Today several factors make a business profitable, including management experts, dedicated and productive employees, constant consumer demand, and careful monitoring of results. In addition to these well-known business practices, companies that implement a management philosophy that relies heavily on business ethics are more successful than those that operate unethically. Although it may not be the first variable considered when looking at a company’s profits, business ethics is an equally important catalyst for its success.
Ethical accounting practices, treatment of employees, interactions with the public, and information disseminated to shareholders are all responsibilities of the leadership team. They can have a direct impact on the overall profitability of the company. When these integral aspects of the business not conducted with a resounding theme of top-down business ethics, each facet of the business under the management team has a more significant potential for uncertainty in the short or long term.
It is being proven repeatedly that employees who are satisfied in the environment they work in are more productive than unhappy workers. Unethical practices in the workplace can lead to widespread disturbances with employees, leading to increased feelings of dissatisfaction with their work and employers’ work. However, when management fosters business ethics and company executives lead by example, employees’ ability to focus on the work they need to complete for them and the organization to succeed increases exponentially.
Employee happiness can also impact turnover and retention, as dissatisfied workers are more likely to seek other opportunities, regardless of the better wages or benefits offered by their current employer. Continuous recruiting and training new employees can reduce the capital a company can spend on income-generating activities, ultimately reducing its long-term profits.
Companies would be nothing without shareholders and investors. It is operating with business ethics in mind is the most important thing when interacting with these crucial players. It is typical for the profitability of publicly traded companies to decline rapidly when they encounter situations in which information about unethical behavior is being discovered. When investor trust is lost, it can be difficult for a company to regain the public’s confidence, its investors, and its valued shareholders; Profitability can take years to accumulate again. Companies that set the framework for business ethics in all operation facets are more likely to become profitable and remain profitable than those that conduct business unethically.
Why are business ethics important to the profitability of a company?
The moral and ethical belief system that guides the values, behaviors, and decisions of a business organization and its people is known as business ethics. Some ethical requirements for companies are codified in the law; Environmental regulations, the minimum wage, and restrictions against insider trading and conspiracy are examples of the government setting minimum standards for business ethics.
Ethics in Leadership
The management team establishes how the entire company works on a day-to-day basis. When the prevailing management philosophy is based on ethical practices and behaviors, leaders within an organization can lead employees by example and guide them in making decisions that are beneficial to them as individuals and the organization, like an everything. Developing a foundation of ethical behavior helps create lasting positive effects for a company, including attracting and retaining highly talented people and creating and maintaining a positive reputation within the community. Ethically running a business from the top down builds a stronger bond between the management team members, creating even more stability.
When management runs an organization ethically, employees follow these steps. Employees make better decisions less time with business ethics as the guiding principle; this increases productivity and overall employee morale; when employees complete work in a way that is based on honesty and integrity, the entire organization benefits. Employees who work for a corporation that demands a high standard of business ethics in all facets of operations are more likely to perform their job duties at a higher level and are also more inclined to remain loyal to that organization.
Ethics vary by industry.
Business ethics differ from industry to industry. The nature of a company’s operations has a significant influence on the ethical issues it faces. For example, an ethical dilemma arises for an investment broker when the best decision for a client and his money does not match what pays the broker the highest commission. A media company that produces TV content aimed at children may feel an ethical obligation to promote good values and avoid non-colored materials in its programming.
A striking example of industry-specific business ethics is in the field of energy. Companies that produce energy, particularly non-renewable energy, face relentless scrutiny on how they treat the environment. One misstep, be it a minor coal spill at a power plant or a major disaster like the 2010 BP oil spill, forces a company to respond to numerous regulatory bodies and society at large about whether it was in breach of its duty. To protect the environment;
Companies like Amazon and Google, which conduct most of their operations online, are not scrutinized for their environmental impact in the same way as industrial companies. However, when it comes to protecting your customers’ privacy and security, your ethics are closely scrutinized. One particular area in which technology companies must make difficult ethical decisions is marketing. Advances in data technology allow companies to track the movements of their customers online and sell that data to marketing companies, or use it to match customers with advertising promotions. Many people see this type of activity as necessary for their customers’ movements. Such customer data is invaluable to businesses; they can use it to increase profits substantially. Therefore, an ethical dilemma arises: How appropriate is it to spy on customers’ online lives to gain a marketing edge?
Companies increasingly have an incentive to be ethical as the area of ethical and socially responsible investing continues to grow. The growing number of investors looking for ethically operating companies to support drives more companies to take this issue more seriously.
With consistent ethical behavior, an increasingly favorable public image emerges. There are some other considerations just as important to potential investors and current shareholders. To maintain a positive impression, companies must commit to operating on an ethical basis for treating employees, respecting the environment, and fair market practices in terms of price and consumer treatment.
Many people interested in business ethics are fascinated by the idea that ethics is good business or that one can “do good by doing good.” Others think that idea is nonsense.
Some people’s obsession with the statement, obviously partially true and partially false, that “ethics brings benefits” is regrettable. Because, in the long run, you tend to be successful if you deal honestly with customers, treat your employees well, treat suppliers with honor, etc. But everyone in their right mind knows that the fundamental axiom does not mean that you can never do a little more (sometimes a lot more) by doing something wrong. And so “ethics is good business” is an unconvincing sales pitch. When the person is trying to sell, it implies that it applies to every individual decision at all levels. It means the highest level of virtue.
Now, of course, there is room for some interesting empirical work. Somewhere between “ethics never brings profit” and “ethics always brings profit” is accurate, and it would be helpful to know exactly where the truth is and what the variables are. Relevant although doing the right thing is (by definition) the right thing, even when it is not profitable, it would be nice to know under what circumstances those two things can go hand in hand
The critical philosophical mistake people make here thinks that the idea of ”ethics is profitable” is applied by choice. It is not, and cannot, more than confirmed that “honesty always pays” in our personal lives. Indeed, having a set of ethical rules that we (the absolute majority) abide by is “profitable” socially. Acting ethically is indeed a decent route to the success of any individual or company.
The profit potential of running an ethical business
A better motivation to inspire ethical behavior is the benefits it provides, both personally and financially. In addition to feeling good about doing the right thing, principled business conduct can also pay off. Ethical behavior is good business.
Feeling better about the business has marketing advantages. First of all, the ethical business owner is safe. It’s easier to show off when there’s nothing to hide. And honesty breeds passion. The owner believes in the business and wants to tell the world. So when ethical behavior builds trust and love, you have a trust-inspiring business owner. Trust with employees, suppliers, and customers. What better way to improve the brand than by building trust?
Improved bottom line
Customer satisfaction is not an amorphous and ambitious goal. It is instant feedback that is driven by technology; companies learn quickly when customers are happy… and when they are not. Angie’s List, Yelp, Trip Advisor online services expose everything to the public. It leaves little room for a business to neglect customers. Bad behavior leads to bad reviews. And that isn’t good for business.
On the other hand, when you treat customers ethically, the news now spreads quickly. They come back for more and make referrals. The business is not only rewarded with good grades; the bottom line is boosted.
Do you want to relieve stress? Run the business ethically. Adopting and owning a set of ethical standards is not just the right thing to do. It also reduces owner anxiety and improves personal health. We all feel better when we do the right thing.
Business ethics’ importance goes beyond employee loyalty and morale or the strength of a management team bond. As with all business initiatives, a business’s ethical operation is directly related to profitability in both the short and long term. A business’s reputation in the surrounding community, other companies, and individual investors is paramount in determining whether a business is a worthwhile investment. If a company is perceived to be unethically operating, investors are less inclined to buy shares or support its operations.