Business ethics set the standard for how your business is conducted. Ethical principles provide the foundations for various modern concepts for work, business and organization’s, which broaden individual and corporate priorities far beyond traditional business aims of profit and shareholder enrichment. Ethical factors are also a significant influence on institutions and public sector organization’s, for whom the traditional priorities of service quality and cost management must now increasingly take account of these same ethical considerations affecting the commercial and corporate world.
Importance of Ethics in today’s Business world
With legal scandals concerning insider trading and employee theft making the news, it is no wonder that businesses are increasingly giving attention to the ethical basis of their business and how to lead in an ethical way.
Ethical investment is a useful aspect for considering ethical business, since large scale investment is ultimately subject to market forces, which largely reflect public opinion. As such ethical investment criteria and examples tend to be a good guide towards ethical attitudes of large sections of people and society, rather than the ‘expert’ views of leaders and gurus.
Ethical business or investment is concerned with how profit is made and how much profit is made, whereas traditional profit-centered free-market based business is essentially only concerned with how much profit is made.
The modern concept of ethical practices in organization’s encompasses many related issues including corporate social responsibility (CSR) – or simply social responsibility, ethical management and leadership, fair-trade, globalization (addressing its negative effects), sustainability, social enterprise, ‘mutual, cooperatives & employee ownership’.
Benefits of Ethical Practices in Business
As never before, there are huge organizational advantages from behaving ethically, with humanity, compassion, and with proper consideration for the world beyond the boardroom and the shareholders:
- Customer Retention: Customers are increasingly favoring providers and suppliers who demonstrate responsibility and ethical practices. Failure to do so means lost market share, and shrinking popularity, which reduces revenues, profits, or whatever other results the organization seeks to achieve. Factors identified include increases in customer loyalty, enhancement of brand image, and tiebreaker effects for customer purchasing decisions. Customers’ sensitivity to corporate citizenship continues to gain momentum. Good corporate citizenship also enhances overall business performance, particularly improved competitive advantage, higher financial returns, and better reputation. A considerable number of studies, including work done by this editor, demonstrate a positive link.
- Employee Retention: The best staff wants to work for truly responsible and ethical employers. Failing to be a good employer means good staff leaves, and reduces the likelihood of attracting good new-starters. This pushes up costs and undermines performance and efficiency. Aside from this, good organization’s simply can’t function without good people. A low level of employee loyalty exists globally, as does a dwindling level of faith in organizational ethics and leadership. Employee turnover and other corporate culture issues present the greatest risk of failing to achieve corporate goals. Three major areas of employee concern that companies need to address in order to build a culture of stronger, more loyal relationships. They are fairness at work, care and concern for employees, and trust in employees. To achieve these goals, a values-oriented code of conduct is the necessary first step toward greater consideration of ethical issues during the decision-making process.
- Productivity of Staff: Staff who work in a high-integrity, socially responsible, globally considerate organization are far less prone to stress, attrition and dissatisfaction. Therefore they are happier and more productive. Happy productive people are a common feature in highly successful organizations. Stressed unhappy staff are less productive, take more time off, need more managing, and also take no interest in sorting out the organization’s failings when the whole thing implodes. In a workplace which is driven by ethical practices, people are less likely to spend precious energy in internal turf battles, both personally and departmentally. This can free up an enormous amount of energy for task accomplishment which versus internal friction. It thus empowers teams and organizations to better serve customers and operate more efficiently. The result can be greater power and influence in the market place.
- Reputation of Organization: It takes years, decades, to build organizational reputation – but only one scandal to destroy it. Ethical responsible organization’s are far less prone to scandals and disasters. And if one does occur, an ethical responsible organization will automatically know how to deal with it quickly and openly and honestly. People tend to forgive organization’s who are genuinely trying to do the right thing. People do not forgive, and are actually deeply insulted by, organization’s who fail and then fail again by not addressing the problem and the root cause. Arrogant leaders share this weird delusion that no-one can see what they’re up to. Years ago maybe they could hide, but now there’s absolutely no hiding place.
- Attraction for Potential Investors: Very few investors want to invest in organization’s which lack integrity and responsibility, because they don’t want the association, and because they know that for all the other reasons here, performance will eventually decline, and who wants to invest in a lost cause?