What Are Business Ethics?

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 wages, insider trading restrictions, and environmental regulations. On another, management behaviour can influence business ethics, with wide-ranging effects across the company.

They guide executives, managers, and employees in daily decision-making. For example, consider a company that has decided to dump chemical waste that it cannot afford to dispose of correctly on a vacant lot it has purchased in the local community. This action has legal, environmental, and social repercussions that can damage a company beyond repair.

Why Is Business Ethics Important?

There are several reasons business ethics are essential for success in modern business. Most importantly, defined ethics programs establish a code of conduct that drives employee behaviour—from executives to middle management to the newest and youngest employees. When all employees make ethical decisions, the company establishes a reputation for ethical behaviour. Its reputation grows, and it begins to experience the benefits a moral establishment reaps:

  • Brand recognition and growth
  • Increased ability to negotiate
  • Increased trust in products and services
  • Customer retention and growth
  • Attracts talent
  • Attracts investors

When combined, all these factors affect a business’ revenues. Those who fail to set ethical standards and enforce them will eventually find themselves alongside Enron, Arthur Andersen, Wells Fargo, Lehman Brothers, Bernie Madoff, and many others.

Types of Business Ethics

There are several theories regarding business ethics, and many different types can be found, but what makes a business stand out are its corporate social responsibility practices, transparency and trustworthiness, fairness, and technological practices.

Corporate Social Responsibility

Corporate social responsibility (CSR) is the concept of meeting the needs of stakeholders while accounting for the impact meeting those needs has on employees, the environment, society, and the community in which the business operates. Of course, finances and profits are essential. Still, they should be secondary to the welfare of society, customers, and employees—because studies have concluded that corporate governance and ethical practices increase financial performance.

Businesses should hold themselves accountable and responsible for their environmental, philanthropic, ethical, and economic impacts.

Transparency and Trustworthiness

Companies need to ensure they are reporting their financial performance transparently. This not only applies to required financial reports but all reports in general. For example, many corporations publish annual reports to their shareholders.

Most of these reports outline the submitted reports to regulators, how and why decisions were made, if goals were met, and factors that influenced performance. In addition, CEOs write summaries of the company’s annual performance and give their outlooks.

Press releases are another way companies can be transparent. Events important to investors and customers should be published, regardless of whether it is good or bad news.

Technological Practices and Ethics

The growing use of technology of all forms in business operations inherently comes with a need for a business to ensure that the technology and information it gathers are being used ethically. Additionally, it should ensure that the technology is secured to the utmost of its ability, especially as many businesses store customer information and collect data that those with nefarious intentions can use.


A workplace should be inclusive, diverse, and fair for all employees regardless of race, religion, beliefs, age, or identity. An appropriate work environment is where everyone can grow, be promoted, and become successful in their own way.

How to Implement Good Business Ethics

Fostering an ethical behaviour and decision-making environment takes time and effort—it always starts at the top. Most companies create a code of conduct/ethics, guiding principles, reporting procedures, and training programs to enforce ethical behaviour.

Once conduct is defined and programs implemented, continuous communication with employees becomes vital. Leaders should constantly encourage employees to report concerned behaviour—additionally, there should be assurances that whistle-blowers will not face adversarial actions.

A pipeline for anonymous reporting can help businesses identify questionable practices and reassure employees that they will not face any consequences for reporting an issue.

Monitoring and Reporting Unethical Behaviour

When preventing unethical behaviour and repairing its adverse side effects, companies often look to managers and employees to report any incidences they observe or experience. However, barriers within the company culture (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, and 22% said they had observed behaviour they would categorise as abusive. Furthermore, 86% of employees said they reported the misconduct they observed. When questioned if they had experienced retaliation for reporting, 79% said they had been retaliated against.

Indeed, fear of retaliation is one of the primary reasons employees cite for not reporting unethical behaviour in the workplace. ECI says companies should work toward improving their corporate culture by reinforcing the idea that reporting suspected misconduct benefits the company. Additionally, they should acknowledge and reward the employee’s courage in making the report.

Principles of Business Ethics

It’s essential to understand the underlying principles that drive desired ethical behaviour and how lacking these moral principles contributes to the downfall of many otherwise profitable, effective and otherwise prosperous businesses.

There are generally 12 business ethics principles:

Respect for laws: Ethical leadership should include enforcing all local, state, and federal laws. If there is a legal grey area, professional and personal life aspects rather than exploiting a gap.

Leadership: The conscious effort to adopt, integrate, and emulate the other 11 principles to guide decisions and behaviour in all professional and personal life aspects.

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.

Responsibility: Promote ownership within an organisation, allow employees to be responsible for their work, and be accountable for yours.

Accountability: Holding yourself and others responsible for their actions. Commitment to following ethical practices and ensuring others follow ethics guidelines.

Honesty: Truth in all matters is critical 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 the same way as good news to develop solutions.

Transparency: Stakeholders are people interested 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.

Respect for others: To foster ethical behaviour and environments in the workplace, respecting others is a critical component. Everyone deserves dignity, privacy, equality, opportunity, compassion, and empathy.

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 behaviour makes you feel uncomfortable or place personal or corporate benefit in front of equality, common courtesy, and respect, it is likely unfair.

Loyalty: Leadership should demonstrate confidentially and commitment to their employees and the company. Inspiring employee and management loyalty ensures 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.

The Bottom Line

Business ethics concerns employees, customers, society, the environment, shareholders, and stakeholders. Therefore, every business should develop ethical models and practices that guide employees’ actions and ensure they prioritise the interests and welfare of those the company serves.

Doing so increases revenues and profits, creates a positive work environment, and builds trust with consumers and business partners.

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