The top objective of any business has always been to make profits. Till recently things like ethics and CSR were largely considered unnecessary overheads. However ethics have become much more relevant in recent decades. The objective of doing business is unchanged. What’s new is the mindset that ethics leads to profits, and their absence leads to loss.
Here is a look at some examples that illustrate the value and importance of ethics for entrepreneurs, and also their application.
Dr. Jill Young of South University’s College of Business says that the most important aspect of ethics is integrity. If integrity is well demonstrated, other components of ethics flow naturally. These include personal responsibility, dependability, honesty, respect, and compassion.
Ethics have a strong bearing on an organization’s public image. This helps build trust with clients and other stakeholders. A positive brand image can create better employee productivity and retention, attract investors, and do wonders for public relations.
Business Analyst Steve Bettwy believes that ethical companies in the US have better profitability. A strong public image backed by strong ethics improves shareholder confidence. Firms such as Allianz, IBM, Microsoft, and HP recorded better profits than their competition. A look at the US Large Cap Index over several years shows that this gap is widening. Sooner or later unethical businesses run out of favor with the market, while ethical companies attract a majority of investors and customers.
After interviewing leaders of 7 reputable companies including Tim Erblich of Ethisphere, Amy Fuller of Accenture, and Mike Valentine of Baxter Credit Union, journalist Bruce Weinstein concluded that ethics create deep impressions. These impressions build clients’ faith in a brand and its partners. Impressions also rub off on employees and other important stakeholders. In their testimonies the respondents explained how business character was more important to them than merely making profits and portraying themselves as successful to the public.
Ethics in the digital epoch
We live in an era when business is done at wire speed. Information is a highly valued commodity. Digital data is instantly shared with millions globally. Accountability is everything. Clients are becoming increasingly careful about who they transact with. The importance of ethics in such an environment cannot be overemphasized.
Some domains are more sensitive to ethics than others. A notable example is the international money transfer industry. Millions of people send money online across international borders every day. Only firms that have a strong track record of compliance and ethics can win customers over. Ria is one such company. In recent years Ria has rapidly grown to be one of the world’s largest remittance service providers.
Businesses profit by prioritizing client and employee satisfaction. Ethical marketing is important for online businesses. For example, retailers selling via platforms like Amazon constantly get authentic reviews from real customers. Buyers write very detailed reviews, often adding pictures. These reviews serve as indicators for all potential customers. Only firms that consistently follow ethical practices manage to stay in business for long.
The outcome of poor ethics
There are numerous examples of businesses which ignored ethics to maximize short term profits, and failed spectacularly. Former American energy and commodities giant Enron Corporation is a well-known example. Enron employed unethical accounting processes to hide losses and show inflated profits. In an attempt to artificially bolster their share price Enron’s leaders deliberately deceived shareholders and regulators.
When the bubble burst Enron’s share price plummeted from $90.74 to $0.26. The company went bankrupt in 2001. Investors and employees suffered major financial losses. Many of Enron’s executives received prison sentences.
Former telecommunications giant WorldCom is another example of unethical practices resulting in failure. The corporation made over $3.8 billion fraudulent balance sheet entries. WorldCom had exaggerated its worth by more than $11 billion. When the fraud was exposed the firm went bankrupt. Eventually shareholders lost a lot of money and WorldCom executives were sentenced.
Running a business ethically or otherwise is a choice. However they choose, business owners create circumstances that pave the way for long term outcomes. These insights show that businesses that maintain an ethical focus create goodwill and foster trust, which goes a long way to win customers.
About the author:
Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.