Business ethics carries significant influence in the corporate world. Not only does it change how businesses operate on a day-to-day- basis, but it also influences legislation around corporate regulation. Find out what business ethics is, why it is important, and how you can spot ethical and unethical behaviors in the workplace. 

What Is Business Ethics?

Business ethics is the study of how a business should act in the face of ethical dilemmas and controversial situations. This can include a number of different situations, including how a business is governed, how stocks are traded, a business' role in social issues, and more.

Business ethics is a broad field because there are so many different topics that fall under its umbrella. It can be studied from a variety of different angles, whether it's philosophically, scientifically, or legally. However, the law plays the biggest role in influencing business ethics by far.

Many businesses leverage business ethics not only to remain clean from a legal perspective, but also to boost their public image. It instills and ensures trust between consumers and the businesses that serve them.

The modern idea of business ethics as a field is relatively new, but how to ethically conduct business has been widely debated since bartering and trading first arose. Aristotle even proposed a few of his own ideas about business ethics.

However, business ethics as we know it today arose in the 1970s as a field of academic study. As part of academia, business ethics were both debated philosophically and measured empirically. As this field of study became more robust, the government began legislating leading ideas in the field into law, thus forcing businesses to abide by certain rules and regulations that were deemed ethical.

Why Is Business Ethics Important?

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.

What Are the Types of Business Ethics?

Business ethics as a field of study is incredibly diverse, but many concepts can be divided into a few basic principles. Every business should strive to follow these guidelines in the pursuit of success.

Trustworthiness

Achieving trustworthiness typically involves being transparent and honest in all actions and communications. Being trustworthy can have a positive impact both internally and externally. Consumers appreciate openness, as it provides them with insight into how a business operates and conceptualizes the work that they do. Employees also appreciate this quality in a business that they work for.

Respect

Showing respect for employees and customers involves following through on all promises -- and providing sincere apologies and appropriate compensation if anything falls through. Showing a lack of respect will deter customers from engaging with a business and lower a business' reputation. It will also do significant damage to employee morale and increase turnover.

Fairness

Treating customers and employees with a sense of fairness and justice is a key type of ethics. Manipulative behaviors aren't just unethical, but they are also unhelpful -- and the top priority of any business should be to be helpful to its customers and employees. It is also important to treat all people equally.

Caring

Businesses, at the end of the day, are composed of human beings. There are human beings that consume goods or services from the business, and then there are human beings that work to produce those goods or services. Being open to their struggles and coming to the table with solutions will show empathy -- a valuable tool for any business to utilize. Showing a sense of caring and keeping the lines of communication is not just the ethical thing to do, but can also boost internal and external perceptions of the business.

Examples of Ethical Behavior in the Workplace

While understanding the basic principles of business ethics is important, it is arguably more important to understand how these ideas apply to day-to-day business operations. Here are some examples of how ethical behaviors can be practically applied.

Putting Customer Needs First

Companies that build their workplace culture around putting customer needs first and hiring people who engage in this behavior are participating in ethical behaviors. For example, if a customer comes into a store looking for a product that meets very specific needs, it's important to provide them the best product for the situation described instead of upselling them or encouraging them to buy a product that won't meet their needs. However, it is important to ensure that the "customer first" attitude does not unintentionally result in the unethical treatment of employees -- such as encouraging them to work more overtime than allowed, forcing them to endure abuse from customers with no safe way to escape the situation, and more.

Being Transparent

Transparency and clear communication is paramount when it comes to ethical workplace behaviors. Employees and consumers alike should never be lied to or told untruths, as this breaks trust within the business. For example, when faced with a public relations crisis, companies should call a meeting and address the problem directly with their employees. It's important to truthfully describe the situation as it unfolded, present solutions, and accept criticism humbly.

Prioritizing Workplace Diversity

Part of being fair is providing everyone with an equal opportunity to be employed at the company. While there is much political debate around how to create workplace fairness, it is undeniable that providing equal opportunity for employment to every applicant is an ethical standard. For example, if someone notices that management tends to hire the same type of person, they may suggest getting employees more involved in the hiring process. This will introduce different perspectives to the hiring process and increase the possibility that different kinds of applicants will be selected for a position.

Respecting Customer Information

Many businesses collect the personal information of their customers, whether it's payment information, health information, or similar. One of the priorities for any business should be securing and protecting this information. For example, a hospital may create and enforce aggressive policies around staff sharing patient information on social media. Having an employee share this kind of information on their personal accounts is not only disrespectful of the patient's privacy, but could also put the hospital at risk of violating HIPAA regulations.

Providing Resources for Reporting Unethical Behavior

If an employee notices unethical behavior in the workplace, they should have an outlet to report these behaviors. The business is responsible for putting this infrastructure in place and designing it in a way that insulates the employee from harm. For example, a research university should have a neutral office of compliance that is organizationally detached from the research arm of the institution. This provides a neutral space where academics can report unethical studies or harmful practices without fear of workplace repercussions.

Examples of Unethical Behavior in the Workplace

Just as it is important to understand how to practically apply ethical behavior, it is equally important to understand what qualifies as unethical behavior. Here are some examples of what unethical situations can look like in the workplace.

Taking Sides in an Employee Argument

It is not uncommon for conflicts to arise between employees in the workplace. Ethically, it is the job of company leadership and management to remain impartial during these conflicts. For example, if two of a manager's employees are in conflict, it is important for the manager to remain as neutral as possible. When a manager gives preference to a favorite or senior employee or provides a solution that only works in favor of one party, they are participating in unethical behavior. They must allow both employees to speak their piece and then come to a solution that works best for both parties, as well as the business itself.

Lying

Lying to your employees or customers is the biggest way to break trust. Trust is the best source of dedication and loyalty that any business has. Once that trust is broken, it is extremely difficult to get it back. For example, if a company has a high-performing employee who is asking for a promotion, they may say that there is no room in the budget for a promotion this year. A few months later, another employee may receive a promotion. Telling obvious lies isn't just unethical -- it will drive people away from your business.

Misusing Company Time

This is a common ethical dilemma that many businesses face. Many employees misuse company time in a variety of ways, whether it's surfing the internet during business hours, taking extended breaks, altering time sheets, or similar. Misusing company time is unethical because the employee is being paid a salary for work that they did not complete or time they did not dedicate to their job.

Cultivating a Hostile Workplace

While there is bound to be some conflict in the workplace, it is important to make the workplace a safe environment for everyone. Some companies unintentionally cultivate a hostile or overly competitive company culture. For example, employers may encourage an unhealthily competitive environment among employees to drive productivity and innovation. However, cultivating this kind of environment can tax employee mental health, and even encourage unethical, sabotaging behavior among employees who want to get ahead at work.

Ignoring Conflicts of Interest

Conflicts of interest encourage businesses to act in ways that do not benefit their customers or employees. For example, if a manager has a relative as their direct report, that manager may treat that employee differently than their other reports. It is the duty of the business to address this situation. Removing conflicts of interest can become more complex when a business is publicly traded, non-profit, or receives funds from a government entity.