Business Ethics

Business Ethics is the study of proper business policies and practices regarding potentially controversial issues. Some of these crisis points include corporate governance, insider trading, bribery, discrimination, corporate social responsibility, fiduciary responsibility and data protection. The reason why business ethics is important can be seen every day on the news whenever some corporation is held accountable for questionable behavior, and their brand is tarnished. Business ethics enables you to make responsible decisions and maintain highly ethical behavior when running a business. Business ethics might sound like an oxymoron, but it should be a cornerstone of every industry.

Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses. For example, a portfolio manager must give the same consideration to the portfolios of family members and small individual investors. These kinds of practices ensure the public receives fair treatment. The concept of business ethics began in the 1960s as corporations became more aware of a rising consumer-based society that showed concerns regarding the environment, social causes, and corporate responsibility. The increased focus on so-called social issues was a hallmark of the decade. Since that time period, the concept of business ethics has evolved. Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what companies must do legally versus maintaining a competitive advantage over other businesses. Firms display business ethics in several ways.

Understanding Business Ethics in Three Parts

To truly break down business ethics, it’s important to understand the three basic components that the term can be dissected into.

• History: The first part is the history. While the idea of business ethics came into existence along with the creation of the first companies or organizations, what is most often referred to by the term is its recent history since the early 1970s. This was when the term became commonly used in the United States. The main principles of business ethics are based in academia and on academic writings on proper business operations. Basic ethical practices have been gleaned through research and practical study of how businesses function, and how they operate, both independently and with one another.
• Scandals: The second major meaning behind the term is derived from its close relationship and usage when scandals occur. Companies selling goods in the U.S. that were created using child labor or poor working conditions is one such scandalous occurrence.
• Integration: Perhaps the most recent and continually developing aspect of ethics is the third piece – the idea that companies are building business ethics into the core of their companies, making them a standard part of their operational blueprint. As the world continues to grow more political – and more politically correct – an increased focus on proper business ethics and strong adherence to them become ever more the norm.

The Importance of Business Ethics

Business ethics are important for a variety of reasons.

• First and foremost, it keeps the business working within the boundaries of the law, ensuring that they aren't committing crimes against their employees, customers, consumers at large, or other parties. However, the business also has a number of other advantages that will help them succeed if they are aware of business ethics.
• Businesses can also build trust between the business and consumers. If consumers feel that a business can be trusted, they will be more likely to choose that business over its competitors. Some businesses choose to use certain aspects of business ethics as a marketing tool, particularly if they decide to highlight a popular social issue. Leveraging business ethics wisely can result in increased brand equity overall.
• Being an ethical business is also highly appealing to investors and shareholders. They will be more likely to sink money into the company, as following standard ethical business practices and leveraging them properly can be a path to success for many businesses.
• Following business ethics can also be beneficial for the business' employees and operations. Attracting top talent is significantly easier for ethical businesses. Employees not only appreciate a socially aware employer, but will also perceive them as the kind of business that will act in the best interest of their employees. This produces more dedicated employees and can also reduce recruitment costs.