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The Importance of Business Ethics

written by: Mary White•edited by: Ronda Bowen•updated: 4/16/2011

There are many reasons that business ethics matter. Companies that have made a commitment to behaving in a socially responsible manner know that committing to ethical behavior is not only the right thing to do – it's also good business.

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    Understanding Business Ethics

    To answer the question of why business ethics are important, you must understand what the phrase "business ethics" really means. At the most basic level, business ethics are nothing more than the code of values and principles that govern the actions of a person, or a group of people, regarding what is right versus what is wrong.

    A person's sense of ethics has an impact on the type of conduct the individual will exhibit. When people are able to tell the difference between right and wrong and they choose to do what is right, then they are acting in an ethical manner. Business ethics aren't just about the difference between right and wrong; they are the actual application of that knowledge to business.

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    Why Are Business Ethics Important?

    success and failure - sxc.hu - cobrasoft - Sigurd Decroos While many businesses have codes of ethics, the words written in a formal code are valuable only if their intent is reflected in the actions of the people who represent the organization. A business cannot be any more – or less – ethical than the people who run it and who work for it. Within a company, people take their cues regarding the behaviors that are acceptable based on how they see the company's leaders acting and the behaviors that they see being rewarded in their peers. Businesses that are managed by leaders who conduct themselves in an ethical manner and who reward employees for doing what is right are much more likely to be characterized by a positive ethical culture.

    If an organization's corporate culture is characterized by ethical behaviors, then the decisions that are made by the company's leaders and workers are likely to be ones that are socially responsible rather than motivated solely by a profit-seeking motive. Socially responsible business decisions are ones that are made from a stakeholder perspective, focusing on coming up with problems that take into account the needs of everyone who has the potential to be impacted by the company's actions. By focusing on the impact an action will have on all stakeholders rather than solely on the bottom line, companies can avoid making decisions that are on the wrong side of the line between right and wrong.

    Individuals who work for businesses make decisions every day, and their actions can impact the lives of many other people. When businesspeople make decisions that are not ethical, many people can be hurt – including employees, customers, and members of the general population -- as well as the business itself. Companies that are operated by people who do not choose to do what is right are often entities that do not survive for the long term. Often, making business decision that are counter to what is right may result in short term profit but lead to eventual demise of the organization.

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    Business Ethics is Good Business

    With so many reasons why business ethics are important, it's easy to see why creating an ethical culture is something that many companies are focusing on. Organizations that are committed to long term success recognize and realize that creating a culture where ethical behaviors are rewarded and encouraged is the ultimate key to survival today and growth in the future.

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    Resources

    Reference: Business-Ethics.com: The Magazine of Corporate Responsibility

    Image Credit: Sxc.hu (cobrasoft)


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