The Importance of Business EthicsThe Importance of Business EthicsThe Importance of Business Ethics
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In today’s business environment, it’s more important than ever to strive for strong ethical behavior. Never before has information been so widely available — news of even minor indiscretions can spread rapidly. Lawmakers, regulators, and the public expect businesses to perform under the highest ethical standards. When companies operate without transparency, honesty, and kindness, they risk legal and financial repercussions as well as loss of credibility in the eyes of customers and other stakeholders.
The importance of business ethics extends beyond simply operating within the boundaries of the law. For example, companies may follow the letter of the law but ignore the spirit of the law with “creative” accounting that makes their financial health appear better. This type of behavior is a clear attempt to mislead shareholders, employees, and customers, and an example of poor business ethics.
Individuals interested in expanding their knowledge of business ethics and other key leadership skills may benefit from pursuing an advanced education program, such as the online Master of Arts in Management and Leadership program from Maryville University.
Business Ethics Defined
Business ethics is the system of moral and ethical beliefs that directs the behaviors and operations of an organization and its personnel. Business ethics inform a company’s values and goals, as well as how it runs its day-to-day operations.
An ethical company runs on principles such as honesty, integrity, fairness, trustworthiness, accountability, and respect for others.
Organizational leaders have an opportunity to promote a culture of ethical behavior, both by establishing codes of conduct and by modeling positive ethical behaviors to the rest of the organization. This doesn’t just benefit a company’s reputation; leaders who expect employees to follow suit with their own ethical behaviors end up with a stronger workforce.
Why Business Ethics Are Important
It’s important for organizations to operate with good business ethics to avoid legal and regulatory problems. However, it’s also vital to exhibit strong ethical behavior to maintain a positive reputation, both with the public and employees.
When an organization enjoys a good reputation in the marketplace, attracts and retains a strong customer base, and maintains a talented workforce, it often sees a payoff in steady or increased revenues. Most people want to do business with a company that operates fairly with others. Just as negative press can drive away customers, positive press can draw in new customers.
Studies have shown that about half of the public pays attention to corporate social behavior, and 20% will actively speak out against or refuse to do business with companies they believe are behaving unethically. Customer loyalty is important to any business, and losing customers can be quite costly. Furthermore, a negative reputation can hurt a business’s chance to gain new customers.
To attract and keep talented individuals, companies should maintain an atmosphere of fairness and openness. Employees appreciate working in a positive environment where they can advance according to merit rather than favoritism or other means. When workers sense unfairness around them, their dedication to the organization suffers.
Examples of Good Business Ethics
Now that the importance of business ethics has been established, what do good business ethics look like in practice? Let’s take a look at some of the ways an organization can exhibit good business ethics.
Treat Employees Well
Companies that hold their employees to high but fair standards benefit from attracting and keeping talented, engaged, ethical workers. For example, pay increases and promotions should be given based on merit rather than favoritism. Employees should be paid as promised and on time. This builds trust between employees and the organization, which positively contributes to the overall work environment.
It’s also important for company leaders to treat employees with dignity and respect and establish a culture in which harassment of any kind isn’t tolerated. This shows employees that they’re valued and improves their commitment to the organization.
Implement Honest Business Practices
Companies should also treat their customers and partners fairly. They shouldn’t overcharge for products or services or overstate the value of what they offer. They should make every effort to keep their pricing, delivery, and service-level commitments to customers. They shouldn’t make unrealistic promises and should take responsibility when they make a mistake. Just the perception of being untrustworthy or being caught in a lie can damage a reputation.
Practice Corporate Social Responsibility
The public is increasingly aware of the corporate social responsibility (CSR) activities of organizations. These efforts may include reducing their carbon footprint and otherwise exhibiting environmental responsibility or committing to workplace diversity. When leaders begin to plan and implement CSR initiatives, they should consider issues that are relevant in their industry, seek possible solutions, set measurable goals, and communicate these plans to the public.
Your Path Toward Management and Leadership Roles Starts at Maryville
Discover how to promote good business ethics in your organization and develop other important leadership skills in the online Master of Arts in Management and Leadership program from Maryville University. With courses including Business Ethics, Organizational Behavior and Development, Workforce Management, Branding, and Management Policies, Maryville University will help prepare you for real-world challenges and opportunities.