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 Ethics are not necessarily synonymous with the law. There will be instances in which ethical

behavior and the law are the same (e.g., in the cases of murder, discrimination, whistleblower protection,

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and fraud). Such instances are illustrative of a good legal system. There will, however, be times when the

law takes a different path than ethics—the result being ethical corruption that serves only the interests of

small groups.

• Ethics are not about following cultural norms. Following cultural norms works only for ethical

cultures. Although most cultures probably like to see themselves as ethical, all societies have been and will

be plagued with norms that are unethical (e.g., slavery in the United States prior to the Civil War and

sweatshops in developing countries).

• Ethics are not synonymous with science. Science cannot tell us what to do. The sciences can

provide us with insights into human behavior, but ethics provides the reasons and the guidance for what

we should do.

• Ethics are not the same as values. Although values are essential to ethics, the two are not

synonymous. Values are enduring beliefs that a given behavior or outcome is desirable or good. [4] They

create internal judgments that will determine how a person actually behaves. Ethics determine which

values should be pursued and which should not. [5]

Why Ethics Are Important

Ethics are important because they provide structure and stabilization for society. They help us to

understand what is good and bad, and this helps us to choose between right and wrong actions.

Without ethics, our actions would be “random and aimless, with no way to work toward a goal

because there would be no way to pick between a limitless number of goals.” [6]Ethics do not


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provide easy answers to hard questions, but they do provide a framework within which to seek

the answers.

Business Ethics

Business ethics is applying the virtues and discipline of ethics to business behavior. They set the

standard for how your business is conducted and define the value system of how you operate in

the marketplace and within your business. [7] They are relevant to any and all aspects of business

conduct: workplace issues, product and brand, corporate wrongdoing, professional ethics, and

global business ethics. They apply equally to the individual who works for the company and to

the company itself because all ethical and unethical business behavior eventually finds its way to

the bottom line. It is almost a certainty that someone will encounter an ethical dilemma at some

point in his or her professional life. Video Link 1.1

Business Ethics in the Twenty-First Century

A PBS documentary about business ethics and social responsibility.


Do Business Ethics Pay?

Asking whether business ethics pay may be the wrong question to ask. Behaving ethically should

happen because it is the right thing to do. However, companies large and small are in the

business of making money, so the question is not an unreasonable one. Good ethics carry many

benefits, not the least of which is financial good health. Companies that “outbehave” the

competition ethically will also tend to outperform them financially. [8]According to an Institute

of Business Ethics report, companies with a code of conduct generated significantly more

economic value added and market value added than those companies without a code,

experienced less price to earnings volatility, and showed a 50 percent increase in average return

on capital employed. [9]

Business ethics also pay in other ways that will improve the workplace climate and, ultimately,

positively impact the bottom line. They can “reduce incidents of corruption, fraud, and other

malpractices; enhance the trust of customers, suppliers and contractors; enhance the credibility



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of buyers and salespersons; and enhance the loyalty and goodwill of employees, shareholders

and customers.” [10]

The Costs of Unethical Business Conduct

By contrast, the costs of unethical business behavior can be staggering. Some of the costs

include the loss of physical assets, increased security, the loss of customers, the loss of

employees, the loss of reputation, legal costs, the loss of investor confidence, regulatory

intrusion, and the costs of bankruptcy. According to a report by the Josephson

Institute, [11] unethical business behavior has an adverse impact on sales, stock prices,

productivity, the performance of the highly skilled employees, efficiency, communication, and

employee retention and recruiting plus the risks from scandal and employee fraud.

The costs of employee theft are particularly daunting. An estimated 75 percent of employees

steal from the workplace, and most do so repeatedly. One third of all US corporate bankruptcies

are caused directly by employee theft; US companies lose nearly $400 billion per year in lost

productivity due to “time theft” or loafing; and an estimated 20 percent of every dollar earned by

a US company is lost to employee theft. [12] Office supplies, money, and merchandise are the

most frequently stolen items. [13]Employee theft may be even more of a concern to small

businesses because many small businesses operate so close to the margin. It has been estimated

that theft by small business employees totals nearly $40 billion each year.[14]

Small Business Ethics

In business, it is common for there to be conflicts between business success and ethical

behavior. When faced with an ethical dilemma, the decision may be unduly influenced by profits

and legality. This challenge is particularly acute for small business owners because they are so

much closer to the employees and the customers. The results of ethical decisions will be felt

more immediately by the entire company. [15]

Small-business owners will find themselves confronted more often with ethical choices because

of the decision-making autonomy that they have; there is no need to answer to a large number of

employees, corporate management, or a corporate board. The ethical choices that are made will

likely impact a far greater number of people than will the ethical decisions of individual

employees. Many business decisions will pose ethical challenges—examples being whether to



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use inferior materials to produce products because of competition with larger businesses,

employee and workplace problems, product quality and pricing, legal problems, and

government regulatory concerns. [16] The pressure to make an unethical choice on behalf of the

small business can be very powerful, especially when the health and vitality of the business may

be at stake. [17] Fortunately, the chances of an unethical decision being made in a small business

are lower because the individual or individuals who are harmed will always be more visible. It is

more difficult for the small business owner to be unethical. Ultimately, small business owners

will behave in accordance with “their own moral compass, sense of fair play and inclination to

deal in good faith.” [18]

According to one study, [19] small businesses see norms and pressures from the community and

peers as having more influence on their ethics than moral or religious principles, the

anticipation of rewards, upholding the law, or the fear of punishment. This leads to the

conclusion that small business is influenced significantly by the communities in which their

businesses are located. Socially responsive behavior is visible and it is “rewarded or sanctioned

by local residents through changes in employee morale, performance, and turnover; customer

loyalty; and positive interactions with business service professionals, suppliers, local

government officials, and business colleagues. These local sanctioning mechanisms [in turn

affected] the success of the business.” [20]

Because of this community influence, customer relationships are and must be based on trust

and the relatively immediate visibility of ethical behavior. It is perhaps not surprising that

people in small business are ranked number one on ethical standards ahead of physicians,

people in big business, and government officials. [21]

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