As an entrepreneur or organizational leader, you are responsible for making ethical decisions. Lecturer Brent Scholar and Assistant Professor Elizabeth Castillo at Arizona State University’s College of Integrative Sciences and Arts share their insight on the importance of business ethics. They also discuss ethical business practices and give tips for creating a code of ethics.
Business ethics, also known as corporate ethics, are moral principles that govern organizational behaviors, norms, policies, practices, standards and values. These moral principles guide how a business treats people, communities and environments.
“I like to think of business ethics as doing the right thing even when no one else is watching,” said Brent Scholar, an instructor of online ethical business courses in ASU Continuing and Professional Education and lecturer in the College of Integrative Sciences and Arts.
Doing the right thing seems simple, but sustaining ethical practices is not easy. The vast number of ethical beliefs complicates the situation because no two principles are going to be the same.
Business ethics are important because they serve as the lighthouse for moral behavior. Business ethics are the cornerstone of sustainable commerce. They are the compass for how businesses can earn and maintain the trust of stakeholders.
“Ethical business practices promote trust, respect, cooperation and creative win-win situations rather than fostering zero sum approaches to commerce,” said Elizabeth Castillo, an instructor of online business ethics courses in ASU Continuing and Professional Education and assistant professor in the College of Integrative Sciences and Arts. “Business ethics help build a trustworthy economic system that promotes widespread prosperity and lessens systemic risk.”
Since economist Milton Friedman said the only social responsibility of a business is to increase profits in the Friedman Doctrine, business ethics have become even more important.
“We have needed business ethics to ensure the expense of higher profits is not at the loss of morally correct business practices,” said Scholar, who has more than two decades of leadership experience in hospitality, mortgage, banking and education. “Over the years, attention has shifted more and more away from Friedman’s profits and shareholder ideology to people, planet and profit.”
On August 19, 2019, a roundtable of the nation’s leading executives from 192 large companies abandoned Friedman’s sentiment. In a new statement, the roundtable noted “business leaders should commit to balancing the needs of shareholders with customers, employees, suppliers and local communities” (Jena McGregor, reporter from the Washington Post).
The highest levels of organizational structures are now taking business ethics into consideration. This route leads to success not only for the company but for communities and the country as a whole.
“This is why business ethics are important, so the right things are done,” says Scholar.
The first step to creating a business code of ethics is to determine what moral principles and values you want to follow as an organization.
“These moral principles are the North Star that will guide your ethical decision-making, strategy and relationships with stakeholders,” says Castillo, who has two decades of management experience. “Ideally, selecting a firm’s core values will involve people throughout the organization. This will promote broader ownership and enactment of these principles.”
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