Is the application of ethical standards to business behavior

Business ethics are the set of practices and policies that companies use to guide them through decisions about finances, negotiations and deals, corporate social responsibility, and more. Without a strong set of ethics, a business can run afoul of the law, encounter financial pitfalls and moral dilemmas. But good business ethics ensure customers, employees, and other stakeholders that a company obeys the rules and does the right thing. When a brand loses trust, it can jeopardize sales and harm employee retention. It brings about more scrutiny from government agencies and has vendors question whether it’s worth doing business with you. If other businesses don’t trust you, they can buy products elsewhere or give their good deals to other buyers. Business ethics are critical to good financial planning and positive earnings. If you’re interested in a career in business, you’ll need to understand the principles of business ethics and how you can hone this essential skill.

Ethics play a much larger role in everyday business transactions than you may realize. Ethics aren’t laws that companies have to follow, but they are a set of guiding principles that organizations should follow if they want to build a good reputation. Why is a good reputation for following fair play so important?

Business Ethics Affect Reputation

Brands are no longer owned only by the companies they represent. Employees, consumers, and stockholders increasingly feel that a brand belongs to them too. That’s why 42 percent of consumers will stop doing business with a company if they disagree with its words or actions on a social issue. And more than 60 percent say their purchasing decisions are driven by a company’s ethical values and authenticity.1

Business Ethics Set the Tone for Employee Behavior

Leadership sets an example for employees. If the CEO of a company cuts corners to secure a contract and it’s a well-known company secret, it can signal to other employees that financial misbehavior is OK. On the other hand, when leaders display a strong moral compass, it encourages others to do the same. If you want your employees to behave well, you need to treat them well and act in a manner that makes them proud to call you the boss.

Good Business Ethics Aid in Negotiations 

When a company has a positive reputation, it encourages other businesses to negotiate with it. No one wants to broker a deal with a company that may not make good on its word. If both businesses understand the rules of the ethical game, they can make better, stronger negotiations because they know they will get what they’ve been promised from the deal.  

Business Ethics Impact the Bottom Line

When an organization is unethical, its reputation is tarnished and its consumers may find an alternative source for the products it sells. Companies like Enron, Wells Fargo, and Monsanto all suffered the effects of bad behavior. But big, profitable companies, such as Microsoft and Dell, are recognized and rewarded for their ethical behavior, proving that you can be a good corporate citizen and make a profit at the same time.

How to Learn About Business Ethics

How can you strengthen your ethics to make the right business decisions? Start with your faith. Incorporate the tenets of Christian business ethics into your professional life so you can remain motivated to serve others and not be moved by wealth or greed. Develop your own professional moral compass that can help guide you through tough and tricky situations so you can preserve your own reputation as well as the reputation of your company. Decide which behaviors are and are not acceptable to you and don’t be afraid to ask questions or hold others accountable when you observe wrongdoing.

And if you’re ready to take your ethical principles into business, choose a business program that believes as you do. A business program can include classes on ethical principles and management. It delves into the issues that you might encounter in the workplace, differing perspectives and philosophies on how to solve those issues ethically, and the relationship that businesses have with society at large.  

If you want to build your business acumen, while honing your business ethics, contact Limestone University today. We offer a variety of business degrees in areas such as finance, marketing, and economics, that can set you on a path to a rewarding career. Each program offers you the chance to study ethics as well as law, management, and much more. Click the button to request more information.

Business ethics is the study of appropriate business policies and practices regarding potentially controversial subjects including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities. The law often guides business ethics, but at other times business ethics provide a basic guideline that businesses can choose to follow to gain public approval.

• Business ethics refers to implementing appropriate business policies and practices with regard to arguably controversial subjects.
• Some issues that come up in a discussion of ethics include corporate governance, insider trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.
• The law usually sets the tone for business ethics, providing a basic guideline that businesses can choose to follow to gain public approval.

Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses. For example, a portfolio manager must give the same consideration to the portfolios of family members and small individual investors. These kinds of practices ensure the public receives fair treatment.

The concept of business ethics began in the 1960s as corporations became more aware of a rising consumer-based society that showed concerns regarding the environment, social causes, and corporate responsibility. The increased focus on "social issues" was a hallmark of the decade.

Since that time period, the concept of business ethics has evolved. Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what companies must do legally versus maintaining a competitive advantage over other businesses. Firms display business ethics in several ways.

Business ethics are meant to ensure a certain level of trust between consumers and corporations, guaranteeing the public fair and equal treatment.

Here are a few examples of business ethics at work as corporations attempt to balance marketing and social responsibility. For example, Company XYZ sells cereals with all-natural ingredients. The marketing department wants to use the all-natural ingredients as a selling point, but it must temper enthusiasm for the product versus the laws that govern labeling practices.

Some competitors' advertisements tout high-fiber cereals that have the potential to reduce the risk of some types of cancer. The cereal company in question wants to gain more market share, but the marketing department cannot make dubious health claims on cereal boxes without the risk of litigation and fines. Even though competitors with larger market shares of the cereal industry use shady labeling practices, that doesn't mean every manufacturer should engage in unethical behavior.

For another example, consider the matter of quality control for a company that manufactures electronic components for computer servers. These components must ship on time, or the manufacturer of the parts risks losing a lucrative contract. The quality-control department discovers a possible defect, and every component in one shipment faces checks.

Unfortunately, the checks may take too long, and the window for on-time shipping could pass, which could delay the customer's product release. The quality-control department can ship the parts, hoping that not all of them are defective, or delay the shipment and test everything. If the parts are defective, the company that buys the components might face a firestorm of consumer backlash, which may lead the customer to seek a more reliable supplier.

When it comes to preventing unethical behavior and repairing its negative side effects, companies often look to managers and employees to report any incidences they observe or experience. However, barriers within the company culture itself (such as fear of retaliation for reporting misconduct) can prevent this from happening.

Published by the Ethics & Compliance Initiative (ECI), the Global Business Ethics Survey of 2021 surveyed over 14,000 employees in 10 countries about different types of misconduct they observed in the workplace. 49% of the employees surveyed said they had observed misconduct, with 22% saying they had observed behavior they would categorize as abusive. 86% of employees said they reported the misconduct they observed. When questioned if they had experienced retaliation for reporting, a whopping 79% said they had been retaliated against.

Indeed, fear of retaliation is one of the major reasons employees cite for not reporting unethical behavior in the workplace. ECI says companies should work toward improving their corporate culture by reinforcing the idea that reporting suspected misconduct is beneficial to the company and acknowledging and rewarding the employee's courage for making the report.

Business ethics concerns ethical dilemmas or controversial issues faced by a company. Often, business ethics involve a system of practices and procedures that help build trust with the consumer. On one level, some business ethics are embedded in the law, such as minimum wage, insider trading restrictions, and environmental regulations. On the other hand, business ethics can be influenced by management behavior, with wide-ranging effects across the company.

Consider an employee who is told in a meeting that the company will face an earnings shortfall for the quarter. This employee also owns shares in the firm. It would be unethical for the employee to sell their shares since they would be subject to insider information. Alternatively, if two large competitors came together to gain an unfair advantage, such as controlling prices in a given market, this would raise serious ethical concerns.

Business ethics are important because they have lasting implications on several levels. With increased investor awareness on environmental, social, and governance issues, a company's reputation is at stake. For instance, if a company partakes in unethical practices, such as poor customer privacy procedures and protections, it could result in a data breach. This, in turn, may lead to a significant loss of customers, erosion of trust, less competitive hires, and share price declines.