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Why Should Businesses Be Ethical?

Summary: A business should be ethical in order to attract top talent and unify its employees under one purpose. It will attract customers, partners, and investors, and also offer the basis for a corporate culture.

Why Should Businesses be Ethical?
 
  • Customers choose businesses based on reputation.
  • Today’s transparent media makes businesses vulnerable to adverse customer feedback.
  • A code of ethics reduces potential lawsuits, steers business against legal issues, and offers a guideline for streamlining employee decision making.
  • Working for an ethical business makes employees proud.

Why should businesses be ethical? After all, nature itself isn’t all that ethical: it’s a take-what-you-can-grab sort of world out there, with every animal and every species eager to secure its prey with as little personal cost as possible. Aren’t there ethics for churches and philosophy departments of universities? They say all is fair in love and war. So if we are at war with our competitor and eager to secure the love of our customers, what policy would we hamstring ourselves with?

Ah, but there’s the clinch: The customers. As a business, you’ve got to court their favor. More than that, you’ve got to court top talent – you don’t want high turnover. Better still if talented folks were eager to get into your company. Then there are the shareholders who want to invest in a winner. “Winners never cheat, cheaters never win,” the old quip goes. Ultimately, the necessity for ethics relates to the etymology of the word – ethics originally meant “customs.” Your business will have a culture of some sort whether you foster it or not. A Code of Ethics will attract top talent, and, once you’ve secured them, help them get along with each other, help them make quick, principled decisions, and take pride in staying with you.

While ethics go far beyond “Don’t break the law,” those companies that impress their workers with ethical constraints will also avoid the sort of legal entanglements that bring businesses – especially small businesses – to their knees. Ethics are a sort of rule book – the official, well-stated, succinct guidelines of right and wrong that provide the background for a corporate culture. It isn’t enough to indoctrinate fresh hires with your ethics: you must repeat them, discuss them, and celebrate them if you want them to have real power in your business.

A proud worker is a hard worker. Few people care to put their heart into and make sacrifices when demoralized and morally opposed to their company. It’s been said that integrity is what we do when nobody is looking. By establishing a culture of responsibility, employees will take pride in making ethical decisions. Rather than belaboring a decision, they can refer to an ethical standard – make them simple, bullet-pointed, and prominent – that will act as a go-to for what to do in difficult spots.

A business is ultimately a name. Does your business have a good name? What sort of reputation does it have? Of course, we all know how important it is – sometimes taking the larger part of corporate capital – to brand a company, give it a sense of attitude, character, and value. The Dawn Soap Company and parent company Procter and Gamble helped clean up animal victims of an oil spill using their soap. That is an image-making decision – who’s to say Dawn Soap was even the best product for oil spills? So if you want a solid reputation, one beyond hypocritical gestures, don’t donate a millions to charity and spend $10,000,000 advertising your goodness to the world. Do the right thing because it’s the right thing. We pass for what we are.

Integrity means a company acts in accordance with what it believes and says. Google is considered by many to be the ideal ethical company. Their glib motto, “Don’t be Evil,” they’ve acted out, proving their concern for free speech by fighting the Chinese government on censorship. Yet more than anything, Google’s loyalty to its employees could be one of the most extreme in the world. They provide free health care, including on-site doctors; they offer free legal advice; plus even the break areas of the company are fun, with elaborate rec-rooms and a cafeteria staffed by world-class chefs. One of their central values is employee loyalty, and they treat their employees as valued and important.

Intel, likewise, dotes on their employees, reassigning them to new work every 16 to 24 months so they don’t get jaded or bored with their jobs. Further, they promote their value of science and technology by encouraging STEM (science, technology, engineering and mathematics) education for young people, especially young girls and underprivileged minorities – thus adding diversity to the field.

Image is crucial in today’s age of internet transparency. Customers recoil from spending their money on companies who abuse the environment, fail to responsibly address sexual-harassment complaints, or who compete with each other in a cut-throat manner. The reputation of a company can either unite your employees under a proud banner, or make them regret being associated with your company.

While Google attracts the best talent in the world, because of their over-the-top employee appreciation, it is a matter of common sense that talented minorities would be attracted to companies that value and practice diversity. Ultimate Software, for instance, has around 46 percent female staff and 33 percent minorities. Their fully free health care for employees further shows how dedicated Ultimate Software is to its employees.

A loyal staff and a loyal client base may cost you in the short run. In the short run, sometimes an unethical choice – the easy way out – tempts you. Your decisions will be streamlined and integrated if you have a carefully explained code of ethics. This will establish a client base that respects your business, and hopes to do business with you far into the future.
 
Social media strikes with a vengeance.

Not only do individual customers command devastating power with their reviews and declamations of your product and service, they can make or break the branding, as well as the corporate image you hope to cast upon the world. Anti-discrimination, offering equal-opportunity employment, making your company safe from sexual-harassment, will secure you from being the subject of social condemnation.

Each day your employees will have to make decisions; some more important than they seem. How can you keep employees responsible if you never clearly state your expectations? Having that code, celebrating it, teaching it, and rewarding and punishing employees according to it will indoctrinate business-wide pride that you follow a moral code, it will also teach your employees to hold each other accountable. It will also save you time on making decisions, since principled actions are clear and strong, whereas murky and ambiguous principles lead to endless interpretation and misinterpretation, and to that an uncomfortable feeling you have compromised something important.

A code of ethics will also give you the backbone of a work culture. When we respect men and women, businesses, leaders, we don’t respect their failures and compromises, but their integrity, their virtues, what is good about them. Employees enjoy working for such companies, though it may seem to require more work. In fact, having a reputation of high-expectations will attract the sort of employees you want, and discourage those employees you don’t want.

Starbucks is one company that has emphasized to both its employees and the general public their intense ethical stance toward proper treatment of their farmers. These are the values Starbucks takes pride in. All new hires learn about corporate values, and are expected to discuss them with the customers. Customers are willing to pay a little extra for Starbucks' coffee, not only because of superior product, but because they are aligned with Starbucks’ corporate values.

Unfortunately , Starbucks has recently caused a media scandal by having two black men arrested in their lobby for loitering. Such an event caused catastrophic turns in their market, and immediately cost them a lot of face, publicly. Well aware of that, Starbucks called for a two-hour training event for all its employees across the nation – costing them millions in lost revenue – to immediately redress this issue and ensure it never happens again.
 
What about customers?

So much of sales involves image. Customers want to spend their money in a manner to buy their own image, to develop their personality as “loyal to this brand.” This is why some models of cars appeal to certain people. A rough and tumble, down to earth, adventurous looking SUV sells to people who want that image for themselves. Customers are meant to envy and admire the actors who represent their company by enjoying their product with pride. In the same manner, if your company is known for its excellence and high standards, customers will want to share in that image, and will take pride in doing business with you.

Thus, for those who believe in gay rights and marriage equality, they may be impressed with Golden Sachs’ support – a stand that even cost them a high-profile client. In February 2012, Sachs CEO Lloyd Blankfein appeared in an ad for marriage equality. They go so far as to offer to fully fund the gender reassignment surgeries of their employees. Starbucks, likewise, has been a vocal advocate for same-sex marriage.

With such an image potential employees will be eager to join your team, investors will want to invest finances in your company, and you can smile in the mirror knowing there is integrity between your personal values and the work you do to make a living.

Thus, it only makes sense to foster an environment of ethical excellence in the work place. Doing so keeps the atmosphere professional, the company integrated, streamlines decision making, and unifies a culture under the banner of one code of ethics, one system of values, helping team efforts and morale.
 
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