What is Business Ethics?
Business ethics refers to the set of principles or standards that govern the moral conduct of business. It is concerned with the relationship between the techniques, practices, and objectives of an organization. Business ethics says that businesses have to be honest with themselves and society.
Some examples of business ethics are treating workers fairly, charging fair prices from customers, providing good quality goods and services, earning reasonable profits, using accurate and fair weights of the goods, etc. However, unethical behaviour involves corrupting public servants to get favours, defrauding customers through misleading advertisements, providing a false image of the business in its books of accounts and financial statements, using the properties and assets of the business for personal use, revealing trade secrets to competitors, etc. A businessperson is said to be ethical if he/she acts upright and serves society’s interests. An ethical business is a good business as it works for the interests of society. Ethical businesses have a good image in the eyes of the public, as people have confidence in the business, which leads towards greater success. Ethical activity is not only good for society, but also for businesspeople and businesses as it helps them enhance the quality of their lives and the work they do.
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Meaning of Ethics
The word ethics is derived from the Greek word ‘ethos,’ meaning ideals, norms, morals, or character of an individual or a group of individuals prevailing in a society. Therefore, ethics can be defined as a study of moral behavior and defining what is right and what is wrong in the behavior of an individual by judging them on the basis of the standards of moral conduct, expressed and established by the society in a specific field of activity. Ethics can be seen as moral values attached by society to the actions of human beings, and they can be seen as codes or a system of control as they serve human ends. Usually, ethical standards are enacted in laws; however, ethical behavior is more than that and goes beyond government regulations and laws. It means that an individual or a group of individuals has to adhere to moral principles and behave ethically. Every profession has its own moral behavior or ethics. For example, legal ethics, medical ethics, business ethics, etc. Today we will discuss business ethics.
Benefits of Business Ethics
- Draws more investors towards the business: Investors are a big part of any business for growth and raising funds. If the investors of an organization realize that the company they are working with is working ethically and prioritizes high morale in the business, they will feel safe knowing that their money is being used responsibly and for good purposes. Also, they can feel comfortable knowing that they are not entering into anything unethical indirectly. Besides, companies with strong ethics get more attention from investors.
- Provide a competitive advantage in terms of customers: Like investors, customers are also a huge part of a business as they are the reason for the sales and revenue of a company. When an organization behaves ethically, it can gain customer loyalty and attract them to their goods and services. It ultimately helps the business in fulfilling its profit-earning motive.
- Enhance a company’s reputation: A company behaving ethically can create a positive image in the eyes of the public, which can help the business retain its existing customers by ensuring them that they are spending their hard-earned money on an ethical business and bringing in new customers. Besides, today’s world is highly social, and dissatisfied customers can easily and quickly give reviews about the negative experience and unethical behaviour of the business, which can be bad for the company and its growth.
- Stronger collaboration: Team members or staff of the company working together on business ethics have respect for each other, which leads them to work together effectively. The practice of ethics not only creates a good work environment, but also helps the members collaborate and bring productivity.
- Avoid lawsuits: Behaving ethically may be expensive for an organization, but unethical behavior can be more expensive as an organization involved in unethical practices may face lawsuits and will have to pay huge fines.
Elements of Business Ethics
- Top Management Commitment: The top management of an organization plays a crucial role in ensuring business ethics. They guide the whole organization towards ethical behaviour. To get better results and inculcate ethical behaviour amongst the members of an organization, the CEO and other top-level managers need to strongly commit themselves to ethical conduct. Their commitment to the ethical code of conduct will set a good example for the employees and encourage them to follow the codes themselves. They must lead the employees to continue to develop the firm and uphold its values.
- Publication of a ‘Code’: Companies having effective ethics programmes define the principles of conduct in written form for the whole organization. This written document of principles of conduct is known as “code.” The code or code of conduct covers various areas, like product quality, product safety, fundamental honesty, adherence to laws, financial reporting, marketing practices, employment practices, health and safety at the workplace, etc. These principles or standards guide an organization and its actions.
- Establishment of Compliance Mechanisms: Publishing the code of conduct is not sufficient until the organization establishes a mechanism to ensure they are being followed by the employees and the actions of the firm comply with these standards. For example, ensuring the applicant has values and ethics while recruiting, forming a communication system for employees to report any incident of unethical behavior, etc.
- Involving employees at all levels: Employees of an organization play a crucial role in the implementation of ethical policies at different levels of the business, making the idea of ethical business real. Therefore, organizations need to involve employees in ethics programmes. For example, an organization can form a small group of employees to discuss the essential ethics policies of the firm and evaluate the employees’ attitudes towards these policies.
- Measuring results: It is not easy to measure the results of an ethics programme with full accuracy. Therefore, the organizations implementing ethics programmes can verify and audit the end results and ensure that the employees carry out the work according to ethical standards. Once the auditing has been completed, the top-level management and other employees of the firm can discuss the end results for their further course of action.