Companies all over the world conduct business with the primary goal of making profits and generating wealth for their stakeholders, but not all businesses are created equal. Some businesses act ethically and benefit society and individuals while conducting business, even if doing so reduces overall company profits. In order to comprehend this idea, one should consider the benefits and drawbacks of corporate ethics.
Advantages of Business ethics
- Support from consumers
Modern customers are different from traditional customers in that they use social media and technology. In the age of technology, any negative news about a company can quickly ruin the reputation it has built over the years, and positive news about a company spreads quickly as well. If a company upholds its values and practices social responsibility, it will benefit from the patronage of both current and potential customers.
- Employee trust
Employees cannot be expected to carry out their duties ethically if a company engages in unethical business practices in order to maximize profits. In addition, employees won’t trust such businesses, and the best employees will seek employment elsewhere, which will result in further losses for the business since human capital is arguably its most valuable asset.
- Brand Image
Good quality goods, good customer service, and a fair price are a few of the factors that assist a company in building its brand image, but one can also include business ethics because, over time, business ethics plays a significant role in building and maintaining the company’s brand image in the minds of consumers.
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Disadvantages of Business Ethics
- Reduction in Profits
If a corporation follows an ethical path, its chances of increasing its earnings are lower since sometimes an unethical path must be taken to steal commercial prospects from rivals. Simply said, a firm can only follow business ethics properly if it is prepared to sacrifice additional revenues in order to remain morally upright. Otherwise, it will be a waste of its time, resources, and effort.
- Long term process
Another problem of corporate ethics is that it takes time and effort for a company to become ethical; this is a long-term process that only a select few in the top management of the company can successfully manage.
- Difficult for small companies
Another argument against business ethics is that while large corporations can afford to lose some customers for operating ethically, it is unrealistic to expect all small businesses, particularly in the current climate of fierce competition where small businesses frequently fail due to low sales and profits, to operate ethically. Simply said, for tiny businesses, it’s not about making smaller profits; it’s about surviving, and when it comes to surviving, odds are good that small businesses will toss talk of ethics out the window.
- Overall management strategy
An ethical compliance program’s drawback is that it needs management’s full support in order to be successful. This conflict of values can create difficulties at work if management team members choose to run their departments according to their own interpretation of corporate ethics. For instance, a manager who frequently chooses to ignore instances of sexual harassment by his staff can start to damage the entire corporate culture. Even with comprehensive policies in place, senior managers all too frequently act as if the rules do not apply to them, as the “MeToo” movement has made abundantly evident.
Conclusion
As one can see from the aforementioned, business ethics has both benefits and drawbacks, and it is up to the firm’s top management to decide whether they want to run their company just for financial gain or also for the sake of earning the respect of the community.