Ethics – The moral principles that guide how a business operates; stands for right and wrong
To remember what ethics means use the following mnemonic:
The air was thick with ticks and crosses (ethics), showing what is right and wrong.
Business ethics deals with the moral principles that govern the conduct of businesses and their employees. These ethics are important because it helps to ensure that businesses operate in a fair and ethical manner and that they do not harm their employees, customers, or the environment.
There are a number of different ethical theories that can be applied to business. One of the most important ethical theories in business is utilitarianism. Utilitarianism states that the morally right action is the one that produces the best outcome for the greatest number of people. This means that businesses that engage in utilitarian practices make decisions which benefit the most people, even if it means sacrificing the interests of a few people, such as the shareholders.
An example of a company that uses utilitarian ethics in its operations is ice cream manufacturer Ben and Jerry’s. They have a long history of commitment to social responsibility, donating to charity, investing in renewable energy and reducing environmental impact. The careful use of recycled materials in their packaging, extensive employee perks including much higher standard wages than equivalent companies, and more extensive training means that shareholders and senior management see less of the profit, but the stakeholders benefit.
Another example is the Timpson group, which have created a company culture of support, fairness and kindness. They are one of the UK's largest employers of ex-offenders who struggle to find a job elsewhere and are committed to giving people a second chance. Management put the average employee first with what is called an upside-down management system, giving them the authority to do whatever they can to provide excellent service for the customer.
Key principles of business ethics are:
- Honesty and integrity – businesses should be honest and truthful in their dealings with employees, customers and the public.
- Fairness and justice – businesses should treat all stakeholders fairly and justly.
- Responsibility – businesses should be responsible for their actions and the consequences of their actions.
By following these principles, businesses can build trust and credibility with their stakeholders, creating a positive reputation for themselves.
Here are some of the benefits of using ethics in business:
- Increased trust and credibility – businesses that are ethical are more likely to be trusted and respected by their stakeholders. This can lead to increased sales, improved customer loyalty, and higher customer satisfaction.
- Reduced risk – businesses that are ethically run are less likely to be involved in scandals or lawsuits. This can save businesses money and protect their reputation.
- Enhanced employee morale – employees who work for ethical businesses are more likely to be satisfied with their jobs and be more productive. This can lead to increased productivity, innovation and profits.