Main Elements of Business Ethics

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Business ethics is a set of standardized norms which are deemed acceptable within a business whereby the behavior of the employees and the leadership is guided. Business ethics is the study of proper business policies and procedures in business, it ensures that a certain level of trust exists between a consumer and business. Business ethics goes beyond just a moral code of right or wrong. (Investopedia, Date unknown) Some ethical requirements for businesses are codified into law; environmental regulations, the minimum wage, and restrictions against insider trading and collusion are all examples of the government setting forth minimum standards for business ethics. (Horton. 2018) Ethics is commonly viewed as an easy task, something that happens with very little effort, but it is the exact opposite. Ethical behavior requires understanding and identifying issues, areas of risk, and approaches to making choices in an organizational environment. (Ferrel, Fraedrich, Ferrel. 2017)

One difference between an ordinary decision and an ethical one lies in the point where the accepted rules no longer serve, and the decision maker is faced with the responsibility for weighing values and reaching a judgment in a situation which is not quite the same as any he or she has faced before. Management All organizations have to deal with misconduct. That is why the management is the most relied upon on any organization. The management team is the one that sets the example for a company on a daily basis. Management within an organization guide and lead employees to make decisions that can benefit themselves and the organization. Management is considered the foundation of an organization, and when you have management that are well familiar with the ethics of the organization and have a positive effect on the company it helps retain the highly talented individuals within the organization. When management is leading in an ethical manner, the employees are likely to follow in their footsteps. (Horton. 2018)


Every organization has the potential for unethical behavior. Ethics can be defined and considered different by industry. For example, with an investment brokerage and the best decision for a client and his or her money does not coincide with what pays the brokerage the highest commission. Companies that produce energy, face inexorable scrutiny on how they treat the environment, so they have to be extra careful with how they produce this energy. And then there are companies like Amazon, who do all their business through the internet, have to be concerned about protecting their customer's privacy and security, but their main concern is their decision in marketing their business. They use their customers' information to track their movement and sell the data to marketing companies. Military ethics was ordered to be renewed by the U.S. Defense Secretary after cheating scandals occurred in different branches in the military. It was discovered that the Air Force officers at the Malmstrom Air Force Base in Montana were suspended after it was discovered that there had been wide- spread cheating on monthly proficiency tests on operating warheads.

The same with the U.S. Navy, it was criticized when sailors were found to have cheated on qualification exams for becoming nuclear reactor instructors. Even in sports it is an issue. The National Football League was heavily criticized for initially giving Baltimore Ravens player Ray Rice a two-game suspension after videos surfaced of him abusing his girlfriend. So, the NFL had to revise their policy on how serious domestic abuse should be taken. Benefits Ethics has benefits to yourself and to the organization you work for or plan on working for. Having good ethics tells about the person that you are and how you can benefit the organization. If you have great ethics you are more likely to get the opportunity of a promotion within the organization. Employee commitment comes from workers who believe their future is tied to that of the organization and from a willingness to make personal sacrifices for the organization. The more an organization is committed to taking care of its employees, the more likely the employees will take care of the organization. The field of business ethics continues to change rapidly as more firms recognize the benefits of improving ethical conduct and the link between business ethics and financial performance. Both research and examples from the business world demonstrate that building an ethical reputation among employees, customers, and the general public pays off. Legislating Ethics In 1907, Teddy Roosevelt said, Men can never escape being governed. If from lawlessness or fickleness, from folly or self-indulgence, they refuse to govern themselves, then in the end they will be governed [by others]. (Mondy & Martocchio, 2016, 2014, 2012)

Therefore, laws were designed to help identify the baseline separating what is good and what is bad. There are four attempts to legislate business ethics since the late 1980s, which are, The Procurement Integrity Act of 1988, 1992 Federal Sentencing Guidelines for Organizations Act, Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002, Dodd-Frank Wall Street Reform and Consumer Protection Act, and Whistleblower Protection. The Procurement Integrity Act of 1988 prohibits the release by government employees of source selection and contractor bid or proposal information. For example, the information in a bid like employee pay rate, goods, and proprietary information about the contractor's business processes. The reason for the regulation is to establish procedures to help mitigate the likelihood of noncompliance. Federal Sentencing Guidelines for Organizations Act which outlines an effective ethics training program and explained the seven minimum requirements for an effective program to prevent and detect violations. It offers softer punishment for corporations that have an ethics program in place. But in order for that to happen there were recommendations regarding standards, ethic training, and a system to anonymously report unacceptable conduct. (Ferrel, Fraedrich, Ferrel. 2017)

The third attempt was the Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002 also known as Sarbanes-Oxley Act, criminalized many corporate acts that were previously relegated to various regulatory structures. The primary focus of the Sarbanes-Oxley Act is to redress accounting and financial reporting abuses in light of corporate scandals. It was intended to eliminate conflict of interest. The act also contains broad employee whistleblower protection that subject corporations and their managerial personnel to significant civil and criminal penalties against employees who report suspected corporate wrongdoing. The whistleblower protection of the act apply to corporations listed in the U.S. stock exchange, which include officers, employees, contractors, subcontractors, and agent of those companies. (Ferrel, Fraedrich, Ferrel. 2017)

The fourth, the Dodd-Frank Wall Street Reform and Consumer Protection Act is a large piece of financial reform legislation passed by the Obama administration in 2010 as a response to the financial crisis of 2008. The act was brought on by the worst financial crisis since the Great Depression, which resulted in the loss of 8 million jobs, failed businesses, a drop in housing prices, and cleared out personal savings of many workers. All four of these attempts are to benefit and protect the business sectors. Businesses need some type of protection when they are accused of unethical behavior and they help determine if the act is in fact unethical. Of course, none of these protect the business unless the business has some type of ethical trainings in place and enforce the trainings.


Business ethics includes organizational principles, values, and norms that may originate from individuals, organizational statements, or from legal systems that primarily guide individual and group behavior in business. Investors, employees, customers, special interest groups, the legal system, and the community are all stakeholders in businesses and they each could determine whether a specific action is right or wrong, ethical or unethical. Studying business ethics is very important. Primarily because of the widespread of incidents of unethical activity and the need to better understand the factors that contribute to ethical and unethical decisions. An individual's personal morals, values, and principles may not be enough to guide them in the business world. Business ethics helps you identify ethical issues and know the necessary approaches to resolve them.

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Main Elements Of Business Ethics. (2020, Feb 26). Retrieved July 18, 2024 , from

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