Why are ethics in business so important? Isn’t it enough to comply with the letter of the law and the rules of society? What’s in it for the business enterprise?
These are all interesting questions. Many business owners feel that maximizing profits is the chief obligation of the firm. Other owners feel that operating a business in a transparent, ethical manner is also important. Both business management and business ethics are about making the right decisions. Does one have to exist to the exclusion of the other?
I think not, and here are the reasons why managing a business ethically is important:
1. It sends the right message to customers and clients. With all the choices available nowadays, who wants to do business with a shady, ethically-challenged company?
2. It sets the right example for the firm’s employees. The temptation to cut corners or behave illegally, immorally, or unethically is reduced if employees are familiar with the firm’s code of ethical conduct and the certainty of its enforcement.
3. It can make the firm a desirable place to work. Recruiting, and then keeping, high-quality employees is far less costly than managing a turnstile where people come and go in bulk quantities.
4. It establishes a prism through which a company views not just normal business dealings, but the handling of extraordinary events or crises. When all options have been considered, asking “What is the right thing to do?” ultimately becomes the basis for action.
5. It provides a clearer focus for the firm. That clear focus is found not just in the tactical day-to-day operations, but in the firm’s strategic planning, as well.
6. It helps protect the interests of the firm. Ethical behavior doesn’t always insulate a firm from lawsuits, bad publicity, or other such negative and costly conditions, but it can certainly reduce the probabilities or mitigate the damage.
7. It helps protect the interests of everyone with whom the firm comes into contact. Will suppliers become more reliable if they know they will get paid on time? Will regulatory agencies be more helpful and accommodating? Will clients be more trusting? There is an obvious higher likelihood of the foregoing answers becoming “Yes” with a company who is seen as highly ethical, than with one who is not.
8. It promotes mutual respect and integrity. This can happen both within the company and from those whom the company deals with.
9. It promotes accountability. This can occur not just within the ranks of the employees, but with the top executives and owners, as well.
10. It can yield a reputation in the marketplace that can be beneficial and sustaining. Isn’t this a desirable condition for any company? If it isn’t, it certainly should be.