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What Is Ethics?
„Ethics is the aesthetics of the soul.“
Pierre Reverdy
The word ethics is used today in many fields and on various occasions. It comes from the Greek word ἦθος (ethos), which means character, custom. Ethics is a branch 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 changes in the understanding of norms in relationships and behavior among people. According to Wikipedia, ethics is the philosophy of morality, a branch of philosophy that deals with the questions of morality and ethics.
What Is Business Ethics?
When speaking about business ethics, it refers to the set of moral principles that a company follows. These principles of business ethics cover every aspect of the company’s interaction – with other businesses, institutions, customers, and employees. When ethical dilemmas or contradictions arise, the company can follow different business ethics rules to guide it in making a decision in a difficult situation.
Indicators of ethics in business organizations are values such as honesty, loyalty, respect, and responsibility. These values, which are part of a corporate culture and business ethics, have both ethical and economic value. You may be wondering what the economic value of ethics in business could be? Imagine that you are an investor and want to invest a large sum of money in a business. You have a choice between a company known for its good reputation regarding moral principles such as loyalty and honesty, and another that is said not to follow such values. You will likely want to entrust your money to the first company, because whether it is business or personal relationships, most people prefer loyal, honest, and benevolent treatment. It is logical that if most investors would put their money into a business that follows ethical norms, that business should have higher profit and growth than others. This is where the economic value of ethical values lies.
But does ethics bring only advantages to business?
Nowadays, there is some controversy in this regard. While some companies believe they should focus on making money by following the laws in a given country, others believe that in addition to the laws they should also follow ethical norms of behavior in business. As mentioned, business ethics can bring benefits to a 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.
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What Can You Gain from Ethics in Business?
Improving the Reputation and Image of the Business
Following ethics in business shows that the business follows laws and rules and provides better customer service. When a business is known for following ethical norms, this means it rejects unfair trade practices and adheres to ethics in all activities. All of this presents the company in a positive image and increases its reputation among customers and employees.
Attracting More Investors
We already mentioned at the beginning of the article that most investors would prefer to invest their funds in a company that is known for following certain ethical values in its work. In this way, they feel more secure that their invested money is being used responsibly and honestly.
Increasing Employee Satisfaction and Retaining Good Employees
Employees feel calmer and more satisfied when they work for a company that values ethical treatment and practices. This increases employees’ trust in the company and in their managers, which also leads to greater labor productivity.
In addition, following ethical principles can help the company retain good employees in 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
Usually, companies that are ethical work with a reasonable profit and at lower prices, since in their case profit is not at the expense of fair treatment of customers. When companies treat customers honestly and fairly, customers become loyal to the brand or organization and are more likely to use its products or services again. Customers know that the company will also deal carefully with their objections or complaints and resolve any issues that arise in a timely manner.
Nowadays, satisfied customers can write reviews on social networks that quickly reach a large audience. Likewise, reviews about unfair treatment or unethical behavior also spread very quickly on social networks and affect the company’s reputation.
Avoiding Legal Problems
Following ethical norms ensures that organizations comply with all legal, labor, and environmental regulations. Companies that follow ethical standards rarely receive fines or other sanctions from institutions.
What Can You Lose If You Are Ethical in Business?
Reduced Profit
Companies that follow all ethical principles and norms of behavior, in a sense, limit their actions and reduce their chances for greater profits. What does this mean? For example, companies that have unethical behavior can exploit their employees by paying them less than their labor is actually worth. This, in turn, leads to lower costs and increased profit for the enterprise.
It Takes Time
Implementing ethical principles in business is a process that takes a lot of time and effort. A company does not become ethical in a day; it takes time to prove that the company applies ethical principles in all its activities. If the company has had unethical behavior or practices up to now, this process may take even longer, and more time will be needed for the company to build a new reputation.
Higher Costs
Following certain ethical norms and standards is associated with developing a program for the organization that meets its goals. These programs can sometimes be expensive for the organization. In addition, ethical standards must be continuously updated in accordance with changes in laws and regulations. Therefore, sometimes it is necessary to hire an employee to monitor the changes, which leads to an additional expense for the company.
Difficult to Apply for Small Business
Large companies can afford to reduce their profits in applying ethical standards of behavior. But for small businesses, fluctuations in profit are sometimes a matter of survival, and reducing them can mean the end of the business. In many cases, small businesses cannot afford to lose profit because of strict adherence to ethical standards due to the high competition in the market.
Ethical Standards Can Be Unstable
Business ethics and ethical business standards change over time, which makes them unstable. It is difficult to change these standards constantly in business. This requires companies to inform and train their employees every time there is a change in their standards.
Being ethical in business has its advantages and disadvantages. But although ethical behavior may lead to lower profit, following ethical principles can improve the business’s reputation, which in turn affects the attraction of customers, investors, and employee retention. And more customers and investors mean more sales and profit. In the end, the negatives of following ethical norms and standards can turn into positives after some time. So, if we have to summarize: You gain more than you lose if you are ethical in business.
Let us not forget that we should treat others as 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 finish with a quote from Aristotle: „It is up to us to be good or bad.“
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