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What is ethics?
"Ethics is the aesthetics of the soul."
The word ethics is used today in many directions and on many occasions. It is derived from the Greek word ἦθος (ethos), which means temper, custom. Ethics is a part of philosophy that studies good and evil, related to morality and human behavior. In different periods of human history, ideas of good and bad, right and wrong change and this leads to changing understandings of the norm in human relationships and behaviour.
What is business ethics?
When we talk about business ethics, we are referring to the set of moral principles that guide a company. These principles of business ethics cover every aspect of a company's interactions - with other businesses, institutions, customers and employees. When ethical dilemmas or controversies arise, a company may be guided by various business ethics rules to guide its decision-making in a difficult situation.
Indicators of ethics in business organizations are values such as honesty, loyalty, respect, responsibility. These values, which are part of a corporate culture and business ethics, have both ethical and economic value. You may be asking yourself, what could be the economic value of ethics in business? Imagine you are an investor and you want to invest a large sum of money in a business. You have a choice between a company that has a good reputation for moral principles, such as loyalty and honesty, and another that is said to have no such values. You will probably want to trust your money to the first company because, whether it is a business or personal relationship, most people prefer loyalty, honesty and goodwill. It makes sense that since most investors would put their money into a business that adheres to ethical standards, that business would have a higher profit and growth rate than others. Therein lies the economic value of ethical values.
But do ethics only bring advantages to businesses?
Nowadays there is some controversy along these lines. While some companies believe that they should focus on making money by obeying the laws in a country, others believe that they should observe ethical norms of business conduct in addition to laws. As mentioned, business ethics can bring benefits to the company, but there are also disadvantages, or in other words, when you gain one thing, you may lose another - this is what happens with business ethics.
What can you gain from ethics in business?
Enhancing the reputation and image of the business
Adherence to ethics in business shows that a business is following laws and rules and providing better customer service. When a business is known for following ethical standards, it means that it rejects unfair business practices and obeys ethics in all activities. All this presents the company in a positive image and enhances its reputation with customers and employees.
Attracting more investors
We already mentioned at the beginning of this article that most investors would prefer to invest their money in a company that is known for its ethical values. This way they feel more secure that their invested money is being used responsibly and honestly.
Increase employee satisfaction and retain good employees
Employees feel more relaxed and satisfied when they work for a company that insists on ethical attitudes and practices. This increases employee confidence in the company and in their supervisors, which also leads to greater work productivity.
In addition, adhering to ethical principles can help a company retain good employees for the long term. This is because employees want to work in companies that treat them fairly and value their skills and talents.
More satisfied customers
Typically, companies that are ethical operate at a reasonable profit and at lower prices, as their profit does not come at the expense of treating customers fairly. When companies are treated fairly and honestly, customers become loyal to the brand or organisation and are more likely to use its products or services again. Customers know that the company will also be attentive to their objections or complaints and will resolve problems in a timely manner.
Nowadays, satisfied customers can write reviews on social media that reach a large audience quickly. Similarly, reviews of unfair treatment or unethical behaviour also spread very quickly on social networks and affect the reputation of the company.
Avoiding legal problems
Compliance with ethical standards ensures that organisations comply with all legal, labour and environmental regulations. Companies that follow ethical standards rarely receive fines or other sanctions from institutions.
What have you got to lose by being ethical in business?
Companies that comply with all ethical principles and norms of conduct, in a sense, limit their actions and reduce their chances of greater profits. What does this mean? For example, companies that engage in unethical behavior may exploit their employees by paying their labor less than it is actually worth. This consequently reduces costs and increases profits for the company.
Time is needed
Applying ethical principles in business is a process that takes a lot of time and effort. A company does not become ethical in one day, it takes time to prove that the company applies ethical principles in all its activities. If the company has a history of unethical behavior or practices, this process can be even longer and it will take even longer for the company to build a new reputation.
Compliance with certain ethical norms and standards is linked to the development of a program for the organization that meets its objectives. These programs can sometimes be costly to the organization. In addition, ethical standards must be continually updated in accordance with changes in laws and regulations. Therefore, it is sometimes necessary to hire an employee to monitor the changes, resulting in an additional cost to the company.
Difficult to apply to small business
Large companies can afford to reduce their profits in implementing ethical standards of conduct. But for small businesses, fluctuating profits are sometimes a matter of survival and reducing them can mean the end for the business. In many cases, small businesses cannot afford to lose profit for strictly following ethical standards due to the high competition in the market.
Ethical standards can be unsustainable
Business ethics and ethical business standards change over time, making it unstable. It is difficult for these standards to constantly change in business. This requires companies to inform and train their employees whenever there is a change in their standards.
Being ethical in business has its advantages and disadvantages. But although ethical behavior can lead to less profit, adhering to ethical principles can enhance a business's reputation, which in turn influences attracting customers, investors, and retaining employees. And more customers and investors means more sales and profits. Ultimately, the negatives of ethical compliance can turn into positives after a while. So, to summarize: you win more than you lose if you are ethical in business.
And let's not forget that we should treat others the way we want others to treat us. Hardly anyone wants to be treated unfairly or unethically, so it is good to follow ethical principles in everyday life and in business.
And to conclude with a quote from Aristotle, "It is up to us to be good or bad."