“Acquisition of public acceptance through professional best practices that are good and right” aptly summarizes the theory of business ethics. An ethical business holds itself to a code of conduct that keeps its practices not only on the right side of the law but on the right side of fairness, honesty, and integrity. The established conventions direct the building of the company’s brand, maintenance of its reputation, external and internal dealings, and policies regarding controversial issues such as bribery, insider trading, fiduciary responsibilities, and so forth.
Benefits of Good Business Ethics
For as long as businesses have been operative, there have been a countless number of times when a company has found itself needing to vindicate ethically questionable business conduct. A code of ethics is necessary to prevent damaging relationships of trust both with the public and within.
When there is public trust in an organization’s actions, the company can succeed. And when the employees who participate in creating and sustaining the company culture believe in what the business stands for, then the company can continue to thrive from the inside out and continually engender success.
- The Importance and Advantages of Good Business Ethics: Aveta Business Institute addresses why business should not be about making money at all costs.
- 10 Benefits of Managing Ethics in the Workplace: Carter McNamara of Authenticity Consulting discusses benefits of business ethics outside of the moral implications.
- Ethics Pays: From EthicalSystems.org comes an article that deals with the discouragement of self-serving behavior or the principal-agent problem.
- Why You Need Good Business Ethics: The Edward Lowe Foundation lists the payoffs of business ethics and provides ways to ensure ethical conduct in your business.
- Ethics and Business Success (PDF): This paper explains what business ethics is about and the advantages of a company having good ethics.
Reputation Is a Direct Result of Business Ethics
Having a solid ethical footing and behavior among consumers and industry peers can propel a company’s fortune and footprint in commerce, public relations, service, viability, and longevity, to name a few merits. And aside from being able to conduct business without the damages and distractions of public scrutiny, having a good reputation comes with an economic advantage. According to management accountancy studies, a reputable company has the privilege of being able to price its services and goods up to eight percent above those of a less-reputable competitor.
Before the Internet and e-commerce, a company’s reputation was formally and informally at the mercy of journalists, publicists, consumer testimonials, and profit announcements. But now, digital branding can have a great influence on a company’s reputation. Stockholders, executives, employees, and customers build and engage with online communities where a company’s credibility can improve or falter in seconds. Reputation management involves not just evaluation but also protection and, in some cases, rehabilitation. An injured public perception can take years to heal, but a company can restore a tarnished reputation caused by an unethical action by taking a few concrete steps.
It’s important to be transparent about any disciplinary actions stemming from the specific concern. Do a thorough investigation to determine what happened and how, and objectively reassess the policies currently in place or the current placement of personnel to figure out liability for circumstances going awry. Then, create a new protocol with a professional promise that the same damaging event will not occur again. Reevaluate the structure of governance within the company and make any necessary changes to minimize the potential for scandals and mistakes. And do not allow the company to be tried in the court of public opinion without making your case: Promptly announce to the media what happened, why it happened, and what is being done to fix it.
- Importance of a Good Reputation: International Charter explains why reputation is one of a company’s most significant assets.
- Reputation: The Institute for Public Relations writes on reputation as presented in trade and academic literature.
- Reputation and Its Risks: An article from the Harvard Business Review deals with the management of reputation risks.
- The Importance of Business Reputation: Unethical business practices can tarnish a company’s reputation, which can negatively affect the bottom line.
- A Study on Corporate Reputation’s Influence on Customer Loyalty: An International Business Research paper shows that likeability significantly influences customer loyalty.
Stakeholders Benefit From Good Ethics
Business leaders want the company to make money. Employees want to earn money. Stockholders want a return on their investment. The consumers may have to spend money, but if they like the products and services, they, too, wish for the company to make money to continue fulfilling a need or want. And in many cases, the community feeds off of the success of the business in some way. Each of these parties makes up the company’s stakeholders, but what is right for one stakeholder may not be suitable for the others. Unfortunately, it’s not always possible to do what is in everybody’s best interests. When it comes to this moral dilemma, it may serve best to borrow inspiration from an ethical theory called utilitarianism.
Utilitarianism promotes doing the greatest good for the greatest number of entities or people. It’s not always easy to know which will be the best move to benefit the greatest number of people, but it can be helpful to engage in a process of stakeholder mapping to figure it out. Examine each option’s potential impacts, focusing on how it will affect each stakeholder group. Then, look at how these groups interact and figure out an honest way to communicate with them, potentially involving one segment to advocate for you with another.
- Utilitarianism and Business: This short article looks at utilitarianism and cost-benefit analysis.
- Corporate Social Responsibility, Utilitarianism, and Capabilities Approach: This article from the Journal of Business Ethics looks at criteria for corporate social responsibility toward a company’s stakeholders.
- The Advantages of Being Ethical: Learn about the many benefits of ethical practices both to the business and its stakeholders here.
- Business Ethics and Stakeholders: This well-research article explains four sources of good and highlights how important business ethics has become.
- Stakeholder Theory and Managerial Decision-Making: Constraints and Implications of Balancing Stakeholder Interests: This report examines how managers are affected by stakeholder interests.
Openness Encourages Ethical Behavior
One approach to promoting more ethical behavior among employees is to adopt open-book management, which allows employees to connect with the company on another level. Through the accessibility of company insight, the employee can make a professional and personal choice to follow the right rules of conduct because they will have a genuine concern for the business as a whole entity. Develop a company culture that does not base the weight of an employee’s relevance to the company on their job title or position in the hierarchy but instead values their contributions, abilities, and strengths; this, too, can encourage ethical behavior.
- Making Ethics a Priority in Your Workplace: Read a practical guide to setting up an ethics program here.
- Ethical Values and Codes: Fostering a climate of openness and ethical behavior is simpler with a proper code of ethics.
- Open-Book Management (PDF): This document explains how employees who understand how the business works will become self-motivated.
- Code of Ethics: Find a guide to creating a code of conduct for employees here.
- Creating an Ethical Workplace: From the Society for Human Resource Management, this page discusses ethical culture and a manager’s influence.