Business ethics are the set of values, policies and protocols within an organization that influences the decisions on a wide range of issues. An organization’s business ethics guide decision-making on topics including social responsibility, fiduciary obligations, hiring practices, harassment and discrimination, living wages, workplace health and safety, accounting and privacy practices. The number of ethical concerns for any business will likely only grow in the future.
Cultural values guide leaders’ and employees’ ethical practices for both mundane tasks and moments of crisis. While many ethical issues are subject to law and minimum governmental standards — such as occupational hazards, medical malpractice, environmental contamination and restrictions against insider trading — many are not. This is, in part, because business ethics evolve over time as the surrounding cultures and expectations change. Today’s business ethics may become part of tomorrow’s business regulations.
Business ethics matter more today than ever before, and sound ethical practices can help businesses achieve their objectives in several ways.
The Pressure to Operate Ethically Is Rising
While ethical expectations remain high in the U.S., according to an Ethics & Compliance Initiative survey, 1 in 5 employees reported working in a strong ethical culture in 2020. In 2000, just 1 in 10 reported as such. However, there are increasing expectations that organizations must continue to raise ethical standards. Consider these statistics:
- Compared with 2017, employees experienced twice as much pressure in 2020 to compromise their standards.
- Reports of employee misconduct are rising, with 8 in 10 employees reporting ethical misconduct instances in 2020.
- Retaliation is skyrocketing, and 79% of employees report experiencing it.
- The most common types of misconduct included favoritism, management lying to employees and conflicts of interest.
With an ever-expanding number of media outlets, social media and smartphones with cameras, people feel more fear of exposure now than they did in the past. While the increased risk of exposure and changing ethical standards sometimes feels overwhelming, one aspect is clear: good ethics is good business. The following are some of the key benefits that ethically focused organizations gain:
A positive culture: Employees need to trust and respect their employer and work environment. To attract and retain top talent, companies must protect job candidates and employees against unfair hiring practices and discrimination. Organizations must have equal opportunities for employment and growth within the organization. Employees must feel both safe from retaliation for personal beliefs and protected when whistleblowing or sharing complaints and concerns.
A positive work culture fosters high productivity and loyalty because employees can focus on their work. The culture, in turn, raises individual standards for acting with honesty and integrity, which further contributes to a strong company reputation in the community and among stakeholders and shareholders.
Customer loyalty: Businesses must have policies that assure employees will treat customers according to ethical standards. Policies that encourage customer relations with fair, honest advertising and marketing claims — as well as with truthful product and service guarantees — help to build customer loyalty. Given digital media’s ability to quickly publicize information and events, catering to consumers’ wants and values is imperative.
Investor appeal: Investors want to feel good about putting their hard-earned money into companies that align with their values. They also have pragmatic concerns about the security of their investments. Investors and regulatory organizations eventually issue crackdowns against businesses with unethical systems, from discriminatory employment practices to polluting the environment to major PR scandals. Serious investors require trustworthy leadership and a strong company reputation for high ethical standards.
Limited employee lawsuits: In a complex society, no business is exempt from lawsuits. Executives have fallen from the highest ranks due to indiscretions such as sexual harassment or money laundering. Organizations must have effective policies and training to prevent harassment, discrimination and unfair hiring and promoting policies. Professionals must consistently enforce rules so that the company is not a target for accusations and lawsuits from disgruntled employees.
What Can Students Learn in an MBA Program?
Managers hold vital positions in upholding many ethical practices. Among their responsibilities are setting behavioral examples, collecting data from their teams, keeping track of issues and complaints and holding employees accountable to standards and for communicating ethical abuses.
Executives set the tone and foundation for ethical behavior within an organization. Their success in doing so is essential to preserving the company’s reputation to customers, prospective employees, investors, stakeholders and community members.
MBA programs equip students to understand the impact of strong ethics on a business. Programs like the University of Southern Indiana’s online MBA emphasize ethics throughout the curriculum and prepare students to effectively execute their roles in upholding ethical standards as managers and executives.