While delivering a talk on business ethics last week, an audience member asked the important, two-part question, “What is Business Ethics and why is it important?” As a business ethics speaker, business ethics consultant and author, I know the question has become increasingly important. During and after the pandemic, unethical business behavior – despite the lockdown – was at an all-time high. We need business ethics more than ever.
What is Business Ethics?
There are numerous definitions around the issue but often the simplest explanation is the best: Business ethics build upon the existing government laws by defining acceptable actions for the organization.
As a business ethics consultant and keynote speaker, I have heard many expert and academic commentaries on ethical business behaviors in the workplace, however the sentence above contains the most important elements.
We should view government laws, rules and regulations as what is minimally acceptable. It is up to organizations to enforce and augment the law. If the government states the workplace must be free of discrimination on the basis of race, religion, sexual orientation and the like, it is up to the company code of ethics to actively prohibit harassment, bullying and other inappropriate behaviors.
However, the “What is” question is not nearly as important as the “Why is” question. For example, if every employee on the sales team is told that the taking or offering of bribes is prohibited, policy must answer “why,” even if the law does not spell it out.
Why is Business Ethics Important?
In numerous business studies, it has been shown that ethically-run companies are more profitable than companies employing unethical business practices. If for no other reason, to be ethical, that reason alone has been proven to be a 10 percent advantage in terms of profitability.
Nevertheless, as a business ethics consultant and business ethics speaker who has spent nearly 25-years in the field, I can easily recount many other reasons including:
- Employees of ethically-run companies are retained longer.
- Employees of ethically-run companies typically feel happier.
- Employees of ethically-run companies feel safer.
- Employees of ethically-run companies feel their bosses will ease potential problems and have more of an investment in monitoring problem areas.
- Employees of ethically-run companies believe the corporate mission is better defined.
- Employees of ethically-run companies like the fact that policy is better spelled out.
- Employees of ethically-run companies feel that misconduct will be addressed.
- Employees of ethically-run companies feel they are being better trained.
- Employees of ethically-run companies believe their organization is held to a higher standard.
- Employees of ethically-run companies believe their management respects them.
All of the answers as to “Why is Business Ethics Important?” can be summarized into the obvious and simple phrase that ethically run companies are better places to work and better places to learn.
What do I mean? The prestigious Harvard Business Review in their article Building an Ethical Company, (November-December 2021) wrote:
“Ethical learning doesn’t happen by rote. Employers should foster an environment that encourages workers to become more ethical by practicing moral reflection.”
Ethics is a circle. So, when I ask: What is Business Ethics and why is it important? It is to say, what workers are taught and take into their hearts, they will, in turn teach. Business ethics is not an abstract; it can be life and career changing.
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