What Is Business Ethics?
Business ethics studies appropriate business policies and practices regarding potentially controversial subjects, including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, fiduciary responsibilities, and much more. The law often guides business ethics, but at other times business ethics provide a basic guideline that businesses can follow to gain public approval.
Understanding Business Ethics
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 as they do to wealthier clients. These kinds of practices ensure the public receives fair treatment.
Concept
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, 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 vs. maintaining a competitive advantage over other businesses. Firms display business ethics in several ways.
Principles of Business Ethics
It’s essential to understand the underlying principles that drive desired ethical behavior and how a lack of these moral principles contributes to the downfall of many otherwise intelligent, talented people and the businesses they represent.
There are generally 12 business ethics principles:
Leadership:
The conscious effort to adopt, integrate, and emulate the other 11 principles to guide decisions and behavior in all aspects of professional and personal life.Accountability: Holding yourself and others responsible for their actions. Commitment to following ethical practices and ensuring others follow ethics guidelines.
Integrity:
Incorporates other principles—honesty, trustworthiness, and reliability. Someone with integrity consistently does the right thing and strives to hold themselves to a higher standard.
Respect for others:
To foster ethical behavior and environments in the workplace, respecting others is a critical component. Everyone deserves dignity, privacy, equality, opportunity, compassion, and empathy.
Honesty:
Truth in all matters is key to fostering an ethical climate. Partial truths, omissions, and under or overstating don’t help a business improve its performance. Bad news should be communicated and received in the same manner as good news so that solutions can be developed.
Respect for laws:
Ethical leadership should include enforcing all local, state, and federal laws. If there is a legal grey area, leaders should err on the side of legality rather than exploiting a gap.
Responsibility:
Promote ownership within an organization, allow employees to be responsible for their work, and be accountable for yours.
Transparency:
Stakeholders are people with an interest in a business, such as shareholders, employees, the community a firm operates in, and the family members of the employees. Without divulging trade secrets, companies should ensure information about their financials, price changes, hiring and firing practices, wages and salaries, and promotions are available to those interested in the business’s success.
Compassion:
Employees, the community surrounding a business, business partners, and customers should all be treated with concern for their well-being.
Fairness:
Everyone should have the same opportunities and be treated the same. If a practice or behavior would make you feel uncomfortable or place personal or corporate benefit in front of equality, common courtesy, and respect, it is likely not fair.
Loyalty:
Leadership should demonstrate confidentially and commitment to their employees and the company. Inspiring loyalty in employees and management ensures that they are committed to best practices.
Environmental concern:
In a world where resources are limited, ecosystems have been damaged by past practices, and the climate is changing, it is of utmost importance to be aware of and concerned about the environmental impacts a business has. All employees should be encouraged to discover and report solutions for practices that can add to damages already done.