Business Ethics - Why it's Important

By: First Union | Date:

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Business Ethics - Why it's Important

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As a business owner, you deal with so many issues on a day-to-day basis. Finances, customer service, employee relations, you name it, these all factor into what keeps your business going and consequently, how successful that business is. One such issue that should be at the top of your agenda is that of business ethics. What are business ethics? Everything from adhering to discrimination laws to ensuring health and safety in the workplace to making sure that employees act ethically are all part and parcel of business ethics. Some business owners may not be aware even that they are violating any sort of code of ethics, which is why it is all the more important to ensure you keep on top of any such issues that pertain to your company. In this article, we look at some of the more prominent issues associated with business ethics and what you as the boss need to be aware of.

Discrimination and Various Forms of Harassment

Discrimination and harassment are perhaps the most important ethical issues that owners need to be aware of in terms of how to prevent it in the first place and then how to remediate a problem should it arise. Let's say for example, that an employee cites harassment within the workplace; this could have devastating financial and reputational consequences for the business. This is why is it critical to stem such problems before they can occur.

To help deter any such behavior that could be construed as harassing and/or discriminatory, you want to have a carefully outlined policy in place. You also want to make sure that every employee is made aware of what those policies are and has a copy of those policies handy so that they can refer to them if needed. Reviewing such policies and procedures as a team can often be an effective way of promoting a company culture free of discrimination and harassment.

Some key areas to emphasize when creating policies to this effect:

  • Age discrimination. Any behavior that assumes an ageist stance should be forbidden.
  • Race. Regardless of race or color, employee treatment must be the same across the board.
  • Disability. Be it mentalemotional or a physical disability, accommodations should be provided and treatment of all employees has to be the same.
  • Sex. Regardless of sex/gender identity, equality needs to be a given.

As the boss, you can encourage your team to act ethically, treat everyone the same, and refrain from discriminatory behavior. However, you cannot make people act accordingly. If a situation does come up in which an employee is being treated in a derogatory manner that constitutes discrimination or harassment, you as the owner must address the situation and make the right call. You might also consider providing educational opportunities regularly to help make your employees more aware of such behaviors. Another important aspect of this is to reassure employees who do come forward that they are protected from any sort of retaliation.

Compliance Issues

Compliance issues can be a little trickier to understand when it comes to business ethics. Essentially, this covers cases in which the company's interests stand in conflict with businesspoliticalsocietal standards. For example, as a business, you are expected to comply with all rules/regulations as put forth by the federal, state, and local authorities. If you, in turn, do something that violates any such regulations, you are not complying. This not only can result in penalties but keep in mind, you are also potentially endangering the well-being of those in your local area—depending on your actions. Remaining in compliance and doing your due diligence to this end are crucial for the livelihood of any business.

Some things you might consider to guard against not complying could include:

  • Ensuring the company bylaws include any issues about governmental rules and regulations.
  • Promoting the long-term health of the company and its community versus short-term gains that are not really in the best interest of either.
  • Regularly training manager regarding updated regulations and laws.
  • Considering how the company's actions affect the "big picture."

Accounting Practices

Many have heard the phrase "cook the books." This is an unethical accounting practice that could seriously jeopardize the future of your company. Creating false documents or presenting financials that do not paint an accurate picture (especially if you are publicly traded/) can result in major problems for a business. Even, in some cases, this could lead to jail time for key stakeholders involved in any wrongdoings.

How do you avoid accounting issues? This is where you have to put your trust in an honest and above-board accountant and/or accounting firm. As the company owner, you should also be continuously reviewing financial documents and statements to ensure accuracy. Many businesses will have a multi-layered auditing system in place to prevent any crucial mistakes or even fraud.

Employee Dishonesty

Employee theft sadly is an all too common problem for many business owners. Particularly if yours is a retail-based company, theft sometimes becomes all too easy for staff members. A recent poll suggested that some businesses lose up to five percent of their annual revenue to employee theft. And it's not just about money. Employees can "steal" time for example if they are paid for more hours than they worked. They can also steal information vital to the business in terms of customer information and thus put your company in a very bad situation.

How can you prevent employee theft? For one, make sure that upon hiring someone you have a good sense of their character and background. Beyond that, have a firm policy in place outlining what could happen if employee theft does occur. Make sure everyone understands the consequences involved.

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