Business ethics means ethical or moral standards that drive corporate culture. Also referred to as corporate ethics, it encompasses ethical issues arising in a commercial or professional environment. In today’s world of the free and open market, globalization and explosion in communication, ethics play a vital role.
Importance of Business Ethics
Whether you own a startup, small organization or are a corporate giant, the same level of ethics govern all businesses. A recent incidence of wall street collapse emphasizes how following the principles of business ethics is essential for improving the profitability of the business and improving employees’ productivity. Major organizations like HealthSouth, Enron, Arthur Andersen, Freddie Mac, AIG and Fannie Mae were damaged and destroyed by their executives. The main culprit for their downfall was their massive ambition and intelligence which lacked the moral compass. Charisma cannot solely run a business successfully in this ultra high tech, competitive and interdependent business world. Intelligence and business acumen needs to be backed by conscience and strong ethical notions. Else it will lead to epic failures in both personal and economic goals. Former US president Theodore Roosevelt rightly said that if you educate a mind that is without morals is like educating and promoting menace in society.
Principles of Business Ethics
Now that we know what is meant by business ethics, we must identify and understand the 12 pillars or principles of ethics for business executives:
Honest: Businesses must show honesty in all their communications and conducts. Abraham Lincoln has drawn a comparison between character and reputation as a tree and its shadow. To build a reputation, one must have character and honesty at the forefront of it. Honesty has to be accompanied with forthrightness and candidness.
Integrity: You demonstrate integrity when your thoughts, words and actions are in line with each other. Ethical executives earn trust by having the integrity of character. Integrity often requires walking the extra mile with moral courage and inner strength to do the right thing even if it costs some personal losses.
Keeping Promises: An executive who makes all efforts to fulfil the spirit of their commitments and promises earns trust and respect. They do not manipulate agreements or misinterpret them to avoid compliance with the commitment.
Loyalty: Executives must be loyal with their organizations as well as people or other organizations they work with. They must strive to protect the lawful interests of their companies and colleagues. They need to safeguard information learned in confidence and not use it for personal gains.
Fairness: Fairness means not to exercise power arbitrarily to gain or maintain any advantage. This also means to not take undue advantage of another person’s mistakes or difficulties.
Caring: A genuine compassion should be shown towards other’s well being. An ethical business person would meet his/her business objectives without causing harm to others and considering their good.
Respect For Others: Every person with whom a business executive interacts with must be treated with respect, autonomy and dignity.
Law-abiding: All laws, rules and regulations related to one’s business activities must be followed.
Commitment to Excellence: Excellence in their job is key to an organization's success. Ethical executives must be well-informed and constantly work towards improving their proficiency in diverse areas.
Leadership: An ethical role model would strive to be a role model for his or her subordinates or employees. They promote ethical decision making principled reasoning.
Reputation and Morale: Reputation of a company and the pride and morale of their employees is of the utmost importance to an ethical businessman. They are constantly trying to build the reputation and morale of their business and people with their affirmative words and actions.
Accountability: A business person must own the outcome of their decisions and accountability of the ethical quality of decisions they make.
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So now if anyone asks you “What do you mean by business ethics”, you can say that ethics refers to how humans conduct themselves morally within the business and also outside of it. Ethical principles are universal standards that differentiate right from wrong. They define the kind of behaviour a human should or should not engage in. Ethics and character count in every aspect of life but business ethics definition has another level of connotation attached to it.