Sticky Situations Three entrepreneurs share their ethical dilemmas-and why they're better because of them.

Company ethics are the stuff of headlines. Each of the followingentrepreneurs faced ethical decisions in their start-ups thatshaped who and what their companies would become. What would you doin these situations?

• Customerconflict:
• "There was a client [project]we'd worked on at our former employer, and for that client, wedeveloped a unique re-search methodology," says Aaron Keller,33, co-founder with Brian Adducci, 36, of Capsule, a branddevelopment firm in Minneapolis.

After finishing the project, they decided to start their ownbusiness and seek out their own customers. However, those formerclients managed to track them down. "This client had gottenthe proposals from our former employer for the next researchproject, and because it was a research methodology that no one elsehad, it was incredibly valuable. They said, 'Can you pitchthis? You developed the methodology and can easily put ittogether.' Even though [it would have been] by far our biggestclient out of the gate, [we said no]. It just wouldn't beappropriate. That's just not something you want to have hangingover you for the rest of your business."

• Financialdilemma:
• "I started organizing theaccounting for this company-it was one of my first clients,"recalls Frances McGuckin, 53, founder of SmallBizPro.comServices, a small-business consulting service in Langley,British Columbia. "They were looking for investors. And when Idid their first set of financials, there was a loss on the bottomline."

The company asked her to change its financial statements to showa profit, but McGuckin refused-and she ended up losing the client."What I learned was, Don't just go for the dollarsyou're going to get now. Look long-term, and build an [honest]reputation. Unethical practices will always come back and hityou."

• Privacymatters:
• "As soon as we had any employees,we intended to have a group health policy," says DanielGrossman, co-founder and CEO of MetroKitchen.com,an online retailer of high-end kitchenware in Atlanta. But aftertalking with agents, he realized that doing so would compromiseemployees' privacy, since rates are negotiated based on theirmedical conditions.

"I just think it's creepy if the boss knows whatdiseases they have-I think it makes the employeeuncomfortable, and I'm invading their privacy more than I'mcomfortable invading it," says Grossman, 40. Instead, he hasemployees get their own policies and give the bill toMetroKitchen.com each month.