Top management of any business makes various decisions daily. These decisions influence the company’s success and the employees’ lives. They also impact customers’ satisfaction.
Any choice leads to positive or negative consequences. It influences finances, reputation, working atmosphere, etc.
Thus, good business ethics is relevant to management today. The ethical decision gives an example to other employees. It endorses healthy working relations. And it increases a company’s financial success as a result.
Business ethics covers every field of responsibility
The term itself, business ethics, is new. It originates in the second half of the 20th century. It covers corporate governance, competition, fair trade, discrimination, social and environmental responsibility, etc.
Yet, the origins of the philosophical ideas behind it are ancient. They start with Plato and Aristotle and their works on economic relations.
The term covers almost all areas of corporate management. And it is especially important in the 21st century. Because of the rise of social and environmental awareness. After all, being honest and fair are basic human needs. Customers and employees expect it from an organisation.
There are legal restrictions, which cover some parts of business ethics. Laws regulate norms for environmental protection, employees’ rights, and fair competition. The legislation also prohibits many unfair financial practices. For example, insider trading, bribing, and industrial espionage. But these measures don’t cover all ethical practices in the management of organisation.
Technology and new media brought transparency
There are more top managers fired for unethical behaviour now than before. The rising awareness of this issue makes it essential in management. The number of such misdeeds has not grown; it attracts more attention now. People expect leaders to follow business ethics and set the tone.
One of the reasons is the rising significance of public opinion. The reputation of an organisation relies on the ethical choices top management makes. It is a signature of our times. The public is much more aware of the use of cheap labour or environmental regulations.
Customers prefer clean and fair producers on an everyday basis. It starts with cruelty-free cosmetics and up to eco-friendly travelling.
The other reason is technology made it all easier to track. People use digital means of communication, which are easy to trace. It works both for messages and browser history. Any business email or text can become a subject of public discussion. And the 24/7 media are also contributing to this matter.
The news is always online now. It can be traditional broadcasting or internet resources. Any piece of information can go viral in an hour, so there is no opportunity to delete it after. Any issue becomes a big deal because of the online media. The pressure of public opinion is higher than ever before.
Ethical decision-making builds trust
Why is it important for people to work with an ethically driven organisation? The answer is simple – it is about trust. When we know someone, who takes moral decisions, we have positive expectations. It works as an insurance system for us. When the company is being ethical enough in its choices, we expect it to treat us fair as well. The policy of management applies to all fields of business.
Employees are more loyal and productive when they work in a healthy surrounding. They are also more likely to make ethical choices after the example of top management. It is one of the essential factors of their satisfaction with the employer.
Unhealthy practices lead to unfair working relations. If the company’s leaders treat law and morals with disrespect, the employees act the same. It is impossible to expect them to do otherwise. After all, they see an example of unethical choices every day.
Customers also feel entitled to make a right choice of a provider. It is all about responsible consumption now and they need to trust the company. There are many examples of people choosing expensive products over unethically produced analogues. We can look at the social response to the fast fashion industry. The movement against it grows today.
Values increase team unity
Management is responsible not only for the business consequences of their choices. It influences the organisation in general and all team members. The top managers set the tone to the company and show an example of values.
By following good business ethics practices, managements unite the team driven by shared values. Employees need to have a feeling of purpose in their work and to be proud of it. Business ethics can increase it in the working environment and bring people together.
It adds emotional value to the work people are doing and the shared goal. But, morally ambiguous or controversial choices lead to discouragement in staff.
The implementation of clear policies of behaviour leads to better working relations. People feel more secure and entitled to work with an employer who cares about them. And who cares about the reputation of the company. Such policies also attract more talented employees to work with an organisation.
The profitability of business ethics
There is a direct link between being profitable and making moral decisions. One of the major factors is investment attraction. Clear management ethics make an organisation more secure for investors. Investments depend on reputation and future profit. So a company needs to have transparent values.
The shady practices might lead to public backlash pretty fast. Unfair competition, misuse of information, discrimination, environmental harm bring extra risk to investors. And the more risks are there, the less are chances they are going to trust their fund with the company.
Unethical choices might bring fast profit now. But in the long run, they bring only negative results. Shareholders want to know that the company is operating according to fair practices. After all, they risk their funds and reputation by supporting it. Ethical companies’ are much more likely to be profitable and successful in the future.
The public demand for moral decision-making and fair competition is big today. It is going to stay the same or even grow in the future.
Expectations depend on the industry
The public demand changes depending on the industry the company is working in. Expectations depend on the field of business. For example, energy producers of non-renewable sources are dealing with environmental impact. If they cause harm to the environment, the backlash is instant.
Even the smallest event in their case leads to enormous public judgement. For this industry, the state of the climate decides the businesses’ moral code.
But, digital companies, such as Google or Facebook don’t have such responsibility. Yet, they have other moral dilemmas to solve. The main concern here is the use of users’ information. And collecting it for marketing purposes. Nowadays, data security is an important and debatable topic.
The controversy is even harder to resolve as there are little legal norms to regulate it. The public, governors and industry’ leaders need to define the moral code here. If it is secure to collect users’ data and how to use it.
Cosmetic producers take moral choices about animal testing. Cruelty-free brands are becoming more popular. The demand for these products has increased by 175% since 2013. The customers want to make ethical choices. They want to cause less harm to others with their decisions.
Business ethics secures society
Ethics is a set of practices, which helps to choose in a controversial situation. It is only theoretical discipline in Philosophy; it is guidance we all use in everyday life. After all, we all want to make better decisions and make the world a little better as we expect it from ourselves. We also expect it from business management.
The use of moral values in business is a security option. One of the examples is data protection in the digital world. The technology evolves so fast so there are no legal practices to restrict some actions. They are going to appear in the future. Yet the technological progress might be far ahead.
In such a case, business ethics is a guarantee that people can trust an organisation. They share the same values. If there are no legal regulations, it all comes down to the choices management makes.
Ethics also ensures fair competition and trade as a way to build a healthy economic system. It cannot exist and prosper in a situation when there is no moral guidance whatsoever. Businesses need to trust each other and investors don’t want to take risks.
Another reason is social responsibility, especially when it comes to HR policies. The discrimination in a workplace contributes to discrimination in other spheres. It leads to inequality of income. The reason is discrimination based on ethnicity, religion or gender.
It is about societal responsibility. Also, diverse teams perform better and are more productive and creative. That’s why discrimination in a workplace is a negative factor for both society and business.
Good business ethics is crucial for creating a healthy workplace. It influences the productivity, and profitability of a company. It ensures security among employees, increases their loyalty and efficiency. Transparent values make a business more exciting to investors.
They bring financial success in the long run. It is also crucial for public demand and expectations. Customers are aware of their choices and tend to base them on a company’s reputation and policies.
About the Author
Vasyl Kafidoff is a co-founder and CEO at WritingMetier, who has strong interest in education, modern technology, marketing, and business management. One of the focuses in his studies is the way business ethics shapes companies’ performance, the market and the success of entrepreneurs or start-ups in the future.