Why Business Ethics are Important for a Firm

Business ethics are written and unwritten codes of principles and values that are used to make decisions and perform actions within an organization. In simple terms business ethics is knowledge of right and wrong and choosing to do the right thing over wrong. We would like to argue that it is one thing to be unethical and other to be illegal, both the terms though used together, has different meanings. Actions those are unethical are not necessarily illegal, but unethical actions will cause as much or sometime more tribulations for the firms that choose to engage in those unethical procedures.

As we know stakeholder is a person, group, organization, or system who affects or can be affected by an organization's actions. If the organization as whole engage in unethical behaviour this is affect each and every person related to that organization. If a word goes out in the market that the particular firm is behaving unethically then it will definitely lose the trust of its workers and also its customers. If you customer does not trust the firm then they will not buy from it and this is will generate loses for the firm in long run.

When an organization behaves unethically it always jeopardizes itself. Employees, who don't like the engage in unethical behaviors, can sue the firm for hostile work environments and there is always a risk to be sued by the employees who feel discriminated by the firm.

Unethical practices compromises the long term viability of the firms, especially in countries like US and the Europe where people question more about the ethical practices of the organization. If the firms engage in unethical practices it looses the trust of its stakeholders and can not survive in the long run. There are many firms which eventually went down buy conducting unethical practices for example Enron and WorldCom. The organization that shows poor judgment breaks faith of its employee and peoples; is answerable to them and have to face the consequences of their actions. We know that workers are company's best asset and if you workers think that company is engaged in unethical actions they will simply not respect the company anymore, which in long run will generate losses for the company. So, creating an ethical environment is more important today than it was ever before.

Building relationships with customers is critical because trust is a huge part of complex or huge purchases. Customers need to find you credible and have benevolence when deciding to spend millions on a contract with your firm. The factors that influence a successful relationship are customers trust; with customer trust, they are more likely to buy from you than from someone else that they know nothing of. When they see firsthand how your company operates and what types of people that run the company, they will have a better understanding of your company to make an informed decision. Firms should not always give what the customers want. It depends on the situation and the scenario. The CEO sets the standards of the company and needs to enforce it so that the whole of a company is unified. Also, even if it is within the realms of the company's culture, spending ridiculous amounts of money such as taking them on a cruise for a small contract cut too much into their profits than a simple drink at a bar. The head of a company would need to set standards and boundaries for its employees.

There are many ways where management can take to reduce unethical practices. One way would be to set boundaries on what can and can't be done. Non adult entertainment related events or nights out on company terms. These events could offend female clients or even their own salespeople; and not only that, the females will be at a huge disadvantage if the male salespeople went without them which will only force them to go to make the commission.

Another way management can reduce unethical practices is to train their employees. For new or old employees they should have an ethics training class that teaches them about ethical business behaviors for the company. Just because something is not illegal does not mean it's ethical, employees should consider that and think outside the box.