Businesses need an acceptable set of rules to operate sustainably. Here, it’s essential to differentiate between the word “rule” from “law.”
Laws (must follow) are made by governing bodies, and failing to abide by them can have serious consequences, such as hefty fines and penalties. Whereas rules are a set of principles businesses outline to operate in society acceptably.
These principles act as guidelines that set standards to differentiate between right and wrong business practices – also called business ethics.
What is Business Ethics?
According to the definition;
“Business ethics refers to a moral code of conduct that outlines how businesses should carry themselves and their transactions in the society beyond government laws.”
Complex issues like harassment, discrimination, honesty, integrity, treatment of employees, working conditions, corporate governance, bribery, whistle-blowing, and insider trading are prevented under business ethics to avoid legal charges.
Big and small corporations uphold business ethics to build employee trust and promote honesty between investors, stakeholders, and customers. While business ethics are practiced widely, the quality varies.
According to a survey conducted by Global Business Ethics (GBES) in 2018, one in four U.S. workers think their company has a “well-implemented” ethics program.
Why Is Business Ethics Important?
Business ethics is essential for several reasons;
Business ethics protects the company’s integrity by keeping away from legal liabilities. It establishes trust among employees and consumers.
Companies with high ethical standards attract an efficient pool of people. Employees want to work for businesses that cherish their teams, resulting in high retention rates and low hiring costs.
Consumers feel comfortable buying from companies with good reputations. For example, consumers boycott products that use animal testing. Ethical brands boost loyalty and positive word of mouth, winning over competition and sales.
7 Types of Business Ethics
Business ethics guidelines are different for every company. A company’s good and wrong business practices depend on the nature of work, product, operations, and location. The following seven are everyday business ethics.
Employee Ethics
When employees work with honesty and integrity, it impacts the whole company positively. Employees should act responsibly and fairly to complete tasks assigned by the leadership. The job description provides clarity on work expectations. Importantly, being accountable for your actions and fixing mistakes is also part of employee ethics.
Ethics in Leadership
Leadership sets the tone for how the company will run ethically and positively. When management leads by example, the employees become part of business ethics and show great responsibility and ownership toward the company goal. This top to down flow of ethical practices brings stability to the company benefiting employees and customers.
Corporate Social Responsibility
A company is answerable to its employees, investors, stakeholders, customers, and environment. The bigger the company, the more ethically responsible it is. CSR promotes a positive brand image and helps raise employee morale in the workplace. The two most common examples of CSR programs are planting trees for a carbon-free environment and arranging marathons to promote healthy living.
In short, CSR programs are a great way to give back to the community and the environment.
Transparency
Companies publish annual, biannual, and quarterly reports that show their financial standing. These reports are not only for the regulators but for the stakeholders, investors, and potential investors to keep them informed of the company operations, CSR activities, and decision-making reasons.
The company feels morally responsible for keeping all its activities transparent to gain the community’s trust. Newsletters are also a way to communicate with the press, stakeholders, and even customers.
Fairness
Fairness in the business ethics context means that all employees, regardless of rank and influence, are treated equally and fairly. Companies ensure that everyone gets fair and equal opportunities at work. The same goes for the customers; all customers are treated with the same respect and offered the same quality of products.
Loyalty
Loyalty is for all levels of the hierarchy. Senior management and entry-level employees should be loyal to their teammates and the company. Loyalty includes data protection of employees and customers. Secondly, the reputation protection of the company and everyone associated with it.
Respect
Respect is the most crucial part of business ethics. The company is known for how its treats its employees, stakeholders, and customers. Respect is the same for all team members, from top to bottom. If handled respectfully, customers’ concerns, queries, and opinions make them feel valued. Companies that resolve issues quickly have a competitive advantage over those that don’t facilitate clients.
Business Ethics Examples
Businesses keep code of conduct manuals for employees to understand ethical responsibilities towards their peers and customers. All companies maintain moral codes of conduct in different ways. Here are a few examples of business ethics practices.
Privacy protection
Businesses collect personal data, such as email addresses, residential addresses, financials, and medical records. The company is responsible for protecting its customers’ privacy by not giving any information to a third party without consent. The same goes for employee records; a company is ethically liable to protect the privacy rights of its employees.
Customer prioritization
Businesses need customers to flourish. Companies show respect to customers by being patient with their opinions and queries. Customer concerns, if addressed, make them feel heard and valued. For example, a faulty product replaced with another product or a refund is customer prioritization. Additionally, unsatisfactory experience is compensated with a discount or the best offer possible.
Diversity at Workplace
Diversity is providing equal work opportunities to people regardless of their age, color, race, religion, and social background. This s shows that the company tries to be fair and equal to society and does not discriminate against any group of people. Diversity also helps the business acquire great talent and different perspectives for their company.
Helping communities
Companies help communities to reach out to those who need financial aid or any facilitation. For example, companies make their employees visit old homes to cheer the elderly. Furthermore, they help disaster victims and donate food and clothes for the homeless as part of their business ethics. It promotes a positive company image and supports causes.
Fair Treatment and Compensation
Companies that practice fair treatment also ensure their employees receive fair compensation. The salary and bonuses directly tied to education, experience, and performance yield better results. The employees must adhere to the job description provided by the employer and perform their duties responsibly.
In return, the company ensures that the employees are compensated fairly for their work and outstanding performance through rewards and bonuses. These incentives boost employee morale and show company gratitude.
Whistleblower’s Protection
A Whistleblower is a person that informs the authorities of any violation of ethical practices in the company. The whistleblower could be planted or voluntarily comes forward to report illicit behavior.
The whistleblower is protected against any negative consequences to encourage the reporting of peers and authorities. With the protection in place, the whistleblower doesn’t have to fear disciplinary action or losing their job.
Environmental Concerns
The environment is indeed deteriorating every day. Fresh drinking water, clean land, and clean air are becoming rare worldwide. Companies feel obliged to clean the environment with the help of human resources and machinery. Initiatives such as recycling waste, investing in green energy, and using teleconferencing to reduce air travel are perfect ways to promote environmental concerns. Companies also consciously place receptacles in their offices to collect recycled paper.
The Bottom Line
Practicing business ethics can improve profitability and attract employees who want to be part of a purpose-led entity. Customers are brand loyal to businesses that share the same values and keep promises. Ethical practices enhance the spirit of the law.
Let us know in the comment section if we missed something important.
