Business Ethics 101
In a nutshell, business ethics means the matter of choosing right from wrong while conducting business. A company's code of ethics, whether written or unwritten, can guide the behavior of individuals within that company. And ethical behavior shouldn't be confused with legal behavior--something may not be against the law, but could still be unethical.
Business ethics could be described from two different vantage points: a shareholder's position, and a stakeholder's position. A shareholder is someone who has invested in the business venture, and stands to profit directly from its success. In this case, ethical decisions would stem from what would best benefit the owner of the business, and would focus on what would best return money on an investment. A stakeholder in the business is more widely ranging, and may include the vantage point of an employee, a customer, a vendor, a governmental agency, or even the outside community. If a business makes ethical decisions based upon what is best for this larger group of interests, the stakeholder point of view may prompt a different decision than what might be arrived at by choosing the route dictated by the more narrow shareholder's stance.
Regardless of the vantage point chosen, it can be helpful when facing an ethical dilemma to think of the following questions: would I want someone to carry out this action against me? If this decision were made public, would I feel comfortable knowing that my parents, and other adults I respect, are aware of what I've done?
In essence, a failure to conduct business in an ethical manner is captured by a proverb: you can win the battle and lose the war, or, in other words, short-term gains can sabotage the potential for long-term gains. Consider the following: a company that runs roughshod over surrounding natural resources can incur long-term costs in decreased employee health and morale; a company that engages in "creative accounting" eventually squanders its credibility with shareholders and employees alike; a company which rewards top executives with exorbitant salaries can find itself lambasted in the press; individuals who indulge in insider trading can weaken their company's stock price; a human resources department which engages in discriminatory hiring loses out on the strength the best employee would have brought to the company; an overemphasis on downsizing can fuel employee cynicism and disloyalty. Another example could include the design, production and marketing of a known faulty or even dangerous product, which opens the company to potential legal liability and, at the least, destroys customer confidence in a brand name. As another proverb says, "an ounce of prevention is worth a pound of cure." A violation of business ethics can, therefore, lead to a disenchantment with a particular company's products, increase the cost of doing business (perhaps with the cost of additional marketing to overcome negative publicity acquired in a myriad of ways), drive the cost of additional security staff, or additional customer service representatives, and even exact a societal cost of heightened pressure on family life.