Businesses run to earn revenue and make profits. Different organisations have different ways of earning revenue. While some of them sell goods, others make money by offering various services. Companies need people to work to perform their daily activities. These employees get paid for the work that they do. The company must follow certain moral principles and social values in all these functions. They must follow practices that will not harm their employees, their society, or their customers. It is called business ethics, and we will look at the nature of business ethics in this article.
All HR professionals need to be familiar with business ethics. The Post Graduate Certificate Course In Human Resource Management is excellent for understanding this subject. You can learn more about this programme on our website.
What Is Business Ethics?
Business ethics deals with a set of moral principles, social values and rules that companies must follow. Though their main aim is to make profits, companies must make sure that they make money by fair means. They must also ensure that their operations don’t cause any adverse effect on the society around them. Organisations are responsible for their customers too. The products they sell must not harm the users in any manner. The nature of business ethics also includes their responsibility to those working in the firm.
Business ethics helps companies maintain a harmonious relationship with the people around them. The organisation must ensure that every employee follows these ethics and does not violate them. The best way to ensure compliance is to have a reward/punishment scheme. It will automatically make the staff members follow the rules. Companies must also have a system of checking whether employees are breaking any rules when dealing with people outside the firm for official purposes. Every HR employee must understand the nature of business ethics if the company’s employees must be happy.
Nature Of Business Ethics
It is also known as the features of business ethics, and every company must follow this without any deviation.
- Code Of Conduct
Business ethics is a code of conduct that explains what a company can and must not do. It explains how an organisation must behave towards the society in which it operates. There are also regulations for how the firm treats its employees and customers. There is no scope for any establishment to deviate from this code of conduct.
- Moral And Ethical Values
The nature of business ethics is that it is based on moral and social values. It means that the company must follow practices that will benefit society. It includes self-control, consumer protection, the welfare of society, service to society, fair treatment to social groups, not exploiting anybody connected to the firm, etc. Organisations must ensure that the products they supply don’t affect society in any manner.
- A Relative Term
We have seen that business ethics means operating as per moral and social values. These values are not the same for all societies, communities or countries. So the company must understand what is acceptable in their society and do it accordingly. The company must understand the morals and ethics in the location and follow them accordingly.
- Protect The Interests Of The Society
It is one nature of business ethics that deals with protecting the interests of society. A business is supported by its stakeholders, employees, customers, business partners, etc. All these people live in the society around the company. When the organisation protects society’s interests, it indirectly takes care of all the above people who support the business in its operations. It must protect society by supplying quality products at reasonable prices.
- Improves Business Social Relationship
Business ethics is a way of ensuring that the relationship between society and the business remains good. By following strict measures for the welfare of society, companies benefit from it. The business also benefits from society through the support they provide as customers, employees and investors.
- Provides Basic Framework
Business ethics provides the basic framework for organisations to operate in. It provides the social, economic, cultural and legal limits within which the company must function. This nature of business ethics helps the company follow rules that are good for itself and society.
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- It Is Voluntary
Following business ethics must be voluntary. The company should not be forced by any law to follow these moral and social values. When it does this by itself, the organisation earns a good name from society, customers and its employees.
- Businessmen Should Be Educated
Not all business people are aware of a place’s social and moral values. They also don’t know what business ethics they must follow to earn the support of the society around them. This nature of business ethics makes it necessary for them to be educated in these values so that they don’t violate any of the directions. Trade associations must inform companies about the benefits they will gain from following business ethics.
- Business Ethics Is Not Against Making Profits
It is a misconception that most people have. Having ethics doesn’t go against the principles of business. All companies work to make profits, and nothing is wrong with it. Business ethics only demands that organisations earn profits by fair means. They must not cheat the customers, employees, shareholders or others to earn profits.
- Good Employee Relationship
Companies need to maintain good relationships with their employees. They depend on the company for their livelihood, career and personal growth. The organisation and its employees must have a good relationship to benefit both. The company must ensure that the staff are paid a fair salary and are treated well. This nature of business ethics is very important for the progress of companies.
- Avoid Cheating And Fraud
Businesses must follow all the rules concerning their finances and ensure that all statutory payments to the government are made. Companies must also ensure that the shareholders are not denied their rightful share. They must not cheat the public with false promises or advertisements about their products.
- Help Save The Environment
The company must strive to protect the environment wherever there is an opportunity. It must avoid pollution and follow green practices even if they are not mandated by law. Such voluntary measures to protect the environment will earn the goodwill of society. It is one nature of business ethics that is very important these days when there is so much damage caused to the environment.
- It Is Dynamic
Companies need to understand that business ethics can change from time to time. Many HR practices have been recently introduced to ensure that all employees get fair treatment. Newer regulations concerning environmental protection are being introduced daily. There are also new technologies that improve the safety of employees and ensure their well-being. Ethics can also change from region to region. Companies must understand this nature of business ethics and comply with new rules when formulated.
- A New Concept
Business ethics is a relatively new concept. It is not enforced to the same degree everywhere. There are several countries in the world where ethics are unheard of, and businesses indulge in various practices that are harmful to society and the environment. Many governments are also not strict in enforcing various rules or checking whether all companies follow them.
You will learn more about this topic in the Post Graduate Certificate Course In Human Resource Management offered by reputed institutions. More details about this course are available on our website.
Scope Of Business Ethics
Ethics In Compliance
Various regulations govern companies in the country. All organisations must comply with these rules failing which they will be punished with heavy penalties. Most firms follow the rules due to fear of punishment. But companies that have good business ethics follow the rules because of a desire to be compliant. They follow the rules and stay updated with the latest regulations. The management monitors all the operations in the company to ensure there is no violation of rules in any department.
Ethics In Finance
There are various areas in finance where companies are faced with ethical issues. This is one area that provides ample opportunities to violate laws. Companies with good ethics will avoid them. They will not give misleading financial analyses or manipulate their accounts. Such organisations don’t act in a manner in which the shareholders are cheated with wrong information or figures. These firms don’t show fake reimbursements to reduce their tax burden. They understand the nature of business ethics, and so avoid bribery or kickbacks. You will not find such establishments doing overbilling.
Ethics In Human Resources
This is one department where there are ample opportunities to violate social values, and the HR department must ensure that this doesn’t happen. They should make sure there is no discrimination based on caste, age, gender, physical disabilities or appearance. Companies must also take care to prevent sexual harassment in the workplace. Employees must be allowed to represent their issues without fear. It is not correct for firms to shift financial risk to the employees through performance-based salaries. Companies need to understand the nature of business ethics and operate accordingly.
Ethics In Marketing
This is the topic that deals with how a company markets its products. We can see various issues in the way firms market their product with false promises or assurances. Some companies also indulge in reducing the supply of products to the market, thereby raising the price. The content of certain advertisements hurts some sections of society. There are also misleading advertisements that cheat customers into buying a product. Companies must not use children wrongly to promote their products. Competition in the market must also be fair without damaging the reputation of other companies.
Ethics In Production
This is one area where there is much ambiguity about following fair practices. Various production practices could be dangerous to the employees. Companies must ensure that they change technologies and machines that can cause harm to the workers. The materials used in production must not include addictive or disease-causing. The manufacturing process in the company must not cause harm to the environment. A keen understanding of the nature of business ethics is essential to avoid such practices.
Importance Of Business Ethics
Helps Control Malpractices
Business ethics have a direct influence on the working of organisations. They help us understand what is wrong and right in business. Ethics help companies lay down rules about what cannot be done. It also helps them decide penalties for violation of such regulations. The nature of business ethics also ensures that the company doesn’t indulge in malpractices like adulteration, black marketing, adjustments in weights or measurement or misleading advertisements. Ethics help the company supply good products at reasonable prices to the customers.
Maintain Good Relationship With Employees
Companies need to maintain good relationships with employees. Staff members are vital for a company’s growth and development. Without their contribution, companies can’t achieve their business goals. This is why companies must look at employee welfare and ensure that their career goals are also met. It is the nature of business ethics to ensure good monetary benefits and working conditions for the employees. Companies will also ensure that there is no discrimination against employees on any basis. Promptly addressing employee issues helps the firm to maintain good relationships with them.
Improves Customer Satisfaction
Customers are the most important entity of any business. Without them, companies can’t sell products and earn profits. The nature of business ethics is to lay down strict guidelines on how a company must be fair to its customers. Firms must sell good quality products at reasonable prices to the customer. They must also stand by the warranty and other assurances they give to their buyers. Business ethics guides the company to address customer complaints promptly and ensure quick redressal. This improves customer satisfaction and results in better business for the firm.
Improves Profitability
Business ethics forces every employee in the company to follow the rules. This means that there will be no waste of resources. When the staff members follow the guidelines laid down by business ethics, they will not indulge in any practices that bring loss to the firm. People will not misuse company property. They will not do anything to damage the reputation of the company. This will ensure good sales and revenues for the organisation. It is the nature of business ethics to follow the latest production practices that reduce wastage. All these contribute to the profitability of the company.
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Helps Earn Goodwill
Goodwill is very important for all business establishments. It helps them capture more customers. Following business ethics is one way of earning goodwill in the market. By enforcing ethics, companies can provide better service to customers. Organisations with goodwill also attract the attention of better business partners who also follow ethics in their business. Such relationships will help the company spread their business. Creating a good image is another nature of business ethics, and this helps the company get new costumes with less effort.
Enables Better Decision-Making
Every decision in a business is crucial as it can have effects throughout the organisation. This means that decisions must be made very carefully and with much consideration. Business ethics provides various guidelines within which decisions must be made. It makes this process easier for the management. It is not just the top management that is guided by business ethics. All employees are bound by them, and this means that decisions at all levels will be made respecting business ethics. This nature of business ethics helps companies make decisions that are fair and correct.
Protection Of The Society
One cannot separate the company and the society in which it operates. Both depend on each other. The company must ensure that it does good for society. Its customers come from the same society. This means that the company can flourish or fail as per society’s wishes. But that is not the only reason for organisations to support society. It is another nature of business ethics to protect society and help it in developmental activities. It is part of the firm’s social responsibility. Companies must also refrain from causing any harm to society.
The above are just a few points that highlight the importance of ethics in business. You can learn more about how it helps business in the Post Graduate Certificate Course In Human Resource Management, the complete details of which are available on our website.
Conclusion
Following ethics is very important for all businesses. It helps them perform well and safeguards their reputation. There are multiple benefits to following ethics, and these include getting good people to join the firm. Today’s youngsters look at how ethically a firm operates before joining it. Following those guidelines also helps the company retain good employees. Being fair to them and providing them with good facilities will earn their loyalty. It is good to learn about business ethics in detail so that you can help your firm follow them and benefit from them.
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