Importance of business ethics

From CEOpedia | Management online

Ethics is closely related to trust. It can be said that if the goal is to develop trust, then behavior must be ethical. Without ethical behavior, gaining trust is a rather impossible task. In business, trust can be divided into three types: The first is trust in relationships with suppliers, the second is trust in relationships with employees, and the third is trust in relationships with customers. In a situation where the company manages to develop trust in all three groups, it can be concluded that the company most likely adheres to the principles of ethics (A. Fernando 2010, p. 1.5).

Ethics consists of building trust and maintaining it regularly, thanks to which the company develops profitably and has a good reputation on the market. Earlier, a well-known saying was "business of business is business". Now, however, entrepreneurs have understood how important business ethics are and this saying has changed into "business of business is an ethical business". A business that does not follow the rules of ethics will probably collapse after some time (A. Fernando 2010, p. 1.5).

Philosophy of ethics

Ethics is a philosophical phenomenon that has been studied in the world for thousands of years. Ethics as part of philosophy mainly concerns morality and it should be associated with it. Behind the concept of ethics, there are main issues regarding good and bad behavior in society. Ethics are most often divided into three types because they exist:

  • applied ethics,
  • normative ethics,
  • metaethics.

Metaethics deals strictly with the theoretical approach to morality, normative ethics deals with practical issues, aimed at creating moral standards in various societies. The last type of ethics, i.e. applied ethics, includes controversial situations and the moral way of acting while in such situations. This part of ethics is a science that gives moral hints on proper behavior in difficult situations in society as well as in the business world. Business ethics can be classified as applied ethics (A. Mika 2011, p. 13).

Components of Business Ethics

The most important types of business ethics cannot be listed because they depend on the type of enterprise. The most popular components of business ethics include:

  • Trustworthiness.
  • Solidarity.
  • Corporate responsibilities.
  • Legal responsibility.
  • Morality.
  • Trust.
  • Fairness.
  • Respect.
  • Equality.

Benefits of using ethics in the workplace

Business ethics are very important and getting it into the company can get many benefits. Among them we distinguish:

  • Improving society - Ethics makes discrimination and the exploitation of employees significantly less frequent, and the fight for equality and integrity in the workplace has resulted in the establishment of provisions that are beneficial to society.
  • Higher efficiency and strong teamwork - Companies in which employees have different moral standards will not function well. Adherence to professional ethics will lead to better teamwork and better efficiency.
  • Adapting employees to difficult situations - Ethical training is helpful in difficult situations. Such ethical training helps managers make the right decisions.
  • Strong public image - Organizations with strong ethical practices will have a strong public image. Thanks to the positive image, the company can count on the loyalty of employees, consumers and the general public (A. Fernando 2010, p. 1.13).

Examples of Importance of business ethics

  • Respect for Employees: Ethical behavior in business is important because it establishes respect for employees. Employees must be treated with mutual respect and dignity, regardless of their position or status in the company. When a company operates with ethical standards, it shows that they value their employees as people, not just as workers. This creates a positive work environment and can lead to higher morale and better productivity.
  • Customer Satisfaction: Ethical behavior in business is important because it encourages customer satisfaction. Customers want to be sure that their transactions are handled with integrity and that their personal information is kept secure. When a company operates with high ethical standards, customers are more likely to trust the company and be willing to do business with them. This can lead to increased sales and long-term customer loyalty.
  • Builds Trust: Ethical behavior in business is important because it helps to build trust between the company and its stakeholders. When a company operates with integrity, it shows that they value their relationships with customers, suppliers, and employees. This trust can lead to better partnerships and more successful business deals.

Limitations of Importance of business ethics

The importance of business ethics cannot be overestimated as it serves to ensure that ethical practices are upheld in the workplace. However, there are certain limitations to the importance of business ethics:

  • Firstly, it is not always possible to determine what is ethically right and wrong in certain situations, as ethical dilemmas often arise in the business world. Therefore, companies must be prepared to discuss and evaluate the ethical implications of the decisions they make.
  • Secondly, the implementation of ethical practices is often hindered by the fact that not all stakeholders are on the same page when it comes to the importance of ethics. This can lead to disagreements, which can ultimately jeopardize the success of a company.
  • Lastly, it is important to note that business ethics are not a one-size-fits-all solution. Different companies have different ethical standards and expectations, and it is important to understand the nuances of each company’s ethical code in order to ensure that the ethical practices are being followed.

Other approaches related to Importance of business ethics

The importance of business ethics can be approached from many different angles. Some of the main approaches include:

  • Corporate Social Responsibility (CSR): This approach emphasizes the role of businesses in being accountable to the environment and society. Companies should strive to conduct their operations in a way that is socially responsible, ethical and sustainable. This includes activities such as investing in green initiatives, reducing pollution, and supporting local communities.
  • Ethical Leadership: This approach stresses the importance of ethical leadership in creating a culture of ethical behavior. Ethical leaders should set a good example for their employees, promote ethical decision-making, and foster an environment of trust and transparency.
  • Compliance: This approach focuses on the importance of adhering to laws, regulations, and other legal obligations. Companies must ensure that their operations comply with relevant laws and regulations, and that their employees are aware of their legal obligations.

In summary, the importance of business ethics can be approached from many different angles, such as corporate social responsibility, ethical leadership, and compliance. Each approach emphasizes the importance of ethical behavior in the workplace in maintaining trust, promoting sustainability, and ensuring legal compliance.

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Author: Agnieszka Damian