Module-1: Introduction : Importance/Significance of ethics in business

 

Conventional approach to business ethics involves a comparison of a decision or practice to prevailing societal norms. The Pitfall is ethical relativism

Business ethics refers to contemporary organizational standards, principles, sets of values and norms that govern the actions and behavior of an individual in the business organization.

 

Importance/Significance of ethics in business

•       Attract customers to the firm's products, thereby boosting sales and profits.

•       Make employees want to stay with the business, reduce labour turnover and therefore increase productivity.

•       Attract more employees wanting to work for the business, reduce recruitment costs and enable the company to get the most talented employees.

•       Attract investors and keep the company's share price high thereby protecting the business from takeover.


Law partially defines the conduct, but “legal” and “ethical” aren’t necessarily the same. Business ethics enhances the law by outlining acceptable behaviors beyond government control.

Corporations establish business ethics to promote integrity among their employees and gain trust from key stakeholders, such as investors and consumers. While corporate ethics programs have become common, the quality varies.

Forward-looking businesses understand how business ethics relates to the triple bottom line: people, planet, profit. All three aspects are interrelated and need to be in balance. Prioritizing quarterly dividends to shareholders at the expense of responsible business practices is no longer acceptable.

An increasing number of consumers don’t want to buy products from companies that make fraudulent claims, subject their workers to inhumane working conditions, or dump toxic waste into lakes and rivers.

Businesses that expect ethical behavior from their executives, employees, and suppliers will gain trust and customer loyalty, which in turn will ensure the company’s financial security.

Business ethics is the art of leading people and making the right decisions based on a defined set of values, such as fairness, accountability, trust, honesty, equality, and respect. In fact, these values form the core foundation of ethical leadership.

Ethics is a way of understanding right from wrong by using a set of values or moral principles. By establishing a set of values for yourself and your company, you can practice ethical leadership.

The values held in esteem in the company culture are revealed by the behaviors, practices, and language incorporated in day-to-day dealings. Observing these testify to the ethical framework of the company.

Likewise, an “ethical company,” which has an actual “written policy on ethics,” projects earnest respect for ethics. Outlining chosen values holds out a beacon for direction, rather than to offer constraints and boundaries by which to operate.

 

When we are in doubt, we should ask ourselves certain questions:

  • Do we have all the information we need to make a proper decision?
  • What impact will this decision have on others?
  • What are the other options and possible consequences?

If ever in doubt, run the decision by someone you trust. Use the golden rule and treat others the way you would want to be treated.

 

Adopting ethics can help to build reputation of businesses. Promoting reputation can help in building customer loyalty and increase in revenue.


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