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Understanding the relationship between business & ethics

By: Leigh Goessl
22 February, 2010

The relationship between business and ethics is intrinsically entwined. A successful company is one which can effectively recognise and cultivate the relationship which exists between the two.

Businesses that exhibit and promote strong corporate codes of ethics are more prosperous in the long run because they show a commitment to an expectation of sound moral behavior. This demonstrates a dedication to society, customers, employees and the business itself. It also enhances a company's reputation if they become commonly known as an ethical company, and this brings more value to the organisation.

The highly competitive environment in today's global economy puts pressures on company leaders to remain profitable and to show a good return to stakeholders. Often this pressure can result in unethical decisions being made in order to deliver positive results. When this occurs it usually results in a pattern that gets passed down through the organisation.
As leaders show unethical behaviour, and perhaps even justify such behaviour while knowing it to be wrong, this eventually becomes a part of organisational culture. People follow by example, and the lack of moral judgment will spread.

It's easy to blame "the system", yet many fail to realise "the system" is comprised of decision making individuals. The relationship between business and ethics is inherently linked, but there are some who fail to make this connection.
To say "business is business" is not justified, as responsible (ethical) decision making is an important component of doing good business.

Today's society is an instant gratification one, and people expect immediate results. This is perhaps part of the reason why some companies exhibit bad business practices. Not the only reason, but perhaps a common one. Obviously one's individual moral compass impacts choices made in a business, and when the cultural environment nurtures sound moral philosophies and does not tolerate bad business practices, the immoral acts will decline.

Granted the unethical companies may initially make significant gains financially and deliver the profits, but at what cost? When companies make unethical decisions, it can result in defective or rushed products, unsubstantiated firing of employees, and false presentations of products to consumers.

Is this good for the company? The fact is the only thing it creates is an illusion. Yes, these factors will all cut costs and give the appearance of profit, but it's inevitable that poor choices will negatively impact the business and be more costly in the long run.

While the immediate bottom lines show a healthy profit through immoral acts, the reputations of these companies ultimately suffer. Over the course of time this can really hurt a business and its profits. All too often we hear about CEOs who have either stolen funds, or ruined a company's reputation, due to corrupt practices.

In the long run, managers and leaders who promote an atmosphere with low ethical standards bring harm the business. While it may not necessarily shut the business down, it will impact the opportunity to increase revenues to its fullest potential.

Good business practices starts with management setting standards of what's expected, and they should lead by example. The establishment of higher levels of ethical behaviour within a business benefits the company in many ways. It displays strong values have been set for a commitment to company philosophy and mission.

There is no good reason why a company cannot make ethically sound decisions, and still turn a profit. Cheating and/or lying do not bring value to a business, and it also affects employee morale. Employees and reputation are two very valuable assets, and by promoting a morally sound environment for both employees and customers; this can only enhance those assets.

Consumer trust and confidence in a business can only serve to benefit the company. Economic rules dictate that the larger a network, the more value is added to that network. If customers can accurately rely on the fair treatment, expertise and knowledge of a company, this will further expand their reputation as honest and as a result attract more customers. This ultimately economically benefits the company as well, and their network will grow. This being the case, it would be in a company's best interest to promote universal ethically good behavior in the workplace.

A positive reputation leads to higher profits and provides better service for the public. Ethics and business go hand in hand, and cannot effectively be separated. Ultimately implementing a strong ethical policy is a win-win situation for all. In today's competitive environment why wouldn't a company want to do all they can do to promote success on all levels?