ABSTRACT
This chapter discusses some of the characteristics of small and medium sized enterprise (SME), and how these affect their ethical behaviour and relationships with financiers and other stakeholders. It focuses on similarity between the ethics of SMEs and other business organisations, and that it is important to remember general principles when tailoring specific measures to meet an end objective of institutionalising ethics within a SME. The smaller number of shareholders in SMEs inevitably means that there is a closer relationship between ownership and control of the enterprise and heightened potential for conflicts of interest. The normative assertions suggest that the entrepreneur's personal values and characteristics provide the foundation of decision-making within SMEs and that personal norms go beyond legal norms in regulating conduct. SMEs have less capacity to control the market and are more subject to economic fluctuations than large corporations. SMEs are heavily dependent upon external finance for start-up and growth, from both traditional sources and more recent innovations.
