-
Education
-
General
- Dictionary
- Economics
- Corporate Finance
- Roth IRA
- Stocks
- Mutual Funds
- ETFs
- 401[k]
-
Investing/Trading
- Investing Essentials
- Fundamental Analysis
- Portfolio Management
- Trading Essentials
- Technical Analysis
- Risk Management
-
-
Markets
-
News
- Company News
- Markets News
- Trading News
- Political News
- Trends
-
Popular Stocks
- Apple [AAPL]
- Tesla [TSLA]
- Amazon [AMZN]
- AMD [AMD]
- Facebook [FB]
- Netflix [NFLX]
-
-
Simulator
-
Your Money
-
Personal Finance
- Wealth Management
- Budgeting/Saving
- Banking
- Credit Cards
- Home Ownership
- Retirement Planning
- Taxes
- Insurance
-
Reviews & Ratings
- Best Online Brokers
- Best Savings Accounts
- Best Home Warranties
- Best Credit Cards
- Best Personal Loans
- Best Student Loans
- Best Life Insurance
- Best Auto Insurance
-
-
Advisors
-
Your Practice
- Practice Management
- Continuing Education
- Financial Advisor Careers
- Investopedia 100
-
Wealth Management
- Portfolio Construction
- Financial Planning
-
-
Academy
-
Popular Courses
- Investing for Beginners
- Become a Day Trader
- Trading for Beginners
- Technical Analysis
-
Courses by Topic
- All Courses
- Trading Courses
- Investing Courses
- Financial Professional Courses
-
- Overview
-
Business Approach
- Overview
- Business Ethics
- Business Plan
- Organizational Structure
- Which Type of Organization is Best for Your Business?
- What Are the Major Types of Businesses in the Private Sector?
- Corporate Culture
-
Business Types
- Overview
- S Corporation
- LLC vs. Incorpation
- Private Company
- Sole Proprietorship
-
Funding A Business
- Overview
- Bootstrapping
- Crowdfunding
- Seed Capital
- Venture Capital
- Startup Capital
- Capital Funding
- Series A, B, C Funding
- Small Business Administration
-
Essential Departments in a Business
- Overview
- Upper Management
- C-Suite
- CEO
- Operations Management
- Human Resource Planning [HRP]
-
Branding
- Overview
- Branding
- Brand Personality
- Brand Management
- Brand Awareness
- Brand Loyalty
- Brand Extension
- Social Networking
-
Marketing Strategy [A-L]
- Overview
- Affiliate Marketing
- Commercialization
- Digital Marketing
- Direct Marketing
-
Marketing Strategy [M-Z]
- Overview
- Marketing
- Marketing Campaign
- Market Research
- Micromarketing
- Network Marketing
- Product Differentiation
- Target Market
-
Sales
- Overview
- Outside Sales
- Sales Lead
- Indirect Sales
- Inside Sales
Business Ethics
Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.
What Is Business Ethics?
Business ethics is the study of appropriate business policies and practices regarding potentially controversial subjectsincluding corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities. The law often guides business ethics, but at other times business ethics provide a basic guideline that businesses can choose to follow to gain public approval.
Key Takeaways
- Business ethics refers to implementing appropriate business policies and practiceswith regard to arguably controversial subjects.
- Some issues that come up in a discussion of ethics include corporate governance, insider trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.
- The law usually sets the tone for business ethics, providing a basic guideline that businesses can choose to follow to gain public approval.
Business Ethics
Understanding Business Ethics
Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses. For example, a portfolio manager must give the same consideration to the portfolios of family members and small individual investors. These kinds of practices ensurethe public receives fair treatment.
The concept of business ethics began in the 1960s as corporations became more aware of a rising consumer-based society that showed concerns regarding the environment, social causes, and corporate responsibility. The increased focus on "social issues" was a hallmark of the decade.
Since that time period, the concept of business ethics has evolved. Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what companies must do legally versus maintaining a competitive advantage over other businesses. Firms display business ethics in several ways.
Business ethics are meant to ensure a certain level of trust between consumers and corporations, guaranteeing the public fair and equal treatment.
Examples of Business Ethics
Here are a few examples of business ethics at work as corporations attempt to balance marketing and social responsibility. For example, Company XYZ sells cereals with all-natural ingredients. The marketing department wants to use the all-natural ingredients as a selling point, but it must temper enthusiasm for the product versus the laws thatgovern labeling practices.
Some competitors' advertisements tout high-fiber cereals that have the potential to reduce the risk of some types of cancer. The cereal company in question wants to gain more market share, but the marketing department cannot make dubious health claims on cereal boxes without therisk oflitigation and fines. Even though competitors with larger market shares of the cereal industryuse shady labeling practices, that doesn't mean every manufacturer should engage in unethical behavior.
For another example, consider the matter of quality control for a company that manufactures electronic components for computer servers. These components must ship on time, or the manufacturer of the parts risks losing a lucrative contract. The quality-control department discovers a possibledefect, and every component in one shipment faces checks.
Unfortunately, the checks may take too long, and the window for on-time shipping could pass, which coulddelaythe customer's product release. The quality-control department can ship the parts, hoping that not all of them are defective, or delay the shipment and test everything. If the parts are defective, the company that buys the components might face a firestorm of consumer backlash, which may lead the customer to seek amore reliable supplier.
Special Considerations
When it comes to preventing unethical behavior and repairing its negative side effects, companies often look to managers and employees to report any incidences they observe or experience. However, barriers within the company culture itself [such as fear of retaliation for reporting misconduct] can prevent this from happening.
Published by the Ethics & Compliance Initiative [ECI], the Global Business Ethics Survey of 2021 surveyed over 14,000 employees in 10 countries about different types of misconduct they observed in the workplace. 49% of the employees surveyed said they had observed misconduct, with 22% saying they had observed behavior they would categorize as abusive. 86% of employees said they reported the misconduct they observed. When questioned if they had experienced retaliation for reporting, a whopping 79% said they had been retaliated against.
Indeed, fear of retaliation is one of the major reasons employees cite for not reporting unethical behavior in the workplace. ECI says companies should work toward improving their corporate culture by reinforcing the idea that reporting suspected misconduct is beneficial to the company and acknowledging and rewarding the employee's courage for making the report.
What Is Business Ethics?
Business ethics concerns ethical dilemmas or controversial issues faced by a company. Often, business ethics involve a system of practices and procedures that help build trust with the consumer. On one level, some business ethics are embedded in the law, such as minimum wage, insider trading restrictions, and environmental regulations. On the other hand, business ethics can be influenced by management behavior, with wide-ranging effects across the company.
What Is an Example of Business Ethics?
Consider an employee who is told in a meeting that the company will face an earnings shortfall for the quarter. This employee also owns shares in the firm. It would be unethical for the employee to sell their shares since they would be subject to insider information. Alternatively, if two large competitors came together to gain an unfair advantage, such as controlling prices in a given market, this would raise serious ethical concerns.
Why Are Business Ethics Important?
Business ethics are important because they have lasting implications on several levels. With increased investor awareness on environmental, social, and governance issues, a company's reputation is at stake. For instance, if a company partakes in unethical practices, such as poor customer privacy procedures and protections, it could result in a data breach. This, in turn, may lead to a significant loss of customers, erosion of trust, less competitive hires, and share price declines.
Article Sources
Ethics and Compliance Initiative. "The State of Ethics & Compliance in the Workplace," Page 16-22. Accessed Aug. 24, 2021.
Ethics & Compliance Initiative [ECI]. "2021 Global Business Ethics Survey® Report The State of Ethics & Compliance in the Workplace: A Look at Global Trends." Accessed Aug. 24, 2021.
-
Business Development: The Basics1 of 46
-
Business Ethics: Fair Business Policies Within Controversial Subjects2 of 46
-
Business Plans: The Ins and Outs3 of 46
-
How Organizational Structures Work4 of 46
-
Which Type of Organization Is Best For Your Business?5 of 46
-
What are the major types of business in the private-sector and how do they differ from one another?6 of 46
-
What Is Corporate Culture?7 of 46
-
What is an S Corporation [S Subchapter]?8 of 46
-
LLC vs. Incorporation: Which Should I Choose?9 of 46
-
Learn about Private Companies10 of 46
-
Sole Proprietorship: What You Should Know11 of 46
-
What Is Bootstrapping?12 of 46
-
Crowdfunding Definition13 of 46
-
Understanding Seed Capital14 of 46
-
What Is Venture Capital?15 of 46
-
Understanding Startup Capital16 of 46
-
Capital Funding: What Lenders and Equity Holders Give Businesses17 of 46
-
Series A, B, C Funding: How It Works18 of 46
-
Small Business Administration [SBA]19 of 46
-
What Is Upper Management?20 of 46
-
Who's in the C-Suite?21 of 46
-
How Chief Executive Officers [CEOs] Work22 of 46
-
How Operations Management [OM] Works23 of 46
-
How Human Resource Planning [HRP] Works24 of 46
-
What Is a Brand?25 of 46
-
What Is Brand Personality?26 of 46
-
Understanding Brand Management27 of 46
-
Why Brand Awareness Matters28 of 46
-
Brand Loyalty: What You Need to Know29 of 46
-
Understanding Brand Extension30 of 46
-
What Is Social Networking?31 of 46
-
Affiliate Marketing Definition32 of 46
-
Bringing a Product to Market through Commercialization33 of 46
-
Digital Marketing34 of 46
-
Direct Marketing: What You Need to Know35 of 46
-
Everything Marketing Entails36 of 46
-
Create a Great Marketing Campaign to Attract Customers37 of 46
-
What Market Research Tells Companies About New Products and Services38 of 46
-
Micromarketing: Advertising Focused on a Specific Group of Customers39 of 46
-
What Is Network Marketing? How Does It Work?40 of 46
-
Understanding Product Differentiation41 of 46
-
What Is Target Market?42 of 46
-
Outside Sales43 of 46
-
Finding a Good Sales Lead44 of 46
-
Why Indirect Sales Matter45 of 46
-
How Inside Sales Can Be a Cheaper Way to Sell Products46 of 46
Related Terms
Related Articles
International Markets
How Do Business Ethics Differ Among Countries?
Socially Responsible Investing [SRI]
Why Socially Responsible Marketing Matters
Government & Policy
Your Boss Cant Do That! Laws That Protect Workers
Insurance
Looking at the History of Discrimination in Insurance Underwriting
Business Essentials
What Affirmative Action Means for Businesses
Small Business
Are Business Ethics Important for Profitability?
- About Us
- Terms of Use
- Dictionary
- Editorial Policy
- Advertise
- News
- Privacy Policy
- Contact Us
- Careers
- California Privacy Notice
- #
- A
- B
- C
- D
- E
- F
- G
- H
- I
- J
- K
- L
- M
- N
- O
- P
- Q
- R
- S
- T
- U
- V
- W
- X
- Y
- Z