Business Ethics and Ethical Behavior

Business ethics manifests both as written and unwritten codes of moral standards that are critical to the current activities and future aspirations of a business organization. They can differ from one company to another because of differences in cultural perspectives, operational structures and strategic orientations. The guiding framework of business ethics permeates all levels of the organization. It is about having the wisdom to determine the difference between right actions and wrong decisions.

Different people have different beliefs about what constitutes ethical behavior. The law defines what is and is not legal, but the distinctions between moral right and wrong go far beyond what is and is not legal.  Ethical issues and behaviors are very often not clear  In many situations lines between right and wrong are blurred. Such situations can lead to ethical dilemmas which are conflicting choices that have to be worked through in making an ethical decision.

When faced with ethical dilemmas, it’s important to consider outcomes of the decision-making process. One way of dealing with ethical dilemmas is to use the four way test to evaluate decisions. This test involves asking four questions:

1. Is my decision a truthful one?
2. Is my decision fair to everyone affected?
3. Will it build goodwill and better relationships inside and outside the organization?
4. Is the decision be beneficial to all parties who have a vested interest in the outcome?

When these four questions can truthfully be answered with a “yes,” it is likely that the decision is an ethical one.

Another way of making sure decisions are truly ethical is by using the publicity test. Ask yourself how you would feel if your actions were published in your hometown newspaper. If you would be comfortable having your family, friends, and other people find out what you did, chances are that your decision is an ethical one. However, if you would not want these individuals to learn about your actions, you probably need to rethink your decision.  Warren Buffet uses the publicity test his business statement of ethics.

Management and Business Ethics

A company’s managers play an important role in establishing its ethical tone. If managers behave as if the only thing that matters is profit, employees are likely to act in the same manner. A company’s leaders are responsible for setting standards for what is and is not acceptable employee behavior. It’s vital for managers to play an active role in creating a working environment where employees are encouraged and rewarded for acting in an ethical manner.

Managers who want employees to behave ethically must exhibit ethical decision-making practices themselves. They have to remember that leading by example is the first step in fostering a culture of ethical behavior in their companies. No matter what the formal policies say or what they are told to do, if employees see managers behaving unethically, they will believe that the company wants them to act in a like manner.

written by Jerry Elman, owner of Schoen Place Auto, recipient of the 2010 Rochester Business Ethics Award and finalist for the 2011 American Business Ethics Award.