Understanding Business Ethics With Examples and Insights

If you follow business news, you’ve probably read headlines about unethical companies or high-ranking figures in a company. To appreciate these stories and their impact on various industries, it’s important to understand business ethics.

Business ethics refers to a set of principles that guides how a business interacts with customers, employees, and suppliers to solidify its reputation.¹ Maintaining a set standard of business ethics helps establish your reputation as a trustworthy brand. Following ethical business practices shows potential customers you have integrity and inspires customer and employee loyalty.²

This post explores the fundamentals of business ethics with key examples.

Core Ethical Principles

Companies committed to ethics in business are guided by the same set of ethical values:³

• Honesty: Leadership communicates with employees and customers truthfully. They avoid misrepresenting the company in advertisements and communicating with half-truths, selective omission, misinformation, or other techniques to obscure the truth
• Integrity: Company leaders honor their word. If they can’t keep a promise, they take responsibility and correct the problem
• Accountability: Company leaders take responsibility for their actions, particularly those that could cause customers or employees to mistrust the brand
• Transparency: Company leaders openly disclose relevant information
• Fairness: Companies treat all people equally without discrimination
• Respect: Companies act in ways to preserve human rights and dignity, including protecting employees from fear of retribution and other forms of abuse

Common Ethical Dilemmas

Any business can commit to ethical business practices on paper, but the real world is complex. Ethical dilemmas can still happen on occasion. These often emerge when options in a decision-making process aren’t wholly acceptable ethically.⁴ In your career, you may be faced with tempting, possibly lucrative options that are potentially unethical or even illegal.

Examples include conflicts of interest in decision-making. Nepotism is a common conflict of interest in which a person in a position of power hires a family member over a more qualified candidate.⁵

Handling confidential information can also pose ethical dilemmas. For instance, if you, as a manager, are given a report detailing potential dangers of a new product, you may have to decide whether to pull the plug on an expensive product launch or let it go forward to benefit your shareholders. In management, you also have to decide how to stand out from your competition while upholding ethical standards.

Decision-Making Frameworks

Understanding how to make these decisions can help you navigate ethical dilemmas that may arise throughout your career. Follow this process to evaluate your decisions:

• Understand the facts: Clearly define what it is that makes you uncomfortable. Is it the process itself or something involved in this decision?
• Outline the information: Figure out what you need to know to make an ethical decision. List out any assumptions facing you and seek out other information so you have a clear understanding of the situation
• Specify your concerns: Assess the factors that could impact your decision, from legal and professional concerns to how your decision impacts the people involved
• Outline potential resolutions: Weigh the pros, cons, and potential outcomes of each resolution
• Recommend an action: After you’ve thoroughly assessed a situation, you should be able to resolve the situation ethically. If not, seek assistance from someone else in the company

Common ethical approaches to decision-making include the following:⁶

• Utilitarianism: Moral reasoning based on potential consequences. Are you doing the greatest good for the most people? How does this approach maximize happiness? 
• Deontology: Reasoning based on a sense of duty and core principles. Does this action align with your core values? 
• Virtue ethics: Moral reasoning based on compliance with your identified virtues. In business, you may weigh your decision based on your company’s core values

Some ethical dilemmas happen when you’re asked to consider profits over people. For example, stopping a product launch because you discovered the product could harm people leads to wasted time and money and a potential scandal. But ethically, it is the right thing to do.

Examples of Business Ethics in Action

For every headline concerning a corrupt company, there are plenty of others about those leading by example. Examples of companies known for ethical business practices include Best Buy (which recycles electronics to keep digital waste out of landfills), Dell Technologies (which makes it easy for employees to anonymously report concerns), and Kao (which has committed to lowering their carbon footprint), among others.⁷

Another company praised for ethical actions is Costco, which consistently pays its employees a fair wage, well above the average for the retail industry.⁸ As a result, Costco has higher employee satisfaction ratings and lower turnover than its competitors.

Car manufacturer General Motors experienced an ethical crisis in 2014 when it had to recall vehicles with faulty ignition switches. Although the company knew about this design flaw, leadership didn’t enact a recall until it was sued after 124 people died and 274 were injured.⁹ In the decade that has followed, GM has conducted an internal investigation and made it easier for employees to report potentially harmful product flaws. Executives have also changed the culture in the organization and are now recognized for their commitment to ethics.¹⁰

Practical Strategies for Implementation

As part of a company’s leadership team, you will be responsible for setting and maintaining ethical business practices. The first step is to establish a written code of conduct and make sure every employee agrees to uphold it. Your team should know what you expect of them and the potential consequences for violating ethics standards.

Employees should also know how to report ethics violations and be encouraged to do so without fear of consequences. Finally, each employee should understand mechanisms for being held accountable, such as performance reviews and whistleblower protection.

Measuring Ethical Performance

If you’re tasked with assessing your company’s ethical performance, measure key performance indicators such as employee satisfaction rates, training completion rates, incident reporting and response rate, and regulatory compliance rates.¹¹ Perform regular internal audits to identify any potential risks to your code of conduct and investigate incidents more quickly.

Ethics starts at the top through corporate governance. Choose company leaders who are committed to upholding ethical practices and encourage them to create a culture of accountability.

Lead the Finance Industry as a Beacon of Ethics

The financial industry deeply impacts people’s everyday lives. As a finance professional, you need to uphold business ethics as you work with customers and investors. An Online Master of Science in Finance and Analytics from the Leavey School of Business at Santa Clara University gives you this vital foundation.

Our flexible online program offers tailored education that equips you with essential skills to succeed in corporate finance, capital markets, investment banking, and other exciting fields. You will also develop a valuable professional network to help advance your skills and career at every step.

To learn more, schedule a call with an admissions outreach advisor today.