Ethical and Unethical Business Practices
"I have always recognized that the object of business is to make money in an honorable manner. I have endeavored to remember that the object of life is to do good." – Peter Cooper, American Inventor, Manufacturer and Philanthropist
Business ethics are moral values and principles that determine our conduct in the business world. It refers to commercial activities, either with other business houses or with a single customer. They can be applied to all aspects of business; from generation of an idea to its sale. Businesses use the society for its resources and functioning, thereby obligating it to the welfare of the society. While the objective of any business is to make profits, it should contribute to the interest of the society by ensuring fair practices. However, greed has led the present business scenario towards unethical business practices, legal complications and general mistrust.
Code of Ethics
Many organizations now implement the code of ethics in their company polices, which they implement during induction and regular training. A Code of Ethics "is generally a more blanket statement of values and beliefs that defines the organization or group" (Brandl and Maguire). It is primarily for the following areas:
- Company’s assets, funds and records
- Conflict of interest
- Management and employee practices
- Information on competition
Ethical Business Practices Following are a few ethical business practices that should be followed to build an honest reputation and ensure smooth running of the organization.
- Investors. Ensuring safety of their money and timely payment of interest.
- Employees. Provision of fair opportunities in promotions and training, good working conditions, and timely payment of salaries.
- Customer. Complete information of the service and product should be made available. Personal information of the customers should not be used for personal gain.
- Competition. Unscrupulous tactics and methods should be avoided while handling competitors.
- Government. Rules and regulations regarding taxes, duties, restrictive and monopolistic trade practices, and unlawful activities like corruption and bribing should be adhered to.
- Environment. Polluting industries should ensure compliance with the government norms regarding air, water and noise pollution.
Unethical Business Practices The financial sector is abuzz with acts of violation of norms to amass wealth in an unethical manner. Following are some of the activities that come under the ambit of unethical practice.
- Resorting to dishonesty, trickery or deception.
- Distortion of facts to mislead or confuse.
- Manipulating people emotionally by exploiting their vulnerabilities.
- Greed to amass excessive profit.
- Creation of false documents to show increased profits.
- Avoiding penalty or compensation for unlawful act.
- Lack of transparency and resistance to investigation.
- Harming the environment by exceeding the government prescribed norms for pollution.
- Invasion of privacy used as leverage, for obtaining personal or professional gains.
- Sexual discrimination
Preventing Unethical Practices in Organizations Addressing unethical behavior and practices is essential to maintain an ethical climate in an organization. Incorporation of ethical norms and conduct into all levels of the organization can be done in the following ways.
- Codes of corporate ethics must be formulated so that employees are aware of the organization’s expectations regarding ethical norms and conduct.
- An appeal process must be in place so that any unethical practice can be brought into light.
- Seminars on business ethics should be conducted for employees. This will help them in understanding the importance of ethical work culture.
- Compliance officers must be appointed to keep a check on fraud, corruption, and abuse within the organization.
- To promote ethical behavior, performance management system of the organization must be modified to incorporate ethical behavior as a parameter for appraisal and rewards.
Business houses that comply with ethics to determine their conduct are shrinking in number. The lack of business ethics in the market is a big reason to worry. Organizations now recognize the positive effects and outcomes of being ethical, humane and considerate. They have a competitive edge in the market, because of the honesty they show in their services. Their morally upright reputation attracts better staff and helps in retention. Though ethics are legally binding in most cases, self-monitoring, transparency and accountability will go a long way in establishing trust of the people. Besides this, it makes sense to change, before you are penalized.