Business ethics are a set of policies and practices that guide companies to maintain suitable behavior and standards regarding issues related to gender, diversity, discrimination, corporate governance, bribery, fiduciary responsibilities, insider trading and corporate social responsibility, among other things. Nowadays, there’s a growing understanding of and support toward ethical issues in the workplace. While laws guide business ethics in most cases, business ethics policies must guide companies at other times. This helps the company look good in the public eye.
The practice of business ethics gained popularity in the 1960s as corporations noticed the rise of consumer involvement in social causes and their keen judgment of corporate responsibility. The ’60s marked an increased focus on social issues. Ever since, the concept has evolved. Businesses must ensure that they do what’s legally correct while maintaining their competitive edge.
Understanding Business Ethics
Sometimes it may be hard to determine ethical issues, especially cases that are ambiguous and not covered by the law. Such ethical issues in business may create low employee satisfaction and involvement. Thus, the onus for identifying the factors influencing business ethics is on the managers and business owners.
Business ethics help create an environment of trust and integrity within the organization and fosters empathy, compassion, acceptance and diversity. Ethical issues in business consist of a wide array of factors within the ethical standards of a business. Understanding these ethical issues in international business and solving them before they become major problems can keep your business on the growth and development path.
As per the 2019 Global Business Ethics Survey, 25% of the employees feel that their managers don’t understand the key ethical business risks that can occur anywhere in the organization. Knowing the types of ethical issues in business will help you understand the problem and solve it.
Some common ethical issues in the workplace are:
- Account statement defaults
- Health and safety
- Abuse by senior authority
- Breach of Privacy
- Corporate Espionage
Factors Influencing Business Ethics
Business leaders are answerable to many stakeholders, including shareholders, customers, investors and managers in a business. The purview of business ethics isn’t restricted to laws and procedures. It’s a combination of formal and informal ways of doing things. Therefore, there are several factors influencing business ethics. Some of the factors that influence business ethics are:
Where people come from is a part of their identity. It defines social norms, practices and customs of specific groups of people. This is called culture. Culture is defined as ‘the way we do things’. It defines what’s acceptable and what isn’t for a specific culture. This definition explains why culture is a factor influencing business ethics. Understanding diverse cultures can help managers and leaders solve complex business ethics problems related to cultural issues
People often have personal moral philosophies based on idealism or relativism (Ferrel and Gresham, 1985). Idealists believe that harming others is always bad and that the right action can help achieve favorable consequences. Relativists believe there are no moral absolutes; they depend on situational circumstances to make their moral judgments. Whatever their philosophy, personal ethics guide individuals in governing their actions and decision-making process. Thus, more often than we’d imagine, personal ethics become an important factor influencing business ethics. As individuals can have sparring moral philosophies, various ethical issues in the workplace can arise
Company Ethical Code
Another important factor influencing business ethics is the code of ethics established by an organization. All companies have a set of rules and regulations that employees must follow to perform effectively. The company code of ethics includes the kind of behavior employees need to adopt at work. Because of the diversity in workplaces, individual codes of ethics may create confusion. Thus, the company code of ethics serves as a common guideline for managers and leaders and helps them determine the right path in case of conflicts
Rules Set by the Government
The government forms some rules and regulations that all the citizens need to follow. The laws of the country in which the business operates govern how to avoid various ethical issues that crop up in business. For example, there are specific laws to combat discrimination and racism. However, there may be some ethical issues in business that aren’t governed by law. Lack of guidance by law can cause disturbance in organizations. Legislation is a factor influencing ethical issues in international business
How To Avoid Ethical Issues In Business?
We’ve learnt about ethical issues in business, but how to avoid ethical issues in business? That’s the main question. There are various factors influencing business ethics that cannot be changed naturally. The organization will have to implement changes in their working system to solve ethical issues in the workplace. The company can:
1. Make A New Code Of Conduct
The company can add new laws and rules to their code of conduct to include a wide range of ethical issues. These will work as a guideline for all employees and managers, and help employees seeking justice against any unethical practices. The 80/20 rule, i.e., 20% of the problems that occur 80% of the time must be included in this code of conduct. In the code of conduct, the company can push for reforms that require immediate actions in different cases. The new code of conduct can solve ethical issues in the workplace effectively.
2. Monitor Only Work-Related Tabs In Laptops
For privacy security, companies should only look into the work-related emails of employees and shouldn’t have access to their private correspondence. By monitoring their work email, you can also determine their work efficiency. This step will help in avoiding ethical issues in international business.
3. Lead By Example
Leaders who display the behavior that they wish to see among their employees find few outliers. As most employees emulate their leaders, one of the best ways to ensure ethical practices is to follow them yourself
4. Avoid Or Inform About Conflicts Of Interest
It isn’t uncommon for leaders to be in conflict of interest scenarios. It’s best practice to disclose conflict and avoid creating it. For example, if one of your family members applies for a tender at your organization and wins it, there still is a conflict of interest. It’s important to follow the company’s guidelines in this case or disclose your relationship to the board or panel deciding the vendor.
5. Provide Training
This aspect can help prevent harassment and ethical problems. Training the employees on the prevalent work culture and informing them about their rights will help minimize instances of harassment.
6. Non-Disclosure Agreement
The employees should sign a non-disclosure agreement before performing any work based on sensitive information. It will help in building the organization’s trust.
Examples of Ethical Issues in Business
Ethical issues in international business are not a recent occurrence. There are many infamous examples of ethical issues in business that you can look into to understand this concept better.
Enron is an example of a company that met its death in 2001 because of presenting unethical account statements for years. The organization presented wrongful profits and business in collaboration with Arthur Andersen LLP. Enron’s share prices rose because of these wrong accounting statements. This led to many new investors putting their money in the company. But when the actual audit was revealed both these companies went out of business
Another example of ethical issues in business is the sexual harassment case on Fox News. In 2016, many female employees stated that they were sexually harassed and they filed a lawsuit against Fox News. Their allegations included not getting senior positions, getting fired or being denied promotions. Such a major ethical issue in international business can make a company lose its reputation
Harappa’s Maximum Manager and Practicing Excellence courses help in developing essential managerial skills in individuals. These courses are beneficial for talented managers, business owners and graduates who want to lead their teams effectively. These courses will help you learn skills that will help create a safe space for your company and expand your work ethic. You will learn to embrace opportunities and grow as an individual and as a team leader. You will develop new skills that will help in navigating conflicts easily. Learn the managerial skills, how to avoid ethical issues in business, and examples of ethical issues in business to take your team to new heights with Harappa.
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