12 May 2010

The importance of ethics in choosing a business partner

Answering the question of how to choose the right business partnership is very difficult. Think about that case. A founder and sole investor of a business needs some cash to invest in human resources and marketing. He decides to take a partner to inject some cash, and gives to this business angel 51% of his business share.

The new main shareholder first decision is to put his new business under the control of his accounting firm. Quickly, the founder of the company discovers that this firm do not provide clear and accurate information, and asks his new partner to put back the company accounting to the initial one. The main shareholder refuses and asks to be patient and wait the new accounting firm aligns to the founder standards. The needed time for the founder to lose the control of his company.

What is interesting is how people reached to conclusion. Some say that the business angel’s attitudes is senseless, he failed to take into account how his reputation will suffer. Other people see the situation in moral terms and requested we should treat others as we’d like them to treat us. Regarding people as individual materialist is a valid point of view, but it isn't the only one. For others, meaning in life is created by how we relate to one another. They believe that attaching a price to integrity and loyalty is fundamentally to debase it.

So what the founder should has done before choosing a business partner?

Obviously a due diligence is the solution. Verifying the business partner’s background has a cost, but is essential. Prudence is critical to maintaining ethical standards, and you will get easily into trouble when you make unsecured decisions.