Many businesses have gained a bad reputation just by being in business. To some people, businesses are interested in making money, and that is the bottom line. It could be called capitalism in its purest form. Making money is not wrong in itself. It is the manner in which some businesses conduct themselves that brings up the question of ethical behavior.
Good business ethics should be a part of every business. There are many factors to consider. When a company does business with another that is considered unethical, does this make the first company unethical by association? Some people would say yes, the first business has a responsibility and it is now a link in the chain of unethical businesses.
Many global businesses, including most of the major brands that the public uses, can be seen not to think too highly of good business ethics. Many major brands have been fined millions for breaking ethical business laws. Money is the major deciding factor.
Ethics is a branch of social science. It deals with moral principles and social values. It helps us to classify, what is good and what is bad? It tells us to do good things and avoid doing bad things.
Is ethical behavior good or bad for business? The advantages of ethical behavior include:
1. Higher revenues demand from positive consumer support
2. Improved brand and business awareness and recognition
3. Better employee motivation and recruitment
4. New sources of finance: e.g. from ethical investors
5. Business ethics offer companies a competitive advantage. Consumers learn to trust ethical brands and remain loyal to them, even during difficult periods. In 1982, Johnson & Johnson spent over $100 million dollars recalling Tylenol, its best-selling product, after someone tampered with bottles of the painkiller. The company followed its credo, a set of ethical organizational values, and the result was a boost in consumer confidence, despite the contamination scare. Society benefits from business ethics because ethical companies recognize their social responsibilities.
6. Attract customers to the firm’s products, thereby boosting sales and profits
7. Make employees want to stay with the business, reduce labor turnover and therefore increase productivity
8. Attract more employees wanting to work for the business, reduce recruitment costs and enable the company to get the most talented employees
9. Attract investors and keep the company’s share price high, thereby protecting the business from takeover.
10. It is good for staff for morale to work in an open culture, with possible benefits of increased productivity and staff loyalty. These are vital ingredients in the current climate when staff may be pushed to the limit. An organization known for fair and responsible practice is likely to attract high quality employees and ‘stand out from the crowd.’
11. Demonstrating sound ethical practices can often be a condition for tendering for contracts with large customers needing to ensure the integrity of their supply chain. Good relationships with customers based on a commitment to honesty and transparency will enhance a company’s reputation. SMEs that are familiar with these demands will have a competitive advantage.
12. There would be happiness in society as people living a life of sharing and contribution.
The disadvantages claimed for ethical business include: 1. Higher costs: e.g. sourcing from Fair-traded suppliers rather than lowest price
2. Higher overheads: e.g. training & communication of ethical policy
3. Danger of building up false expectations.
4. Business ethics reduce a company’s freedom to maximize its profit. For example, a multinational company may move its manufacturing facility to a developing country to reduce costs. Practices acceptable in that country, such as child labor, poor health and safety, poverty-level wages and coerced employment will not be tolerated by an ethical company. Improvements in working conditions, such as a living wage and minimum health and safety standard, reduce the level of cost-savings that the company generates.
5. Bad business ethics also includes illegal actions. For example, falsification of information regarding financial status can lead to criminal prosecutions of business executives. Investors can lose great sums of money due to such practices. UK clothing firm, Primark, has fired three Indian suppliers because they used child labor to finish goods.
Real-World Examples of Bad Business Ethics Reputation is a company’s biggest asset and bad business ethics invariably result in loss of reputation and credibility. Yet many large corporate also find themselves caught red handed indulging in shady conduct. Read on for some real life examples of bad business ethics.
There are good business reasons for a strong commitment to ethical values: 1. Ethical companies have been shown to be more profitable.
2. Making ethical choices results in lower stress for corporate managers and other employees.
3. Our reputation, good or bad, endures.
4. Ethical behavior enhances leadership.
5. The alternative to voluntary ethical behavior is demanding and costly regulation.