Ethical Decision-making in Business

Business ethics function as a moral compass for companies, ensuring responsible decision-making. They guide businesses in maintaining the well-being of their employees and promoting a positive reputation and effective accountability. Companies that are committed to doing good can inspire more customer support as well as increased revenue. Some organizations have led the way with profitable enterprises that incorporate ethical values and behavior.

Business professionals who want to move into higher management and improve their career opportunities can take the Master of Business Administration (MBA), a prestigious postgraduate qualification. Kettering University delivers an online mba that teaches the key concepts, tools, and application of knowledge in finance, marketing, accounting, and managing people to become an expert organizational leader.

TOMS – an Ethical Business

Brand authenticity can be crucial to a company’s success. With moral core values and decision-making, some companies demonstrate how business and ethics can go together.

Blake Mycoskie founded TOMS in 2006 following a visit to Argentina. During his trip, Mycoskie saw that people living in the poor areas of Argentina did not have shoes. He was inspired by this trip and had this in mind when he established his company. This American company sells shoes, eyewear, coffee, clothing, and handbags. Corporate philanthropy is a core part of the company’s values and brand.

Since 2006, TOMS has donated over 60 million pairs of shoes to children in need worldwide. TOMS’ eyewear unit has given more than 400,000 pairs of glasses to visually impaired people who do not have access to clinical eye care.

These operations have spread throughout the company with clean water projects from its coffee section and expanding access to birth kits from the bag division. Birth kits have been provided to pregnant women in developing countries, along with training for birth attendants. So far, TOMS has helped more than 25,000 women deliver their babies safely.

TOMS ensures its philanthropy is visible across its branding. The brand is consistently reinforced, letting potential customers know what kind of company they are dealing with. On TOM’s homepage, the company makes clear that it will help someone in need with every purchase. TOM’s mission is central to the company’s branding and is given the same emphasis as the products it sells. When navigating through the website, there are examples of how TOMS helps people around the world. The philanthropic mission is reinforced throughout the website and in marketing materials. The brand has come to represent both the products and the company’s charitable work.

Everlane – a Discredited Company

With consumer demand for ethical practice, some companies make promises but fall short when under scrutiny.

In 2010, Michael Preysman founded Everlane and made a bold commitment to ethical manufacturing. He said the company would use radical transparency regarding pricing, production, ethical labor, and sustainability. Everlane’s website told its brand story, including how the company advocated the rights and well-being of the workers making its clothes. This ethical stance was made clear in all its marketing material.

Everlane’s major period of growth came as many brands realized consumers cared about the conditions in which clothing was made and were looking for sustainable fashion. With greater awareness about working conditions, the demand for ethically made clothing had increased.

Everlane appeared to be sustainable and ethical but also trendy and fashionable. Consumers responded well to the brand. In 2015, the company earned $50 million in revenue.

In 2019 the ethical reputation of Everlane was undermined when employees announced their intention to unionize. They accused the company of selling an image that did not reflect its mistreatment of staff. Some of their complaints included part-time staff not having fair wages, benefits, paid medical leave, and time off. They also said they had witnessed and experienced anti-Black behavior such as underpaying over-qualified Black employees, racial and heteronormative supremacy, and bullying and intimidation. Everlane leadership completed an internal investigation and confirmed many of these complaints.

There have been other accusations against Everlane. Last year it was revealed that the company had failed to track greenhouse gases across its entire line and had no initiatives to guarantee living wages or reduce water use.

Preysman has said his company has lost $15 million this year in profit. He maintains that he will make improvements at the company, but with the discrediting of its ethical stance, it remains to be seen if recovery is possible.

What are Business Ethics?

Business ethics are the moral standards companies use to influence their decisions. Maintaining high ethical standards can encourage integrity among staff and garner trust from stakeholders, such as consumers and investors. These standards can be implemented through management to create a secure ethical code that helps companies succeed.

Some laws prevent illegal actions such as discrimination, fraud, bribery, or insider trading and can guide business principles. The law partly defines conduct, but business ethics enhances the law by defining acceptable behavior beyond legal limits. Digital communication and technology have made it easier for ethical misbehavior to be widely publicized. To safeguard their reputations, companies are paying more attention to business ethics. Honesty and integrity have become sought-after for leaders as the link between ethics and business success has been more widely recognized.

As businesses grow and mature, they may develop ethical standards to improve their public image. Some business ethics are considered universal, while others may be personal or cultural and only apply in some instances. These ethical viewpoints can continue to evolve within the company. An individual’s ethics may change as they are exposed to new people, situations, and environments.

The Importance of Business Ethics

A robust ethical code can have many positive effects on a company. It can mean better staff retention and satisfaction, a higher profit margin, and more sales. Business ethics ensure that companies follow all applicable laws. This results in respect among its customers and other businesses and shields it from legal liability. An organization’s ethics can help it attract quality staff, as job seekers can be attracted to companies that look after their employees. Principled treatment can increase staff retention and reduce hiring and training costs.

When a business treats customers ethically, it can develop trust and create established relationships. Customers are more likely to return and may recommend the company to others. This can lead to greater long-term profits. A business known for its strong principles can mean its brand is elevated. Greater adherence to ethics leads to more commitment from employees, better financial performance, and improved operational efficiency.

How to Make Ethical Decisions

Ethical decision-making is a business strategy related to moral principles for business decisions. Moral issues in business include employee well-being, environmental concerns, product honesty, operations transparency, and customer satisfaction. Many ethical dilemmas in business relate these variables to financial growth.

These four core steps provide an ethical decision-making model:

1. Ensure all the facts have been identified. This means choices are based on verified details, events, and actions. Consider the level of awareness, thinking through every element of the situation. Communicate with all relevant stakeholders.
2. Outline all possible options for the business decision. Brainstorm possible solutions that may not have been considered. Be aware of any aspects that may have been overlooked.
3. Once all the options have been outlined, look at the effects or consequences of each option. Consider which options:

• Have the most significant benefit for the most people and have the fewest negative consequences.
• Have the most or least benefit to the company.
• Are in line with company values.
• Reflect personal values or ethical standards.
• Involve using ethical actions and which do not.

Ethical choices value variables like transparency, widespread good, fairness and duty, equality, and rights. After considering the implications of each option, decide which principles are most important to the business and which are not. This framework for ethical decision-making can support going forward with a strong course of action.

Improved Leadership

Leaders define a company’s culture and mission. By following the ethics of a business, the management team is more likely to gain the trust and respect of the employees. Add a well-defined code of conduct, and employees are more likely to act ethically. Staff should perform better and use moral conduct when they are treated fairly and feel valued and respected.

Effective leaders listen to their team to help reduce stress and pressure from the working day. This could mean fewer disciplinary issues and a better response when tough decisions must be made. Good ethical decisions can strengthen and develop a company’s reputation and image. All staff within a company must follow its code of ethics which should be straightforward and easy to understand. The management team or the employer should explain the consequences of not following the code.

Leaders must have strong communication and relational skills. Employees are more likely to support leaders who are open about difficulties in the business. Managers who are transparent with employees and encourage open communication can help staff feel connected and comfortable. An environment of transparency can benefit companies in the long run.

Ethical leaders support their company’s culture and strive to protect it. Although some customers may disagree with the company’s values, leaders who take a stand on environmental and human rights issues can earn respect and enhance the business’s reputation. Leadership can be tested during periods of growing expansion. Managers must work to balance strategic growth with principles when doing the right thing is difficult or costly in the short term. As companies grow, some lose sight of their mission and put profits above ethical behaviors.

How to Implement Business Principles in the Workplace

Creating an ethics program is the first step in building an ethical culture. A complete ethics program should cover all business functions, including marketing, operations, and human resources. If ethics programs are integrated with business operations, there is more impact, and the processes become part of the employee’s working day. An ethics program should:

• Define the program’s directive.
• Reduce and monitor risk.
• Create policies and procedures.
• Supervise allegations of misconduct.
• Deliver training and communications.
• Clarify expectations of behavior.
• Manage the function of behavior ethics.

Some companies will give new employees a code of ethics document. This document will outline the ethical standards it expects staff to adhere to.

A company may apply ethics in the workplace in many ways, including:

• Conflicts of interest can occur when an individual or organization has multiple interests, and one may taint the actions of another. This can affect a company’s integrity. Most organizations have a clear policy on this. An example could be a conflict of interest if a manager interviews a family member.
• The law always directs business principles, and a company’s code of ethics reflects this. Organizations that follow the law are seen as more respectable and regarded more favorably by the public. Working within the law protects the company from any issues that could arise. The company can feel like a safe place to work for employees.
• Most companies keep a record of staff attendance. A high attendance rate indicates employees respect the work and the company. If staff are ill or going to be late, they will usually be required to contact their manager first thing in the morning. This behavior can demonstrate understanding and respect and ensure company members are following the company’s code of ethics.
• The company may wish to have a diverse workforce. To achieve this, recruitment practices need to give equal opportunity to people from different cultural and ethnic backgrounds. A diverse group of people in the workplace can provide the company access to other ideas and viewpoints. It also demonstrates that the company follows its business ethics regarding treating everyone with respect and equality.
• It can benefit companies to provide training on business principles within the workplace. This can help employees by reinforcing a company’s code of ethics and ensuring understanding of how to follow the code of ethics in the workplace. Employers may require employees to take a refresher ethics course every year. This can mean staff are up to date with any changes and ensure their understanding of what the company expects.
• Communication is an essential part of maintaining a robust code of business ethics.

If staff face an ethical dilemma at work and need to know what action to take next, they can speak to the management. Many companies have a human resources department or ethics officer who can help with these kinds of issues. Being supported by someone qualified in this area can help to resolve ethical problems effectively and quickly.

Whistleblowing

Workplace whistleblowing happens when an individual reports wrongdoing in an organization. This person is usually an employee but can also be a customer or supplier. Internal whistleblowing concerns someone making a report from within the organization. External whistleblowing is when someone blows the whistle publicly, either to the media, police or through social media. People may choose the public route if they do not trust the organization’s investigation or reporting procedure or have tried disclosing internally with no result.

Speak-up policies can cover a wide range of issues related to ethics and compliance. Whistleblowing is different from raising a workplace grievance. A grievance is of personal interest and does not impact the wider public, whereas whistleblower revelations relate to more serious and widespread concerns.

Whistleblower reports can be from these areas:

• Corruption.
• Discrimination and harassment in the workplace.
• Human rights violations.
• Bribery.
• Maladministration or mismanagement.
• Insider trading.
• Misuse of data.

These cases can have severe consequences for employees and companies. Unethical behavior must be brought to public attention to prevent the continuation of unacceptable behavior. The US, France, and the UK have laws that protect whistleblowers and promote a culture that encourages the detection of irregularities in organizations.

The ethics of whistleblowing can be complex. It can be a conflict between loyalty and fairness. Many whistleblowers decide to report because justice and doing what is right overrides their loyalty to the organization. An example is when a whistleblower does what is fair by reporting misconduct, which conflicts with loyalty as they have worked for the company for many years. The whistleblower could have good intentions and be trying to do what is right and protect the public. However, some reports could stem from self-interest or the pursuit of financial gain.

Companies can discourage unethical whistleblowing by offering an anonymous, internal system for reporting wrongdoing. This means the whistleblower’s identity is not revealed, and they are less likely to report externally to the press.

Conclusion

There are many advantages to companies having an effective code of ethics. They can engender loyalty from employees, customers, and other stakeholders. This can improve staff performance, allow strong customer relationships, and be reflected in increased sales and profits. Business leaders are pivotal in ensuring an ethical workplace and setting the tone of the company’s culture. The company’s reputation and image are enhanced when moral values are embedded into business operations. TOMS has led the way as an ethical business, combining commercial success with great philanthropic endeavors.