Why Ethics Important in Business

Why Ethics Important in Business?

Why Ethics Important in Business

Importance of Business Ethics

Ethics is, at their essence, moral judgment about what is right and what is wrong. In a business sense, ethics is decided upon and formed by each company, employees must decide what they think is the right course of action because each individual’s action within the company affects the entire company, not just the individual. When an employee acts ethically and responsibly, it helps the entire organization develop. Thus, business ethics is more than just words used to enhance the image of a corporation; it is the foundation for success and business ethics should be applied at the very moment a firm opens its doors.Let’s see why Ethics important in Business.

Why Ethics Important in Business?

Long-term growth: sustainability comes from an ethical long-term vision which takes into account all stakeholders. Smaller but sustainable profits long-term must be better than higher but riskier short-lived profits.

Cost and risk reduction: companies which recognise the importance of business ethics will need to spend less protecting themselves from internal and external behavioural risks, especially when supported by sound governance systems and independent research

Anti-capitalist sentiment: the financial crisis marked another blow for the credibility of capitalism, with resentment towards bank bailouts at the cost of fundamental rights such as education and healthcare.

Limited resources: the planet has finite resources but a growing population; without ethics, those resources are repleted for purely individual gain at huge cost both to current and future generations.

Importance of Business Ethics

Importance of Business Ethics in attracting Investment:

  • Business ethics attracts investors and keeps the company’s share price high, thereby protecting the business from takeover. When a person or an entity is considering investment in a particular stock, there are a number of things they take into account.
  • Aside from the quantitative factors surrounding a company’s profit margin a future prospects, consideration is also given to a particular company from the point of view of the qualitative aspects such as their public image and the products that they happen to sell. All of these things are taken into account before the final investment is made.

Business ethics promotes benefits to the organization

  • One of the main benefits for a business of behaving ethically is that a better image is given to the world at large, and especially to consumers, resulting in greater profit. It also means that expensive and potentially embarrassing public relation disasters are avoided.
  • As far as employees are concerned, if the business is seen to behave ethically, for example with regard to the environment, it will recruit more highly qualified employees, and this leads to better employee motivation as the employees are proud of their jobs.

Importance of Business Ethics in adjusting employees’ behavior

  • Ethics in leadership within an organization can direct employees by example and guide them in making decisions that are not only beneficial to them as individuals, but also to the organization as a whole.
  • When management is leading an organization in an ethical manner, employees follow in those footsteps and make better decisions in less time with business ethics as a guiding principle; this increases productivity and overall employee morale.
  • When employees complete work in a way that is based on honesty and integrity, the whole organization benefits. Employees who work for a corporation that demands a high standard of business ethics in all facets of operations are more likely to perform their job duties at a higher level and are also more inclined to stay loyal to that organization.

Importance of Business Ethics in improving the public image of the company

  • It is impossible to discuss business ethics as a branch of academia without taking a look at the relationship between business ethics and public image. Each corporation has a particular public image, which represents the way in which the public views the corporation.
  • A corporation’s environmental policy, the way they treat their employees and the way they treat the communities they exist in are all parts of their overall behavior and this in turn is the principle factor in determining their public image. As proof of this, you will notice that even though Wal-Mart makes products that have a decent quality and an extremely low price, they still have a negative public image.

Role of Business Ethics in Socio – Economic Development

In market economy, the enterprises produce and sell products and services in order to meet the demand of customers, get profit and continue their existence. While producing they make some flaws knowingly or without noticing. And this in turn leads to occuring of socio-economic problems in the society.

Features of Business Ethics

There are eight major features of business ethics:

  • Code of Conduct: Business ethics is actually a form of codes of conduct. It lets us know what to do and what not to do. Businesses must follow this code of conduct.  
  • Based on Moral and Social Values: Business ethics is a subject that is based on moral and social values. It offers some moral and also social principles (rules) for conducting a business.
  • Protection to Social Groups: Business ethics protect various social groups including consumers, employees, small businesspersons, government, shareholders, creditors, etc.
  • Offers a Basic Framework: Business ethics is the basic framework for doing business properly. It constructs the social, cultural, legal, economic, and other limits in which a business must operate.
  • Voluntary: Business ethics is meant to be voluntary. It should be self-practiced and also must not be enforced by law.
  • Requires Education & Guidance: Businessmen should get proper education and guidance about business ethics. Trade Associations and Chambers of Commerce should be active enough in this matter.
  • Relative Term: Business ethics is a relative term. It changes from one business to another and from one country to another.
  • New Concept: Business ethics is a relatively newer concept. Developed countries have more exposure to business ethics, while poor and developing countries are relatively backward in applying the principles of business ethics.

Advantages of 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 also 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 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 Ethical. 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 also learning.


About the author


Writing is my Niche with which I like to share my thoughts and values. I believe words are the most powerful tool which can even Start/Stop a War. By using Motivating & Positive words, we can inspire others. By using Harsh words, we can hurt others. As it is proven Scientifically (Newton's Law) & Spiritually (Karma), "For every action, there is an equal & Opposite Reaction." So, Stop Hatred & Start Spreading love.

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