Business Ethics: Why are they important?

To answer the question of why business ethics are important, one must understand what is meant by the term business ethics. “Ethics involves the study of moral issues and choices” (Kinicki & Kreitner, 23). To simplify this would be to say that business ethics are the code of values and principles that control the actions of a person, or a group of people, regarding what is right versus what is wrong. Business ethics aren’t just about knowing what is right and wrong; but using that knowledge in everyday business practices.

Business Concerns & Ethics

When management refers to business ethics they usually mean avoiding breaking the law, as well as avoidance of actions that may result in law suits or negative publicity that are bad for the company image. Businesses are especially concerned with these three things since they involve the loss of money and company reputation.

For a business to achieve long-term profits, customer relationships are of extreme importance. To maintain these relationships a business needs to earn trust through customer service and its desire to retain current customers. Business ethics have a lasting impression on its customers’ that builds trust, bringing more customers while retaining the older ones. Costa (2006) stated that “ethical companies also attract better employees, better use their skills and imagination, and achieve higher loyalty and commitment”.

Successful businesses fail, profitable businesses suffer and effective corporations lose profits and popularity. One of the main reasons behind these failures is the lack of business ethics. For a business to prosper and maintain its wealth, it should be founded on ethical principles. Managers who disregard ethical values can only earn short-lived success. To last long in the business world, business ethics is essential.

Individual Influences on Ethics

There are several factors that influence how individuals make ethical decisions. What they learned as they grew up from family members and from leadership figures such as teachers or coaches. Following one’s moral standards is more important when making ethical decisions than personal gain or profit. Individuals often show concern for others when making ethical decisions. Giving others the benefit of the doubt and helping others maintain their dignity seemed to play a part in how ethical decisions are made.

Influencing ethical behavior in employees
Ethics and leadership in an organization is a top down process. Management’s honesty, the willingness to share openly about decisions made, and a willingness to listen contribute to the influence on the ethical decision-making process. Likewise, listening and talking through problem situations, coaching employees through the decision-making process by prompting them to consider alternatives in helping them reach ethical decisions.

Companies are realizing that ethical training is necessary and they can no longer assume that their employees will automatically make ethical decisions. Customer service trainings have always had some ethical components built into them but more detailed emphasis must be placed on upholding the organization’s standard of conduct.

Managers should employ ethical standards of conduct as part of their organization’s culture and employees should be expected to adhere to those rules of conduct. Employees who practice unethical behavior reflect poorly on their organizations and should be terminated to protect the reputation of the company.

Ethical issues being addressed by a corporation today
Mark Hurd was forced to step down as CEO of Hewlett-Packard. Hewlett-Packard had a talented and successful chief executive who misused company funds on a personal relationship. The action of the board expressed the character of the company and showed it is living up to the values that leaders are legally and ethically bound to uphold. The board made its decision based not on his personal failings but on his betrayal of corporate values.


Business management experts and researchers have encouraged CEO’s and upper management to study ethics. They have emphasized the importance of founding business on ethical values and following them. They have urged management professionals to adhere to ethics and accept it as part of business. Ethics remain being important in business and strong ethical values shall take the business a long way.

Costa, J. (2006). The upside of ethics. Marketing Magazine, 111 (32), 14-14.

Kinicki, A and Kreitner, R. (2009). Organizational Behavior Key Concepts, Skills, & Best Practices. New York:Mcgraw Hill.

Swartz, J (2010, August 10). Jodie Fisher ‘saddened’ claim cost HP CEO Mark Hurd his job. USA Today Online. Retrieved August 14, 2010 from