Business ethics: definition and significance

What business ethics means

The word ethics comes from a Greek word meaning character. Ethics deals with what is right and wrong in human conduct, judged against the standards of behaviour that society approves for a particular field of activity. It goes beyond obeying laws and regulations: it means following moral principles and acting as people ought to act, whether the rules are written down or not.

Business ethics applies this to business. It is the set of moral principles, laid down by society, that should govern business activity, and it is concerned with how a firm's objectives, practices and techniques relate to the good of society. A businessperson acts ethically when his or her actions are upright and serve the interests of society.

Everyday Indian examples make the idea concrete: a pharmacy in Indore that refuses to sell medicines past their expiry date, a builder in Navi Mumbai who hands over flats with exactly the carpet area promised, or a food-delivery company that shows customers every charge before they pay.

Significance of business ethics

1. Trust and reputation. Ethical conduct improves a firm's public image and wins people's confidence and trust, which leads to greater success.
2. Profit over the long run. Ethics and profits go together in the long run; ethical business is good business.
3. A higher standard for those with more power. Because businesspeople control so much of society's resources, their actions affect society far more than most people's, and they are expected to meet higher standards as the price of deciding on society's behalf.
4. Beyond the law. Ethical standards are often turned into laws, but ethical behaviour is fair and just beyond what the law requires. It guides a firm where no rule exists.
5. A culture of care. An ethically responsible firm builds a culture of caring for people and the environment and deals with others with integrity.
6. The progress of society. Ethics matters greatly for every business and for the progress of any society; it links the good of the individual with the good of society.
7. Value in itself. Ethical activity is worth pursuing for its own sake, because it raises the quality of our lives and of the work we do.
8. The base of social responsibility. Whether a firm should serve only its owners or also customers, employees, suppliers and the community is at heart an ethical question of what is right.

To make ethics work day to day, a firm needs open commitment from top management, a written code of conduct and mechanisms to check compliance.

Conclusion

Business ethics asks not only whether an action is legal or profitable but whether it is right. Firms that answer that question honestly earn the trust on which lasting success depends.