What is business ethics? The Institute of Business Ethics (IBE) defines business ethics as “the application of ethical values to business behaviour”. Business ethics refers to both the conduct of individuals within an organisation and the conduct of the business that these individuals are part of. In our Pearls of Wisdom videos, the IBE’s Research Director, Simon Webley, explains common questions surrounding business ethics.
Ethical values guide the way that business is done, and determine what is deemed acceptable, desirable and responsible behaviour, above and beyond compliance with laws and regulations. Values may not only differ from person to person, but also from company to company. Common ethical values include “respect”, “fairness” and “transparency”, however “integrity” is the ethical value that we most commonly see employed by organisations. Values are an important support in decision-making. Within organisations, boards want to influence behaviour so that employees make good decisions. Often there is no one, absolutely right answer so everyone needs to feel equipped and supported to make decisions by way of clear and simple company values.
With this in mind, what factors may lead to unethical behaviour? Employees are under a number of different pressures which may lead them to act unethically. As part of our Ethics at Work survey, we asked employees in 12 different countries about this. Most reported that the main pressures for them to act unethically were that they were under-resourced, under time pressure, or that they were simply following their boss’s orders. The impact of pressure is significant and can lead to a number of outcomes that have a negative impact on the ability of a given organisation or business to do the right thing, which may lead to ethical scandals or so-called ethical lapses. Are such crises ever unpreventable and can unethical decisions within an organisation happen in isolation without being part of a wider, endemic issue? With the right mechanisms in place to prevent ethical lapses from occurring in the first place – such as a supportive, well-functioning Speak Up system – chances are issues will be picked up before they become a major problem.
The IBE defines corporate culture as “the beliefs, values and behaviours that determine how an organisation’s employees and management conduct their business and manage relationships with individuals and groups with whom they have dealings with within and outside the organisation (stakeholders).” So what then is an ethical culture? We would say that an ethical culture is one where good decisions are made and ethical decision-making is demonstrated, bad practices are not tolerated, and issues are resolved appropriately and effectively through employees being able to speak up about their concerns without the fear of retaliation.
Through communications and training doing the right thing can become the norm and the instinctive reaction or “gut feel”. People are more likely to put aside ethics if they think this is what their boss or their role requires, so setting the right tone from the top is important, and people determine the appropriate behaviour by looking around them, so ethics needs to be part of the incentives in terms of reward, recognition and promotion systems. At the end of the day, what gets measured gets delivered, so anything an organisation can do to steer its employees toward ethical decision-making – such as by focusing on good customer relations rather than selling as many products as possible – will help set the organisation up for long-term success.
What are the outcomes associated with having an ethical company culture? When it comes to building trust in business, the simple answer is that trust needs to be earned. And how do you earn it? By behaving in a way that is trustworthy. If a company can demonstrate that it is trustworthy, it will be more likely to achieve good business outcomes. How this all ties together is visualised by way of the IBE’s Business Ethics Framework.
Research from Great Place to Work UK has identified ethics and values as the #1 driver of being a great place to work. They tracked companies that fit into their list of great workplaces, and employees working for these companies were shown to be more likely to positively promote the company, go the extra mile and to stay at the company. This equates to better employee retention and lower costs, which also means a better retention of knowledge and skills. Ultimately, “doing business ethically makes for better business”.