What Is “Business Ethics” and Why Is It Important? According to 23 Experts

How is “Business Ethics” defined? What is its significant role in business?

Find out from these 23 experts who shared their views about business ethics and its importance in their business.

What is “Business Ethics”?

Responsibility to act ethically

An ethical business considers the social and environmental impacts of its policies, practices, and products when making decisions. In business ethics, the responsibility of every individual to act ethically according to commonly accepted standards extends to the workplace. Business ethics encompasses honesty, integrity, and accountability. Transparent communication is important.

Forward-looking businesses understand how business ethics relates to the triple bottom line: people, planet, profit. All three aspects are interrelated and need to be in balance. Prioritizing quarterly dividends to shareholders at the expense of responsible business practices is no longer acceptable.

How businesses treat their employees and customers every day of the year—and how they use resources to manufacture products and run operations—affects profits and corporate reputation.

Why is it important?

To avoid erosion of trust

Businesses that sell products to the general public run the risk of boycotts if they engage in unethical behavior that erodes trust in their brand. An increasing number of consumers don’t want to buy products from companies that make fraudulent claims, subject their workers to inhumane working conditions, or dump toxic waste into lakes and rivers.

To ensure financial security

Businesses that expect ethical behavior from their executives, employees, and suppliers will gain trust and customer loyalty, which in turn will ensure the company’s financial security.

Just replace the word “business” with “personal.” Now the fun begins!

I haven’t met anybody eager to find friends with the lowest personal ethics. Why would anybody have such satanic aspirations? Here’s the problem.

Perhaps you’ve heard the phrase, “it’s just business; it’s not personal.” Personal and business ethics, at many levels, are the same. Some people acquire two sets of behaviors: one in office and other for family and friends, greed in one quadrant and generosity in the other are only for the near and dear ones. Perhaps it is an excellent foundation for precipitating tragedy because we haven’t learned from all that happened in Enron and too big to fail arrogance of the boardroom.

Beyond the realms of the letter and the spirit of the law

The lowers form of compliance I know exists is to abide by the letter of the law. One is not breaking the law – but one can wink and find a way to beat the system. Then thump your chest and say that we are winners and the best, and we did nothing illegal.

The lowest breed of business has this animal-like tendency. Then there are those a shade better. Such an organization aspires to abide by the spirit of the law. Accepting the latter is not a debate.

Then there are those beyond the realms of the letter and spirit of the law. These organizations strive for the highest ethical standards.

Every personality is different – the code of ethics is less lucid than the letter of the law. Constant conversations are necessary to sustain an ecosystem that prevails the sensibilities of abiding by the spirit.

It can get even more complicated beyond the realm of ethics as it now begins to penetrate the highest domain. That’s what we call morality. The sensibilities of the moral compass are highly personal. The hierarchy, as I see, has at the lowest layer, the legal codification of laws and its legal framework.

The second layer is about consciousness around ethical practices and dynamics of group behavior of abiding by governance standards. This emanates from a code of ethics that sometimes has deep-rooted corporate values — some pay lip service to a fashionable code of ethics.

The third is at the dizzying height with feet on the ground with a strong moral compass. Those who have a foundation of a moral compass with a steadfast anchor in core values and personal integrity are truly rare to find. Navy Seals are what they are because they touch these highest echelons and shape the destiny of the cause they serve.

Making the right decision based on a defined set of values

There are so many reasons to drive business ethics across your organization, from personal character building to having a high performing, respectful, and motivated team members.

Business ethics is the art of leading people and making the right decisions based on a defined set of values, such as fairness, accountability, trust, honesty, equality, and respect. In fact, these values form the core foundation of ethical leadership.

Understanding right from wrong

Ethics is a way of understanding right from wrong by using a set of values or moral principles. By establishing a set of values for yourself and your company, you can practice ethical leadership.

Most large companies have a process and set of stated values, usually referred to as the Standards of Business Conduct (SBC).

Many of the highest calibers of companies will also ask their employees to take a training course and test. It is to prove that they understand the code of ethics as well as the process by which to uphold and escalate any breaches of conduct. There is much to be admired by operating these processes and having these standards in place. But in the real world, what is on paper and how people actually behave is usually different.

Good for business

Promoting business ethics and ensuring your staff is behaving ethically is good for business.

Just this year the Economist reports that:

“Boeing faces claims that it sold 737 max planes with dangerous software. It says it is “taking actions to fully ensure the safety of the 737 max”. Criminal charges have been filed against Goldman Sachs in Malaysia for its role in arranging $6.5bn of debt for a state-run fund that engaged in fraud.

Goldman says it is co-operating with investigators. A jury in California has just found that Monsanto failed to warn a customer that its weed killer could, allegedly, cause cancer. Bayer, a German firm which bought Monsanto in June, says it will appeal the verdict.”

Even corporate leaders do not abide by their codes of conduct, so why should you?

Stand for integrity

Because you are better than that, you stand for something, you have integrity, and real integrity gets you a long way.

As you can see, there are plenty of examples of leadership without any moral guidance. Research from the Institute of Leadership & Management noted:

• 63% of managers have been asked to do something contrary to their own ethical code.
• 43% have been told to behave in direct violation of their organization’s own values statements.
• 9% have been asked to break the law.

We need more ethical leadership, and it starts with you.

Doing the right thing

Business ethics is about doing the right thing when it comes to the establishment and enforcement of a business’ policies and procedures and involves creating a culture that is honest and has its stakeholder’s best interest at heart.

In business, generating revenue can sometimes be at odds with doing what is right so ethical dilemmas come about as a result. As an ethical leader, you need to be vigilant in addressing potential problems and setting the right example for your team.

Related: Real-Life Examples of Ethical Dilemmas

There can also be a difference between what is legal and what is ethical. Just because something is legal doesn’t mean it’s ethical and vice versa.

Places a high level of importance on trustworthiness

In general, being ethical in business means that you place a high level of importance on being trustworthy, respecting others, and being responsible for your company’s stakeholders (clients, employees, and society).

Helps in making decisions

Being an ethical leader involves making decisions are that are effective, consistent, fair, and competent. This sort of decision making is the key to running a business that is ethically focused.

When we are in doubt, we should ask ourselves certain questions:

• Do we have all the information we need to make a proper decision?
• What impact will this decision have on others?
• What are the other options and possible consequences?

If ever in doubt, run the decision by someone you trust. Use the golden rule and treat others the way you would want to be treated. Numbers are important, but so are people.

Practices that either uphold moral integrity or not

Business Ethics, like every other “sector of ethics,” can be ultimately and narrowly defined as “practices which either uphold moral integrity or not.”

Yet, when discussing “business ethics and moral integrity,” the definition may be misshapen to simply refer to “what is legal or not,” rather than correctly designating an organizational operating culture and its benchmark for acceptable behavioral norms. An “Ethical Business” is held in high regard by those of moral conscious.

Projects earnest respect for ethics

The values held in esteem in the company culture are revealed by the behaviors, practices, and language incorporated in day-to-day dealings. Observing these testify to the ethical framework of the company.

Likewise, an “ethical company,” which has an actual “written policy on ethics,” projects earnest respect for ethics. Outlining chosen values holds out a beacon for direction, rather than to offer constraints and boundaries by which to operate.

Creates a place of trust, pride, and confidence

Consequences result from a company’s stand on ethics. Vigilantly constructing a culture of honorable words and actions raises the consciousness of all involved, creating an organization where employees are proud to be working and, too, where clients are clearly confident to do trade.

Yields more of the rewards desired

Even suppliers and logistical extensions of the organization get the message as to what practices are acceptable. Building a reputation as an “Ethical Company” yields more of the rewards desired and less worrisome malignancies. Tapping into human tendencies for moral thought and actions is not only admirable but also a beneficial business venture.

A principle-based approach

Business ethics, also referred to as “ethical business conduct” or “business integrity,” is a principles-based approach that provides individuals within and outside of a particular business or industry with behavioral determinants.

Well defined principles, such as responsibility, accountability, etc. can be elaborated into voluntary or mandatory “codes of ethics” that many businesses and non-business organizations, of all sizes and types, use to inform their daily behavior.

Distinct from legal vs. illegal behavior, ethical vs. unethical behavior is far more expansive and typically grounding in a defined morality. In many cases, legal behavior can be unethical, while illegal behavior can have an ethical justification. And different societies can have different views on ethical behavior.

For global trade

But as a business has become increasingly global, so to have efforts to foster harmonization in business ethics around the world, particularly on a sector-by-sector basis. If a small company in one country wishes to sell its goods or services in another, ideally, those you might sell to or partner with have the same understanding of what is ethical and unethical in their business dealings. For this reason, business ethics has become increasingly vital to global trade and creating a level playing field.

For strengthening employee retention

Business ethics also matters for far more reasons than that. The World Bank has shown that unethical behavior in business disproportionately negatively hurts small businesses seeking to grow, both in developed and developing countries. Business ethics also matters in strengthening employee retention – workers of all ages increasingly want to be part of and work harder for ethical companies and industries overall.

For fostering trust

Business ethics also fosters trust with stakeholders outside of the business, such as customers, governments, and research partners. In fact, for this reason, business ethics can spur faster innovation, better ensuring different individuals and stakeholders are on the same page, and building trust.

We’ve also seen that where there is unethical business conduct, investors are more prone to look away from financing innovations in the same space. Meaning, the next time an innovation comes forward seeking investment, if the previous actor was unethical, it could impact the next actor’s ability to secure support even if they are ethical.

This is referred to by some as the “bad apple” effect.

In a world where it is so common to be who we want to be and not who we actually are, for a lot of people, their ethics become negotiable, especially in business.

Set of guiding principles

Business ethics are those set of guiding uncompromising principles. Those standards that no matter the temptation or potential gain, you do not waver from.

In my business, it has always been to put the customer’s need ahead of ourselves and treat everyone we work with fairly. It requires a high level of E.Q. (emotional intelligence) to understand where others are coming from, what is important to them, and work to accomplish the goal while not compromising your ethics.

Doing what is right when no one is looking

This is a simple explanation, but it is beyond that. It has to be a culture commitment in any business with a no-tolerance approach to violations of it. Compromising these ethics may lead to short-term or temporary gain, but any owner, leader, or manager that wants a business to last, will never deviate from them.

Sometimes this means turning down an opportunity or not partnering with a company that isn’t aligned with your ethics. That has to be okay, and you don’t need to brag about it. The publicity of being known as the business that follows a strict code will eventually be shared.

Set of rules and a code of conduct

Business ethics is described as a set of rules that a business or organization follows. Business ethics is a code of conduct that individuals of an organization would be expected to follow and uphold. Business ethics helps provide employees with a set of guidelines on how they are expected to act and behave in the workplace.

For companies to feel more at ease during transactions

Business ethics is important because it offers many benefits when running a successful company or industry. Having high morals within a company allows for the companies you are working with to feel more at ease during transactions because they are aware of your ethical guidelines when doing business.

For employees to have a sense of ethical satisfaction

Employees often feel more comfortable and at ease when the company they are working for has strong business ethics. Employees have the satisfaction of knowing that their decisions and actions in the workplace are ethical.

For consumers to have an easier time

Consumers of products as well have an easier time purchasing products when they know the business providing the items made the items in an ethical manner.

Business ethics allows for a company to grow and thrive in their industry. Through creating and behaving in an ethical manner, the company appeals to the outside realm of their business.

The relationship between customers and the company’s commitment

For our business, “Business Ethics” is all about the relationship between our customers and the commitments we make to them prior to earning their business as well as throughout our business relationship.

We are investors who purchase houses directly from homeowners, so who they choose to work with is a big decision. They want to choose someone who they can trust to have a firm foundation when it comes to ethics.

What the company is about

We have created a set of guiding principles that we publish for our customers to see so that they can know what we are about as they make an informed decision on who they may want to work with. Our reputation is paramount, so we do everything we can to follow our guidelines and make our customers feel satisfied with our company.

To distinguish our company as one that does what is right

In our niche of the real estate sector, there are a few who can give everyone a bad name by conducting themselves unprofessionally. This is another reason why maintaining our business ethics is so crucial. We must always distinguish ourselves as a company that will do what is right, even when doing what is right may be less profitable in the short term.

To provide a sustainable model for continuous growth

We have adopted the stance that doing what is right each and every time will be more profitable in the long run and provide a sustainable model for us to continue to grow and improve the community in which we live and work.

Extension of organization’s code of conduct

Business ethics cover all aspects of individual and corporate behavior and conduct within an organization. It’s an extension of the organization’s code of conduct, which means everything from daily business practices, like how to achieve organizational goals, to the handling of the more complicated issues that affect the organization from an ethical and moral standpoint.

Here are some examples of those more complex issues that often put organizations and their leaders in hot water:

• Discrimination – Not hiring/promoting based on the knowledge/skills/experience of the candidates (both internal and external).
• Corporate social responsibility – Not engaging in business practices that ensure the organization leaves minimal to no negative impact on its local community (and the world).
• Corporate governance – No discernable system of checks and balances in place, through policies and practices, to prevent or otherwise deter corruption, such as fiduciary abuse (misappropriating funds for personal gain) and bribery.

To handle transgressions

Business ethics are crucial because, without it, an organization and its employees are left to determine on their merit (or lack thereof) what is ethical or moral on a case-by-case basis.

As an organization, you don’t want that because as I alluded to, morality and ethics can and will differ from person to person, and when you factor in the numerous decisions and opportunities to make moral decisions through the course of a business day, therein lies the making of a potential disaster.

In other words, to set an example for employees and establish a culture of moral and ethical integrity, organizations must practice business ethics by implementing policies and procedures that not only address the organization’s moral and ethical stance on issues, but also explicitly states how the organization will handle such transgressions as part of their code of conduct.

Rules and standards

Business Ethics are the rules and standards which a business operates under. In our field of cybersecurity, our business ethics mean everything. We deal with some of the deepest, personal secrets individuals do not want to get out.

I run my business on stringent standards of honesty, integrity, authentication, confidentiality, and only work inside legal lines. We follow our security protocol to the letter so that we are not responsible for compromising business or family digital assets. If I did not hold myself or my employees to these standards, clients would be less likely to trust my company.

Builds a trustworthy relationship

Business Ethics build a trustworthy relationship with my clients that keeps them coming back again and again. I have had clients trust what I say over a family member or lifetime friend because of the ethics I hold.

Imagine how successful a company can be if it has that kind of loyalty from its customers and employees. Every business should want to have that community. You can only get that from having business ethics.

Operating within your prospects’ or clients’ best interests

Business Ethics, to me, is about always operating within your prospects’ or clients’ best interests. I see so many marketers and salespeople these days are more interested in lining their own pockets irrespective of whether the product or service they are selling is a good fit for their prospective customers.

I feel it’s important to be able to walk away from a prospect and potential sale if it’s not a good fit even if they’re stood there with their checkbook out. More often than not, when one takes on customers who are not a good fit, it leads to frustration, a lack of results, and a general bad feeling between the customer and supplier.

Rules and policies that govern business operations

While ethics in the private industry can be a bit fuzzy, business ethics is a more concrete concept. Business ethics refer to the rules and policies that govern how a business operates. Most of the time, these ethics are simply written confirmation of the laws that are already in place. But there are times when a company must decide how it wants to operate when there are no laws to dictate their behavior.

To put proper ethical guidelines

As to the why, it’s simple. Especially in these times, companies are judged quickly and harshly in the court of public opinion. While some companies have the capital to weather a PR storm, others could be taken down entirely by a single unethical move. And, even if you could weather the storm, you’re still taking a hit and one that could be avoided if you’d put the proper ethical guidelines in place.

I see business ethics in the overall, larger context of corporate social responsibility.

Being a good corporate citizen

For me, to be ethical in business is not just keeping your word and treating people fairly; rather, it is about being a good corporate citizen. That means seeing yourself and your company as a stakeholder in your community and vice versa (seeing your community as being just as much of a stakeholder in your company as, say, your employees, shareholders, customers, etc.).

I started Fast Layne Solutions three years ago with a dual business and social mission. My business mission is to save America’s disappearing independent physicians by helping them thrive through the use of affordable but cutting-edge technology solutions that allow them to compete with big corporate providers/hospital systems.

My social mission is to do all that while giving back in a meaningful way to my community, which my company does in a variety of ways. (We’ve earmarked 5% of corporate profits for St Jude, we’re partnering with non-profits to create jobs in economically distressed areas, and we routinely run promotions to generate new revenue streams for charities and schools in exchange for referrals.)

Ethical Businesses build an incredible culture

When you think of a bunch of big businesses out there, you will see a reason as to why people continue to support those brands; they add value, and they do the right thing. They go the extra mile and educate their people.

I have been a financial advisor for four years now, and most people wouldn’t see that as a place to excel at going the extra mile, but I disagree. In our company, we focus on always doing the right thing. I love to help the people around me learn and grow. Helping people find their true selves, happiness, and passion for their work is how you build the desirable culture everyone is looking for.

I do my best to strive for excellence daily, whether that means bringing a sick client a cup of soup or even dog sitting! You never know what someone actually needs from you. If you are open to running a business that is focused on absolute service, then you will be successful long term.

Short term sacrifice is sometimes needed, but once you have established your personal brand, you will have a much easier time showing people why they want to do business with your company. People will become word of mouth marketers for you because they are so impressed with the core values your company stands for.

Think of words like:

• Justice
• Respect
• Trust
• Honesty
• Contribution
• Growth
• Integral
• Ethical
• Kind
• Happy

These core values truly shine when they are practiced. When you teach your people to showcase these emotions, they will create an incredible customer experience. It will help you gain customer loyalty for life as well as people who will spread the word about your amazing company.

Application of core ethical values

Business ethics is the application of core ethical values, such as integrity, honesty, and responsibility in the business practice of the company or profession.

Creates trust

Strong business ethics creates trust for all stakeholders. I believe that trust is the most important value in any relationship, personal or corporate. Without trust, sustained by ethics, businesses ultimately will not survive.

Client’s best interest as a beacon in all transactions

In our line of work, business ethics means using your client’s best interests as a beacon in navigating all transactions.

In our business, we try to really stress to employees how important it is always to have the customer’s best interests in mind when guiding them through various insurance planning discussions.

For quick organic growth

How a company approaches business ethics is important because those that always seek to do what’s in their client’s best interests typically grow quickly through organic growth while those lacking either never take off or slowly die because they are not trusted.

Without trust, any business relationship is doomed to fail when clients find out a business is looking primarily after their own financial gain rather than the client’s best interests.

Appropriate business policy and practices

Business ethics refers to what is appropriate business policy and practices.

Many issues brought up in business ethics are mirrored closely in business law, for example, things that are illegal like insider trading, bribery, and discrimination. However, business ethics also deal with appropriate business practices that aren’t just illegal.

There are plenty of legal business practices that are legal. An example of unethical but legal business practices is multi-level marketing companies. They operate very similarly to pyramid schemes but are legal in all 50 states.

Reputation over a short term profit

Business ethics occasionally run counter to actions that would maximize profits. When this occurs, it’s wise to remember reputation is more important than short term profits. If you have a bad reputation, it will be more difficult for you to do business dealings in the future.

Long term profits are more closely associated with a good reputation and fair business dealings than trying to cut corners and squeeze every penny you can out of every person you interact with.

Applied principles

Business ethics refers to the form of applied principles, morals, and rules of conduct in pursuing business. These are determined upon the expected policies and practices approved by society and government administration. Business ethics include customer satisfaction and benefit, employee benefits and welfare, legitimate business processes, corporate social responsibility, corporate governance, etc.

For customer satisfaction and benefits

Customers are the main things of any business which settle the fate of the business. It is one of the foremost duties of any business to fulfill the expectations of its customers or consumers. Consumers have the right to be satisfied with the products or services of any business as expected.

Consumers can be fully satisfied, and their rights can be secured by the business only if the business follows proper business ethics.

To stop business malpractices

Some businesses practice improper and illegal business processes to attain certain business targets, mainly to gain quick profits. These malpractices include selling counterfeit, low-standard or harmful products, black-marketing, overloading the market, cheating in weights and measures, harassing consumers, etc. Each of these actions hurts the consumers and society, as well. Following business ethics resists these malpractices.

For the survival and growth of the business

The business which does not follow business ethics can not succeed in the long run. A company that deceives its consumers in any way or engages in illegal business processes loses its credibility.

Deceived customers or legal actions against the business ruin the credibility of the business, and these acts eventually lead the business to its closure. So following business ethics is a must to survive and grow the business.

The question is, why not business ethics? This topic is an overlooked way too often in business from simple areas of accepting gifts from vendors or suppliers to falsifying accounting documentation.

Anyone in a leadership position needs to understand the importance of business ethics and how not having a code of ethics or not following the code can have detrimental impacts on the culture and reputation of the organization. There are many case studies over the last two decades to drive home the importance of ethics.

Ethics is simply this, doing the right thing when everyone is looking and when no one is looking.

What all brands should be guided by

Are you serving your customers’ best interests? Are you serving your employees’ best interests?

The “bottom line” should be more than the profit. We need to consider our impact on our community as well.

Make sure that your team members are treating each other and your customers well. And, make sure your company as a whole is treating competitors and communities fairly.

Doing the right thing

When I think of business ethics, I immediately think of doing the right thing.

I’ve always believed in that – it’s something that was instilled in me at a very young age thanks to my maternal grandfather. He was a small business owner and took the time to talk to me about his work and how to manage others, and he always emphasized the importance of doing the right thing for your business, your employees and your customers – and thanks to him, so do I.

Business ethics is the key to becoming a better business owner

What is ethical, though? Doing what you would want others to do to your mom or dad in business. If you are questioning what to do in a situation, always error on the side of caution.

As you build a solid foundation, your business will move substantially forward also. It may seem slower at first to not skip and cut corners, but in the long run, it will pay dividends!