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How Would You Handle These 7 Situations? Would You Pass the 'Diaper Test'? There are many moral and ethical questions business owners face on a regular basis. Is there a right way to do things?

By Gene Marks Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Running a business oftentimes means dealing with controversial situations and making decisions. Are you making the right ones? Let's see.

Situation 1: You are working on a large project for a customer. After the project is done you send your invoice for the hours incurred. The customer questions some of the time spent. You know that all of the time spent was legitimate and reasonable. But the customer is being a jerk and wants you to remove some of the hours.

It's not significant. But it's annoying. You know you're right. Some business owners would just cave in and eat the time. Others would never let a jerky customer get the better of them and would fight. What would you do?

Related: The Ethics Coach's Top 3 Strategies for Creating an Ethical Workplace

Situation 2: An employee borrows $500 from your company. You don't charge her interest. Six months later she abruptly quits after receiving her paycheck. She still owes you the $500, plus interest. You know where she lives. You're definitely never going to give her a future reference. But what about the money? Some would pursue the debt because, hey, a debt's a debt. Do you pursue?

Situation 3: You are aware that two good and valuable employees are having a physical relationship. They work in separate areas of your company, so there is no superior/subordinate conflict. They're not breaking any rules or policies. However, both of them are married. You consider this to be unethical. You see their spouses at company events.

You are the owner, the boss, the leader. I know a few business owners who would feel it their moral obligation to say something. Yet many others would keep their mouths shut. Do you say anything?

Situation 4: Your customer makes a mistake and overpays you. Not a lot. But it's still something. Or a supplier ships you an extra pallet of materials in error. Do you pretend it didn't happen? Maybe you say to yourself "well, that's for all the other times that guy was a pain the neck," or "that makes up for all the times I was overcharged."

So you take the money and run. Or maybe you just come clean, write a check or send the materials back. How would you handle this?

Situation 5: A customer asks if he can pay in cash. You take the cash. Hmm. That's a nice chunk of cash, isn't it? How would the taxman ever find out, right? Or maybe you're on a trip with your family and decide to use the business credit card instead of the personal one. You do a lot of travelling.

What, an auditor's going to figure that out? Why not just take the deduction? Isn't that one of the perks of being a business owner? Some clients I know do this and sleep like a baby. They pay plenty of taxes. Others are strictly by the book and would never consider hiding revenues or running the odd personal item through the business. How about you?

Related: If You Found $100,000, What Would You Do?

Situation 6: A customer calls you with a big problem. Actually, it's not so big. They think it's big. But you know it's an easy fix. You quote a high price because you also know they're in a jam. As you figured, your service tech fixes the problem in 10 minutes. Your customer is happy that it got fixed and doesn't seem concerned about your inflated price.

Was this the right thing to do? Some business owners don't ever want to be accused of taking advantage of a situation. Still others see this as just ordinary business. How do you see it?

Situation 7: Five minutes into an interview with a prospective employee you know you're not going to hire him. He's perfectly qualified. But there's something about him that you just don't like. It could be his religion/culture/race/color/politics/hair/sexual orientation/appearance. Whatever. Yeah, you're being discriminatory. But who's ever going to know? You just don't want this guy working in your company. Period.

Is this the right decision? Is this something you do?

Present these typical situations to any business owner and you'll get lots of differing opinions. Nothing is black and white. Sometimes, not even the law!

I've had to deal with every one of these situations. I think I've figured out how to address them. In fact, I think I've figured out how to deal with any ethical/moral issue that presents itself.

I give it the "Diaper Test."

What's the "Diaper Test"? I imagine myself 40 years in the future. I'm 89 years old. I'm in a nursing home, at the end of my life, and wearing diapers.

I'm looking back at my life, reviewing situations like the ones above, thinking about how I behaved and the decisions I made. Would I be proud of those decisions? Could I still, 40 years later and while wearing diapers, hold my head up high and say I wouldn't have done it differently?

That's the "Diaper Test." Because in the end, only you are the one to judge you. So would you pass?

Related: What Not To Do: Lessons From 'The Wolf of Wall Street'

Gene Marks

Entrepreneur Leadership Network® VIP

President of The Marks Group

Gene Marks is a CPA and owner of The Marks Group PC, a ten-person technology and financial consulting firm located near Philadelphia founded in 1994.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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