Arguments for and against Business Ethics

More and more companies recognize the link between business ethics and financial performance. Companies displaying a “clear commitment to ethical conduct” consistently outperform companies that do not display ethical conduct.

Attracting and retaining talent: People aspire to join organizations that have high ethical values. Companies are able to attract the best talent and an ethical company that is dedicated to taking care of its employees will be rewarded with employees being equally dedicated in taking care of the organization. The ethical climate matter to the employees. Ethical

Organizations create an environment that is trustworthy, making employees willing to rely, take decisions and act on the decisions and actions of the co-employees. In such a work environment, employees can expect to be treated with respect and consideration for their colleagues and superiors. It cultivates strong teamwork and Productivity and support employee growth.

Investor Loyalty: Investors are concerned about ethics, social responsibility and reputation of the company in which they invest. Investors are becoming more and more aware that an ethical climate provides a foundation for efficiency, productivity and profits. Relationship with any stakeholder, including investors, based on dependability, trust and commitment results in sustained loyalty.

Customer satisfaction: Customer satisfaction is a vital factor in successful business strategy. Repeat purchases/orders and enduring relationship of mutual respect is essential for the success of the company. The name of a company should evoke trust and respect among customers for enduring success. This is achieved by a company that adopts ethical practices. When a company because of its belief in high ethics is perceived as such, any crisis or mishaps along the way is tolerated by the customers as a minor aberration. Such companies are also guided by their ethics to survive a critical situation. Preferred values are identified ensuring that organizational behaviours are aligned with those values. An organization with a strong ethical environment places its customers’ interests as foremost. Ethical conduct towards customers builds a strong competitive position. It promotes a strong public image.

Regulators: Regulators eye companies functioning ethically as responsible citizens. The regulator need not always monitor the functioning of the ethically sound company. The company earns profits and reputational gains if it acts within the confines of business ethics. To summaries, companies that are responsive to employees’ needs have lower turnover in staff.

• Shareholders invest their money into a company and expect a certain level of return from that money in the form of dividends and/or capital growth.
• Customers pay for goods, give their loyalty and enhance a company’s reputation in return for goods or services that meet their needs.
• Employees provide their time, skills and energy in return for salary, bonus, career progression, and learning.

The disadvantages claimed for ethical business include:

• Higher costs: e.g. sourcing from Fairtrade suppliers rather than lowest price
• Higher overheads: e.g. training & communication of ethical policy
• A danger of building up false expectations