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Why Business Ethics are More Important than Ever for Employers

The term “business ethics” in its formal sense is fairly new and can be traced back to the early 1970’s. However, ethics in business goes all the way back to pre-biblical times when Greek philosophers like Plato and Aristotle discussed the place of justice in economic relations. Although business ethics have always been essential, it’s perhaps never been more important for employers than it is today.


An Increase in Ethics-Related Firings

There’s an interesting phenomenon occurring in the U.S. as well as other economic powerhouses such as the BRIC countries (Brazil, Russia, India and China). We’re seeing a significant increase in firings due to ethical lapses. A study by Success&, a part of the PwC network, found, “Successions in the U.S. and Canada attributable to ethical lapses more than doubled from 1.6 percent in 2007 to 3.3 percent in 2012-16.”

However, this number is actually much lower than the number of firings during the same period in Western Europe, which was 5.9 percent and 8.8 percent in the BRIC countries.


Violations Aren’t Any More Frequent

By examining this data, the first thing you may assume is that CEOs are being more mischievous than ever. Surely the dramatic increase in ethics-related firings must be the result of nefarious activity and underhanded business practices.

What’s interesting is that there has not been an increase in the number of violations cases. There’s absolutely no data to suggest that this is the case. The reason for this upswing is simply because the world is changing.


Specific Factors

The technological revolution throughout the 21st century has brought about many changes. One of the biggest is the prevalence and widespread use of digital communication such as smartphones, social media and email. Not only does this enable people to conveniently capture digital footage of ethical misconduct, it can spread like wildfire.

You could also make the argument that people are more skeptical than ever of big business. After the Great Recession, there’s an underlying wariness for many consumers. If someone spots any wrongdoing, you can almost bet that it’s going to be brought out in the open. Combine this with 24/7 media coverage, and a CEO’s reputation can go from spotless to tainted within a matter of hours.


HR’s Responsibility

Given the current business climate we’re in as it relates to ethics, company leaders need to be more conscious than ever of their decision-making. When you get right down to it, it’s up to your HR team to create a set of rules and procedures to ensure that leaders don’t find themselves in a compromising situation.

There should be clear policies that dictate what’s considered proper behavior and to specify any actions that won’t be tolerated. You’ll also want to have an effective way to handle complaints and investigate any questionable behaviors that may arise.

Business ethics have always been important. When analyzing recent research and the increased number of ethics-related firings, it’s obvious that this is an area that should receive top priority in 2017. Addressing this issue and implementing effective policies is your best bet for keeping your company’s reputation clean and avoiding unwanted attention.

Top Five Ethical Practices for Your Business

Ethics play a major role in modern business and can impact everything from brand reputation and public perception to employee productivity and overall profitability. According to the Society for Human Resource Management, “Companies that work to build and maintain ethical workplace cultures are more financially successful and have more motivated, productive employees.” For this reason, it’s in your company’s best interest to implement some key ethical practices.


What is Business Ethics?

Investopedia defines business ethics as, “The study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate responsibility and fiduciary responsibilities.” Upholding certain values and moral principles is important to the success and longevity of your business because poor ethics can hurt your culture, lower your retention rate and sour relationships.

Unethical practices also greatly increase your odds of incurring penalties and open the door for litigation. While the specific approach to business ethics will vary from company to company, there are five common ethical practices that should keep your business on the straight and narrow.


1. Develop Ethical Standards

An integral first step is to formalize your expectations and make it clear about which behaviors are and aren’t acceptable. If you haven’t done so already, create a code of ethics section in your employee handbook that outlines proper business conduct. This should eliminate any confusion and ambiguity about your company’s ethical practices and keep everyone on the same page.


2. Ensure Leaders Exhibit Proper Behavior

Behavior often trickles down from top to bottom within an organization. It’s therefore crucial that your leaders act virtuously and serve as examples for the rest of your staff. After all, if managers demonstrate questionable ethical behavior, why should anyone else be expected to act with moral conviction? When leaders practice what they preach and uphold a high standard of ethics, the rest of your staff will have a positive role model.


3. Be Diligent About Enforcing Policies

Let’s be realistic. Not everyone is going to uphold every single ethical expectation 100 percent of the time, and rules will inevitably be broken. It’s important that you don’t tolerate unacceptable behavior and show that there are consequences. Holding employees accountable should prevent the perpetuation of any unsavory behaviors and nip them before they get out of control.


4. Praise Positive Behavior

Just as it’s important to stomp out unethical practices, it’s equally important to praise your employees for following best practices. This doesn’t have to be anything over the top, but you should make it a point to acknowledge individuals who live up to expectations. Doing so should serve as positive reinforcement, which can have some long-term benefits for your business.


5. Promote Community Involvement

What’s a common thread among some of the world’s most ethical companies? Most tend to place an emphasis on community involvement and are genuinely interested in having a positive impact on the world. Whether it’s raising money for local causes, establishing volunteer programs for employees or donating to worthy charities, this can be huge.


Following ethical practices is important for many reasons and a major selling point to many of today’s consumers. By taking measures to promote ethics in your workplace, you can create a better culture, improve your brand reputation and simply feel good that you’re doing something positive.