5 reasons why your organization needs to think about business ethics

Have you ever tried to Google the term “business ethics articles?” This yields a list of entries covering many different topics: money getting in the way of business ethics, how to establish a culture of ethical behavior in your business, the importance of business ethics in saving the environment and the moral responsibilities of business leaders. , to name a few.

For anyone who has ever taken a philosophy course, this diversity should come as no surprise. The word “ethics” covers a vast territory, and great thinkers throughout history have struggled to define its concepts.

Business ethics is no exception. An interesting article published by the Markkula Center for Applied Ethics at Santa Clara University notes that when sociologists asked businessmen “What does ethics mean to you? they received responses such as:

  • “Ethics has to do with what my feelings tell me to be true or false.”

  • “Ethics has to do with my religious beliefs.”

  • “Being ethical is doing what the law requires.”

  • “Ethics consist of standards of behavior that our society accepts.”

Experts in the field also present different mindsets. For example, the concept of corporate social responsibility (CSR) today leads many business owners to examine their role in the environmental crisis or to determine how to demonstrate their support for social causes. Nobel Prize-winning economist Milton Friedmanhowever, asserts: “There is one and only one corporate social responsibility — to use its resources and engage in activities designed to increase its profits as long as it plays by the rules of the game, that is, say that she engages in open activities. and free competition without deception or fraud.

Alternatively, the famous business ethics Edward Freeman offers a Stakeholder theory in which companies and the leaders who run them should “create value” for “the groups without whose support the organization would cease to exist”. This opens the door to considering groups such as customers, employees, suppliers, local communities, etc. Additionally, the use of the word “value” instead of “profit” brings more than monetary concerns into the mix.

Because of the complexity, many leaders might be tempted to leave the debate on ethical issues to business school classrooms. However, a company that does not reflect on its ethical standards may end up regretting it. Here we look at five reasons why business ethics should be discussed in every organization.

Unethical behavior can lead to a legal mess

Yes, it is true that “legal” and “moral” are not always synonymous. But let’s start with perhaps the clearest reason why every company should be concerned about its ethical behavior: failure to do so can lead to legal problems.

The law has certain standards that must be adhered to, and companies whose business practices go against them are subject to heavy fines and possible jail time for wrongdoers. Like it or not, doing business in the United States means following its government rules. The Internal Revenue Service prosecutes tax evaders or cheats. The US Equal Employment Opportunity Commission states that you may not discriminate against workers on the basis of race, national origin, gender, sexuality, religion, disability or of age. The Occupational Safety and Health Administration sets rules designed to protect employees from harm on the job. Going beyond the requirements presents dilemmas for individual businesses, but the laws provide a minimal starting point for ethical business concepts such as fairness and honesty.

business ethics-450x400px-2An ethical culture plays an important role in attracting candidates and retaining employees

Businesses depend on human capital. Securing and retaining qualified talent is both a priority and a challenge. Insufficient manpower reduces productivity and forces the company to spend time and money trying to fill the void.

Human beings have their own individual sense of right and wrong. When an employer’s actions and attitudes contrast with someone’s personal beliefs, problems result.

Modern job seekers can find a plethora of information about potential employers. Negative hiring practices such as nepotism, favoritism, and discrimination can immediately put candidates above a given company. Likewise, hearing about employee mistreatment, questionable practices with customers, violations of laws, etc. most often leads prospects to avoid a company. Why does chance find itself in a delicate situation?

Those who accept jobs and later discover ethical conflicts experience a lot of turmoil. Even if a worker is not the one committing questionable acts, they may fear for their own reputation by blaming themselves by association. Or, he may just feel deflated to be there. Unethical work situations cause stress. Leaders may pressure employees to keep quiet, neglect things, or actively commit crimes in order to keep their jobs or move up the ladder. The weight of how to respond, including whether or not whistleblowing would result in repercussions, often proves too heavy, and leaving to seek employment elsewhere is a more sensible option.

The research supports this type of result. According 2022 Deloitte Gen Z and Millennials survey, nearly two out of five people in these age groups say they refused a job or mission because it did not correspond to their values. Meanwhile, those who are satisfied with their employer’s societal and environmental impact and their efforts to create a diverse and inclusive culture are more likely to want to stay with their employer for more than five years.

An Unethical Company Culture Can Damage Your Reputation

A global survey conducted by the Human Resource Institute (HRI) and commissioned by the American Management Association (AMA) posed the interesting question “Why should companies behave ethically? » The number one answer was not “to do the right thing” (although that answer came close). The main reason was “to protect a company’s brand and reputation”.

Undeniably, we live in a world where social media and 24-hour news stations report business events quickly and thoroughly. Branding itself as the place that pays women less than men for equal work, violates human rights in its overseas manufacturing plants, or clearly chooses practices that promote profit over environmental sustainability can kill relationships with potential customers and investors.

Practicing corporate social responsibility can help you stand out

Although not Friedman’s cup of tea, many modern companies are integrating CSR into their business practices and ethics. They deliberately operate in ways that improve society – such as supporting social causes, minimizing carbon footprints, performing voluntary work and donating to charity. Not only do these actions increase the morale of the members of your organization, but they can generate good vibes among the public. With so many businesses focused on profitability, a business marketed as one that cares about the common good commands attention.

Ethical business practices are good for your bottom line.

It’s no secret that businesses want to make money, and research shows a link between ethical values ​​and profitability. According to the Ethisphere Ethics Index, the The world’s most ethical companies 2022 the winners outperformed a comparable index of large-cap companies by 24.6 percentage points from January 2017 to January 2022.

What could be happening here that explains this discovery? Perhaps customers are more attracted to companies that make good ethical decisions. Or maybe fines, lawsuits, and attorney fees eat up a big chunk of the profits of companies with questionable codes of ethics. It also stands to reason that leaders and employees in places with high ethical cultures show greater respect for each other, leading to better decision-making and less conflict between teams. . They may also have a greater desire to give 100% because they believe their employers have their best interests at heart.

Perhaps one could even hypothesize that people who work in places whose practices align with their own personal code of ethics sleep better at night. With lots of Zzzs and a clear conscience, they come to work ready to perform rather than focused on whether or not they’re doing the right thing.

Aubrey L. Morgan