Principles of Business Ethics

Whether you work for a small business or a major corporation, following ethical principles
matters.

The most recent lesson on the importance of business ethics came with the Wall Street
collapse, as once highly esteemed financial institutions made headlines for their bad choices
and questionable behaviour.

While businesses have to meet economic expectations, they also have ethical
responsibilities. Everyone, from the bottom to the top of the organizational chart, must take
care to meet these responsibilities.

According to Dr. Jill Young, an instructor in South University’s College of Business, integrity is
the most important ethical concept because it covers such a broad area. “If you act with
integrity, ethical behaviour is just a natural progression,” she says. “Those who have
integrity are guided by a set of core principles that influences their decisions and
behaviours.”

Now that we know what is meant by business ethics, we must identify and understand the
12 pillars or principles of ethics for business executives:

Honest: Businesses must show honesty in all their communications and conducts. Abraham
Lincoln has drawn a comparison between character and reputation as a tree and its shadow.
To build a reputation, one must have character and honesty at the forefront of it. Honesty
has to be accompanied with forthrightness and candidness.

Integrity: You demonstrate integrity when your thoughts, words and actions are in line with
each other. Ethical executives earn trust by having the integrity of character. Integrity often
requires walking the extra mile with moral courage and inner strength to do the right thing
even if it costs some personal losses.

Keeping Promises: An executive who makes all efforts to fulfil the spirit of their
commitments and promises earns trust and respect. They do not manipulate agreements or
misinterpret them to avoid compliance with the commitment.

Loyalty: Executives must be loyal with their organizations as well as people or other
organizations they work with. They must strive to protect the lawful interests of their
companies and colleagues. They need to safeguard information learned in confidence and
not use it for personal gains.

Fairness: Fairness means not to exercise power arbitrarily to gain or maintain any
advantage. This also means to not take undue advantage of another person’s mistakes or
difficulties.

Caring: A genuine compassion should be shown towards other’s well being. An ethical
business person would meet his/her business objectives without causing harm to others and
considering their good.
Respect For Others: Every person with whom a business executive interacts with must be
treated with respect, autonomy and dignity.

Law-abiding: All laws, rules and regulations related to one’s business activities must be
followed.

Commitment to Excellence: Excellence in their job is key to an organization's success. Ethical

executives must be well-informed and constantly work towards improving their proficiency
in diverse areas.

Leadership: An ethical role model would strive to be a role model for his or her subordinates
or employees. They promote ethical decision making principled reasoning.

Reputation and Morale: Reputation of a company and the pride and morale of their
employees is of the utmost importance to an ethical businessman. They are constantly
trying to build the reputation and morale of their business and people with their affirmative
words and actions.

Accountability: A business person must own the outcome of their decisions and
accountability of the ethical quality of decisions they make.

Types of Business Ethics

Personal Responsibilities: Personal responsibilities refer to the personal code of ethics of an

individual which he follows firmly in his daily activities. Such ethics are: always behaving
honestly, respecting elders, performing accepted duties properly and timely, promptly
settling all dues, not indulging into criminal activities etc.

Official Responsibilities: These are the responsibilities which comes with the position that a
person occupies. Every official position has certain rules and regulation that are meant to be
strictly followed in all situations. An individual holding such a position should follow all
standards and norms set for that particular official position.

Corporate Responsibilities: Corporation is an artificial person which is treated as a separate

legal entity. They have their own moral responsibilities towards the society that is distinct
from personal moral ethics of managers running them. Such responsibilities are both
internal and external which assists in deciding matters related to employees, shareholders,
customers, creditors, society and government.

Economic Responsibilities: These ethics are one which guides actions of an individual which
are of economic nature. Economic responsibilities consist of moral values which directs
toward the usage of resources. Every business should make efficient use of all resources and
try to enhance the profitability without involving in any fraud. They should avoid any kind of
wastage and contribute towards the welfare of society.
Legal Responsibility: Legal responsibilities provides a framework within which a business
should operate. It shall abide by all the rules and regulations imposed by legal authority. All
unethical activities should be avoided as they are treated as illegal in eyes of law.
Personal loyalties: It means the loyalties that superiors have towards thier subordinates and
loyalty that subordinates have towards their superiors. If a superior act honestly and treats
its subordinates fairly, then the subordinates will not face any problem. Similarly, the
subordinates having strong personal loyalty for their superior will turn blind eyes towards
the blunders of their superior.

Organizational loyalties: This involves the loyalty of employees towards their organization.
Some employees develop a deep sense of loyalty out of love and affection for the
organization. Such loyalties are so strong that they even do not hesitate from neglecting
their personal interest for the sake of organization. They work efficiently toward the
achievement of organizational goals.

Technical morality: Technical morality is related to state of technology implied by enterprise

for production of its goods or services. Every professional person having technical morality
shall not compromise with quality of goods. They should properly adhere to all the ethical
standards provided by competent bodies. Organizations focusing on technological
advancement are able to attain better efficiency and create more challenging situation for
competitors.

Examples of Ethical Behaviors in The Workplace

Examples of ethical behaviors in the workplace includes; obeying the company's rules,
effective communication, taking responsibility, accountability, professionalism, trust and
mutual respect for your colleagues at work. These examples of ethical behaviors ensures
maximum productivity output at work. And could be pivotal for career growth.

Obey The Company’s Rules & Regulation

At the start of an employee contract, companies may need the employee to sign various
documents, including the company rules and regulation agreement form. Also, the
employee may be given a handbook that may serve as a guide.

Some common rules are tardiness, inappropriate dressing, and language, etc. Due to the
excitement of getting a new job, some employees do not properly read these rules and may
end up deferring them in the future.

Therefore, it is important that new employees properly read these rules & regulations in
other not to defer them.

Communicate Effectively
Effective communication is very important to avoid misunderstandings when dealing with
issues in the workplace. Communicating effectively may mean different things to people at
different points in time.
Let us consider the hypothetical situation of an employee trying to relay information to a
French-speaking customer. The best way to communicate effectively with the customer is to
have an employee who can speak French relay the information.

Effective communication may also have an employee breaking one of the rules and
regulations of the company without getting penalized for it. An employee reaching out to HR
that they will be coming in late due to some unforeseen circumstances may be spared for
coming late if the situation is properly communicated.

Develop Professional Relationships

Good professional relationships are not only a thing that fosters teamwork among
employees, but also help with individual career development for employees. Developing
professional relationships with coworkers or other professionals outside the workplace will
also directly or indirectly improve productivity.

Professional relationships between low-level and high-level employees will make it easier for
ideas to be shared and knowledge to be passed to junior employees. That way, the company
can confidently have an intern work on a tough project to meet a pending deadline due to
the guidance from older employees.

Salespeople, for one, need to build external professional relationships with professionals
from other organizations—especially those who are potential clients. These relationships will
help create a contact person in another organization in case they need to sell a product to
them.

Take Responsibility
It is important for employees to always take responsibility for decisions made both
individually and in a team. This is, in fact, a leadership trait that every employee who is
looking to take up a managerial position in the future should exhibit.

responsibility-workplace-ethics

Understandably, employees may want to save their job and are therefore scared of taking
responsibility for a particular event. However, they shouldn't let this fear take them.out of
the team.

For example, the communications team came up with a marketing strategy for the company
and it failed. The team members are to jointly take responsibility for this failure, not
individuals coming out that they weren't part of the decision making process.

If the strategy has gone the other way round, they wouldn't have said the same.

Professionalism/Standards
There are professional standards that everything an employee does in the workplace. The
use of informal words in a formal workplace is highly unprofessional.
These standards should be held high and applied to every part of an employee's activity in
the workplace. This should include the way they speak, kind of work they deliver and their
relationship with coworkers and customers.

Be Accountable
Accountability is also a very good trait of an employee. One of the things that may short
change a talented and responsible is the lack of accountability.

Lack of accountability may result in your boss thinking you have an "I don't care attitude" to
the company's project or worst take you as a liar and may lead to job loss in the long run. For
example, at the beginning of each year, a certain amount of money is allocated to each
department.

The manager is meant to oversee how this money is spent. If at the end of the year, the
manager can not make an account of how the money was spent, he may then be suspected
of stealing company funds.

Uphold Trust
An employee should not do anything that may make his or her employee withdraw trust. As
an employee of a company, your employee trusts you to get work done perfectly on time.

Things like missing deadlines regularly or delivering work that needs to be revised over and
over again will deny you a promotion. It may even leave the employer not giving you tasks to
complete in the future—a nightmare for freelancers.

Show Initiative without being told

Is the company running behind deadline and you feel you can stay a few extra hours after
work to finish up? Do it.

You are a freelance designer and your client wants a particular poster designed but doesn't
have a copywriter to write the content. If you can write the contents, do so. Don't delay a
client's work because of a few contents.

Respect Your Colleagues

It doesn't matter whether you are dealing with the intern, a junior, janitor, etc. they should
all be treated with respect. As a manager, treating your team members with respect will
help improve their productivity.

Giving constructive criticism and saying kind words to them even when they are not able to
deliver perfectly will help them strive to do better in the future.

Work Smarter
Don't just work hard, work smarter. The reason why you see an employee promoted to the
post of manager after just 2 years and a hardworking employee who has been with the
company for 10 years failed to get a promotion is smart work.

Assume that these 2 employees are data scientists who collect data and analyze them. A
smarter employee will use the Formplus data collection tool to collect data and receive real-
time data analytics, while a hard-working employee will print paper-based forms and do the
hard work of sharing it to respondents.

Unethical Workplace Behaviors

Lies
Lying is a trait that is detested in and outside the workplace. It kills trust, affects
relationships and may even put people in trouble.

There are different situations where employees lie in the workplace—with just one lie
opening the floor for many others. It could be a sales manager lying about the number of
clients they were able to get in a month or an employee calling in sick just to attend another
job interview.

A lot of employees start lying from their CV, by adding experiences they didn't acquire, and
the skills they don't have. Employees need to understand that lying about work may
eventually get them in trouble and needs to stop before they lose their job.

However, we notice that employees lie due to fear of their employer—an employee will call
in sick to go for interviews because companies frown against employees interviewing at
another company. HR should put up a more friendly culture that will encourage people to
progress in their careers taking up other jobs and even support them throughout the
process.

Taking Credit for Others Hard Work

It is very common for managers to take credit for their team member's hard work when
reporting to the management. A team member may have brought an idea that helped the
sales team improve their sales by 200%.

However, when giving a report, the manager doesn't mention the team member's name but
claims the idea as his. Employees need to reduce the use of "I", but embrace the use of "
We".

By taking credit for another person's work, you will be denying the person a promotion,
bonus or commendation for a job well done. This will discourage the person from sharing
ideas that will benefit the company in the future.

Verbal Harassment/Abuse
Employees need to stay away from using foul language on coworkers in and out of the
workplace. This is very important when dealing with customers.

Customers are known to get angry and may result in verbal abuse due to a bad product or
service. They may even get insult you when they are at fault.

As a customer care representative, salesperson or any other employee, it is beth important

that you don't use abusive words on customers no matter how provoked.
workplace-abuse-unethical-behaviors

Violence
Similar to verbal harassment, employees should not be violent when dealing with coworkers
and customers. Customers may likely provoke you, but it is better to keep shut and walk
away rather than turn violent.

Non-Office Related Work

A lot of employees have side hustles which they use to supplement salaries. This is very
good and only very few companies are against employees working to make money outside
work hours.

However, some employees still do non-office related work during office hours. Employees
who have side hustles should try doing them on weekends or employing other people to
handle some of the business logistics to avoid eating into office hours to get the work done.

Extended Breaks
Companies give lunch breaks to employees and people take advantage of these breaks to do
other things outside office work like, go for interviews, meet with friends or even work on
their side hustles. They are free to do whatever they want these lunch breaks.

Employees, however, take advantage of these lunch breaks and extend them beyond time.

Theft/Embezzlement
Some employees are known for diverting company funds into their bank accounts—padding
project quotations, invoices, etc. to deceive the company on how much was spent on
particular projects.

This act is detrimental to the company because employees who steal sometimes replace
quality products with counterfeits which are cheaper but causes damage in the future.

Sexual Harassment
Sexual harassment is an offense that is not limited to the workplace alone. An employee
accused of sexual harassment will not only face consequences in the workplace but also
tried at a court of law.

Many companies have a zero-tolerance rate for sexual harassment in and outside the
workplace. This may tarnish the company's reputation and the only way to curb is to make
an example of defaulters.

Corrupt Practices
Some common causes of corruption can be seen during the employment process of an
organization. They invite so many people to send their CVs and come for interviews but only
people with the same political affiliation with them get the job.
This is also common with companies that ask for contractors to bid for a project but the
employees will only give them to their friends who may not even bid at all.

Get started with our workplace harassment form template to receive feedback from
employees

Management/Employers Unethical Behaviors

Workplace ethics is not for employees alone. Employers are also bound to workplace ethics
and may also be tried for unethical behavior.

Sex for Job/Promotion

It is common for managers, employers and major decision-makers to use their position in
the workplace to influence the hiring decision in exchange for sex.

Late Night Out/Unpaid Overtime

Some employers take advantage of desperate job seekers and the competitive job market to
use employees' leisure time as they wish. They do so with the mentality that they are doing
employees a favor by employing them, not knowing that the favor is mutual.

Employees who are scared of queries or job loss are not able to protest the infringement
into their private time by the employer.

Verbal Harassment
It is common among employers to verbally harass employees when they make little
mistakes. This will reduce employee morale and productivity.

Employers should always say kind words to their employees.

Undue Pressure
Deadlines are a great way to make sure the work gets done on time. However, when
employees are placed under undue pressure, they end up trading quality for on-time
delivery.

An example of undue pressure will be giving an employee a 1-day deadline for a project that
would normally take a week.

Nepotism
This is a common type of corruption that happens in the workplace. An employee who has
been working hard for years while influencing company growth may get sidelined for a
promotion because of another employee who is a family friend, family, or friend of the
employer. Things like this are what reduce employee morale or even push talented
employees to dropping a resignation.

Unfriendly Work Environment

One of the things that can mar productivity is an unfriendly working environment. This may
come as a combination of abusive bosses, lack of commendation, nepotism, etc. An
unfriendly environment is an environment that combines various unethical behaviors into
one.
Unrealistic Expectations
Creatives usually have it worse when it comes to having unrealistic expectations from
employees.

Advantages and Implications of Workplace Ethics

It can stimulate positive employee behavior and create a positive ambiance in the workplace

Ensures management guides and mentors their employees in a healthy environment

A workplace with good ethics usually strengthens the bond employees have with their
superior

It boosts productivity through employee performance and job satisfaction which in turn
increases company growth.

Bad workplace ethics can cause a strain in the relationship with company stakeholders

When it leaks (which it most likely will) poor behavior can be recorded and propelled into
unsavory headlines online. This can lead to reputational damage to the brand name.

How to Solve Unethical Issues at the Workplace

1. Have Rules
Organizations need to have predefined rules and regulations regarding workplace ethics.
These rules and regulations should be given to new employees together with their
employment contracts.

workplace-code-of-conduct

Also having the rules written at strategic places at the workplace will also help remind
people about the rules. People tend to unconsciously imbibe things they see every day.

2. Accept Feedback/Complaint
Make it easy for employees to send feedback or complaint in case of harassment, abuse, or
any other unethical activities going on in the workplace.

With tools like Formplus, you can create online forms to receive complaints on workplace
harassment or any other unethical behaviors
3. List Consequences for Unethical Behaviors
Consequences for unethical behaviors should also be placed alongside the rules at strategic
places in the organization. That way, if anyone wants to ignore the rules despite seeing
them, the fear of getting punished will stop him or her from going ahead.

4. Swift Justice/Disciplinary Action

Some Companies often cover up issues of rape, sexual harassment, etc. when the
perpetrator is a high-ranking member of the organization. Things like this should not be
accommodated.

Irrespective of who breaks the rule, there should be swift disciplinary action by the
organization.

Types of Business Ethics

Since business ethics is a vast and complex topic, there have been various categories by
which it has been addressed and summarized over the years. A few of the generally
recognized types of business ethics are mentioned below.

Personal Responsibility
This refers to an individual’s responsibility towards following ethical behavior. A business
executive who follows ethical standards in his dealings is also likely to discharge his duties
with acceptable moral principles. This might include performing duties diligently, not
violating the law, being honest, etc. Every individual has certain beliefs which shape their
personality. Personal responsibility is the responsibility of individuals to follow ethical
standards. While these might differ from culture to culture, specific measures are arguably
universal, such as honesty, integrity, obeying the law, etc.

Official Responsibilities
When representing a business, the individual must uphold its core values and set standards
defined by it. For example, many companies claim to be equal opportunity organizations
that do not discriminate based on race, gender, religion, or sexual orientation when hiring
employees. Anyone in a position of power discriminating against someone would not only be
acting in an unethical manner in an individual capacity, but this would also go against the
organization’s core values.

Official responsibility entails that the individual follows the set norms deemed necessary to
dispense duties properly. Corporate culture often has a significant influence in shaping the
official assignments of employees.

Personal Loyalties
Personal loyalties can occur between subordinates and senior officials. A senior official might
overlook a subordinate’s mistake due to some sense of commitment, or the subordinate
might not report an issue caused due to the manager’s fault.
 Organizational Loyalties
Some people have a deep sense of loyalty towards an organization. They might even neglect
their self-interest and well-being for the organization due to a sense of organizational
commitment. For example, many people allow their health to suffer in the hope that they
can propel a new initiative in the organization’s best interest through their hard work.

Corporate Responsibilities
Since corporations are separate legal entities, people who run them are obliged to follow
specific responsibilities. These might be internal or external. Under their corporate social
responsibility initiatives, many organizations try to reduce pollution or reduce the negative
externalities created by the business. Similarly, organizations might be required to test
products using set standards to ensure they are safe for consumers and recall ones that
might be identified as faulty or dangerous.

Economic Responsibilities
If you have studied economics, you would have come across the concept of opportunity
cost, i.e., the next best alternative is forgone. As wants are unlimited and resources are
limited, one must efficiently use resources to their optimum potential. This can also be
described as an economic responsibility for a business. Since the efficient use of resources is
necessary for sustaining resources for the future. Companies that aim to deplete resources
for maximizing their gains, for this reason, are often seen as unethical.

Legal Responsibilities
Every company and individual is governed by law. Overstepping or violating legal
responsibilities is deemed unethical. Many businesses cannot operate without adhering to
specific legal standards, which act as a prerequisite for doing business. However, other legal
responsibilities can be harder to identify and impose in companies. Getting caught violating
the law can land a business or executive in serious trouble.

Technical Morality
There are specific technical standards that businesses are expected to adhere to produce
goods and services. Compromising on these would be deemed unethical. These standards
are set by competent bodies to ensure that products are safe and made according to
standards considered necessary.

IMPORTANCE OF BUSINESS ETHICS:

 Control Business Malpractices: Business ethics directly influence the operations of the
business. It is the one which helps business in deciding what is wrong and what is right.
These ethics set certain rules and principles to be followed strictly by business, and their
violation leads to a penalty. Implementation of these principles ensures that business does
not indulge in any unfair practices like black marketing, providing misleading advertisement,
frauds in measures and weight, adulteration, etc. Through business, ethics works on
providing better products to its customers at reasonable prices.
  Better Relation with Employees: Employees are an important part of the business and
necessary for the survival of the business. Business ethics ensures that business works for
the welfare of its employees working with it. The business should not only work for the
achievement of its objectives like profit maximization and higher growth but should also
focus on peoples working with it. These ethics ensures that business provides better
monetary compensation and good working conditions to its employees, active participation
in decision making, addressing complaints, and providing promotions as per their progress.
This helps in maintaining a good relationship with employees.

 Improves Customer Satisfaction: The consumer is termed as king in the market and is the
one who decides the success or failure of every business. It is important that the business
fulfills the needs of its customers. Business ethics provides principles for business operations
under which it is required to provide better quality products at reasonable prices. It ensures
that the business provides better customer support and redressal of all complaints. This
helps businesses in improving the satisfaction levels of its customers.

 Increase Profitability: Business ethics improve the productivity and profitability of every
business. It sets certain rules to be followed by every person working with the business.
Every employee is required to adhere to these rules and should focus on its duties with
sincerity. These ethics ensure that there is no wastage of resources, and every resource is
efficiently utilized. This eventually leads to an increase in business profit in the long run.

 Improves Business Goodwill: Business goodwill has an important effect on capturing the
market. Better goodwill businesses are able to attract more and more customers. By
implementing ethics in its operations business aims at providing better service to the
market. Businesses that work ethically operate at the low-profit base and with honesty. This
develops a better image in front of the public and is easily accepted by customers with fewer
efforts.

 Better Decision Making: Ethics in business helps them in making better decisions timely. It
provides certain rules and guidelines that every business needs to follow in its operations.
Every decision is taken in light of the moral principles and social values provide through
these ethics. It helps businesses in deciding what is right and what is wrong. Every person
working within the business is required to respect these ethics, violation of which would
lead to the penalty.

 Protection of Society: Society is very important for the success of every business. If a
business does not consider the interests of its society, then it will harm its survival. Business
ethics direct that business should work for the welfare of its society and take part in various
infrastructural development programs.

It ensures that business contributes actively to its corporate social responsibility. A business
should not perform any activity that creates a problem for the society in which business exists.

 Long Term Gains: Organizations guided by ethics and values are profitable in the long run,
though in the short run they may seem to lose money. Tata group, one of the largest
business conglomerates in India was seen on the verge of decline at the beginning of 1990’s,
which soon turned out to be otherwise. The same company’s Tata NANO car was predicted
as a failure, and failed to do well but the same is picking up fast now.
Business Ethics – 8 Important Techniques Used for Promotion of Ethics: Vision and Mission
Statements, Core Values, Business Policies and Rules and a Few Others

Some of the techniques that can be used for promotion of ethics in business are given below:

Technique # 1. Vision and Mission Statements:

A mission statement is a written statement of “what the business wants to be and in which direction
it will move.” Ethical principles can be incorporated in the mission statement that will guide
everybody in the enterprise for a long period.

Technique # 2. Core Values:

These values specify the limits of ethical conduct and the priorities of a business firm. If core values
are ethical behaviour of people in the firm is likely to be moralistic. For example, during the 1970s,
the Articles of Association of the major companies in the Tata Group stated “the company shall be
mindful of its moral and social responsibilities to the consumers, employees, shareholders,
community, and the society.”

Technique # 3. Business Policies and Rules:

The policies and rules are formulated to implement the core values. These policies and rules should
be just and fair so that ethical conduct becomes a routine practice.

Technique # 4. Code of Conduct:

Code of ethics specifies standards that guide employees how to behave with respect to certain
matters and uncertain circumstances. It helps in maintaining ethical behaviour in business.

Technique # 5. Grievance Redressal System:

Proper mechanisms are needed for the implementation of policies and rules in the organisation.
Grievance redressal system is one such mechanism. Any employee who is not satisfied with any issue
can appeal to the prescribed authority. The authority shall redress the grievance within the
prescribed time period.

Technique # 6. Workshop for Resolution of Ethical Dilemma:

All ethical dilemmas cannot be anticipated and provided for in advance. Therefore, periodic
workshops should be conducted to help employees in resolving the ethical dilemmas that occur
from time to time.

Technique # 7. Training in Ethics:

Well-designed training programmes help to develop sensitivity to ethical issues.

Technique # 8. Incentives and Penalties:

Ethical acts should be widely publicised and publicly rewarded. Similarly, violation of ethical norms
should be punished to discourage their occurrence.