dilemmas that Entrepreneurs Face

When Should Entrepreneurs Lie? 5 Common Ethical Dilemmas that Entrepreneurs Face

Like every profession, Entrepreneurs sometimes find themselves caught in ethical dilemmas where they are forced to make decisions about what is right and wrong. A recent Wall Street Journal article suggests that unethical behavior is typical of entrepreneurship, stating that, “Some entrepreneurs stay the ethical course. But there seem at times to be the exceptions.”

This begs the question – are there some circumstances where seemingly ‘unethical’ behavior is acceptable? Are there gray areas where the lines of right and wrong are blurred? What moral code should entrepreneurs live up to, and is it sometimes okay for entrepreneurs to lie? In this article we’ll give insight into some of the most common ethical dilemmas faced by entrepreneurs.

Should I Become an Entrepreneur?

At first this may not seem like an ethical dilemma, but when you consider that many relationships, marriages, and families are strained (or even destroyed) by the entrepreneurial lifestyle, you understand that it is indeed a question of right and wrong. In the case of this dilemma, many entrepreneurs say to be open and honest with your family about the realities and stresses of an entrepreneur’s life and, when possible, make the decision as a family.

Who Owns Rights to Intellectual Property?

Ideas are often intangible, so it can sometimes be hard to determine ownership. Is your startup idea entirely your own, or is it something you learned at your former company? At the very least you can try to avoid blatantly stealing intellectual property. If you decide to move forward with an idea that might not be completely your own, be prepared for challenges and lawsuits that may follow.

The Question of Equity

Equity has to do with how work is divided as well as how the profit is divided. As a startup idea progresses, some people may eventually contribute less, and others may engage in cutthroat activity out of greed. Entrepreneurs often have to entertain questions about profit share and whether to fire team members, and the exact right and wrong of these moral dilemmas can be hard to determine.

Lying about Finances for Financial Gain

There are several instances when entrepreneurs may be tempted to lie about their financial records or performance for gain. This includes:

  • In initial funding, when money is particularly important, should entrepreneurs lie about performance to get financial backing?
  • In public offerings when a company is looking for a high stock price, should they inflate sales and earnings?
  • When quarterly earnings are due, and the company is underperforming, is it okay to manipulate earnings to hit the earnings target?

Although some entrepreneurs justify their actions by saying that it is a minor embellishment and not a full out lie, any entrepreneur who lies in these situations must understand the potential consequences of the lies being found out. For example, Yahoo’s Marissa Mayer is currently under fire from investors and advertisers who say she has been misleading them with ‘jiu-jitsu move’ diversions. Although you may take an attitude of 'the ends justify the means,' you also have to deal with the fact that, if you are caught, you may not get 'the ends' that you were looking for.

Lying to Customers

Other ethical dilemmas involve lying to customers. This could be lying about a product or service or about how their private information is used. Once again, what is right or wrong will depend on the situation at hand. However, considering how important customers are in the success of your business, lying to them may very well be your downfall.

These five circumstances highlight the main ethical dilemmas facing entrepreneurs throughout the lifespan of owning a business. While we do encourage everyone to take the moral high ground, we also understand that it’s not always easy to see what is right and what is wrong in situations that impact profit, success, and business & family relationships. The important thing is to remember that there are consequences for every action you take in life. Before you make your decision, ask yourself if you can live with the consequences that may unfold.