Seven Factors Influencing Business Ethics in an Organization

Business ethics can be considered a set of policies and practices that will guide the entity to function in a manner that is acceptable to various aspects of society. By behaving ethically, businesses can maintain suitable behavior towards issues related to aspects such as gender, diversity, discrimination, corporate governance, bribery, fiduciary responsibilities, insider trading, corporate social responsibility, and so on.

Entities should ensure that they behave ethically because they have the power to influence society and make significant positive contributions. Moreover, malpractices by business entities can cause individuals, communities, and the environment to suffer.

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Factors Influencing Business Ethics

Business ethics can benefit organizations by weighing out the advantages and drawbacks of various policies and practices implemented in the workplace. Here is a list of seven factors that influence business ethics in every workplace:

1. Culture

Culture refers to the social norms, customs, and beliefs of a society or group. Culture influences business ethics because it affects how people perceive and do things. Where people come from forms a part of their identity and personality.

Religion, heritage, family system, and education system are some of the main elements of an individual’s culture. Their norms, customs, and practices define what is acceptable as per their culture and what is not. Managers and promoters of entities understand the different cultures of people and solve ethical dilemmas arising from the same.

2. Personal Code of Ethics

Right after learning how one’s culture affects one, he perceives business ethics; the next factor is the personal code of conduct. Every individual has morals that drive their behavior. The personal code of ethics of an individual influences his decision-making and how he acts in a particular circumstance.

This personal code may not be written, but it is deeply ingrained in each individual and plays a major role in his everyday life. The personal code of conduct of each employee of the organization may be different. These may clash and lead to business ethics issues as well. Hence, a personal code of ethics becomes one of the important factors that influence the ethical functioning of an entity.

3. Legislation

Legislation concerning business ethics refers to the fact that government departments and agencies will intervene and enact laws and rules to prevent companies from engaging in unethical behavior. These measures will only be taken when situations go out of hand and malpractices by entities are beyond our control.

Society will not tolerate entities’ unethical behavior for long and will revolt. Governments will be forced to act and enact laws and rules to curb the situation. The government’s enactment of rules would be the last resort and would be used when situations are adverse.

4. Government Rules and Regulations

Another factor that influences business ethics is the set of rules and regulations imposed. Various laws are enacted in India concerning various aspects of business functions, such as laws regarding working conditions, insurance, pension, minimum wages, the rights of employees and laborers, etc., which act as a guide to organizations in the formulation of their ethical code of conduct.

They provide details of what is acceptable and the recognized standards for different aspects of the business. As a result, these laws assist organizations in adhering to ethical standards. Hence, government rules and regulations have a major impact on the ethical functioning of a business.

5. Ethical Code of the Company

The code of ethics that has been designed, communicated, and implemented by the entity also influences its ethical climate. The code of conduct, which is usually communicated to all the employees of the company and is available in various publications of the company, such as their website, drives how employees and staff behave in the entity.

Each employee may have their own set of ethics, and it may cause widespread disruption if all employees behave as per their ethics. As a result, the company’s code of conduct is introduced to consolidate all employees’ ethical behavior. Now, all employees must adhere to the same standards and policies in order to ensure ethical compliance.

6. Social Pressures

Societal pressures and forces are other factors that play a role in influencing the business ethics of an entity. With the growth of the “cancel” culture, just like people, businesses also get canceled for their beliefs and policies.

In today’s world, when a business sells substandard products or services or is involved in unethical activities or practices, society will immediately develop a negative attitude toward the company.

This attitude is converted into a refusal to purchase the goods and services sold by the entity. In an era where even a tweet or comment can make or break a company, entities need to be extra careful and very ethical in their practices and policies.

7. Ethical Climate of the Industry

The ethical climate of the industry refers to the practices and norms followed by other companies in the same industry as that of the company in question. As every industry becomes more and more competitive, companies need to ensure that they adhere to the industrial code of conduct so that they can be part of the competition with other companies in the long run.

When other companies in the same industry adhere to a strict code of conduct, the company in question should also ensure to follow these codes to the same standard. If the company cannot perform at the same level as other companies in the same industry, it will be kicked out.

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FAQs on Factors Influencing Business Ethics

The following are important FAQs related to business ethics.

What are some of the methods to avoid ethical issues in businesses?
Some of the changes an organization can implement to be more ethical include creating a new code of conduct, giving employees the right to privacy by not accessing their private data from laptops, avoiding and disclosing conflicts of interest, entering into non-disclosure agreements, and providing adequate training to staff regarding business ethics.

What are some of the factors that influence ethical decision-making?
Factors influencing ethical decision-making include individual factors, organizational relationships, and opportunities.

What are some of the elements that help build an ethical organization?
Respect, honor, integrity, customer focus, result-oriented tasks, risk-taking abilities, passion, and persistence are the eight elements that help make your organization ethically strong.

What do you mean by a code of ethics?
A code of ethics is a set of guiding principles and practices that relate to a particular group of people, employees, or professionals to ensure that they act in a manner that is honest and beneficial to their stakeholders.

Give a few examples of ethical issues faced by companies.
Harassment, discrimination, breach of confidentiality, whistleblowing, health and safety violations, technology and privacy concerns, a toxic or unsafe work environment, and setting unrealistic goals are some of the examples of ethical issues faced by entities.

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As seen above, the different factors influencing business ethics and how each factor has a major role to play concerning the same As a result, in the modern era, business ethics is one of the factors that can make or break a company. Companies should ensure that they behave ethically and ensure compliance with the ethical code of conduct. An ethically strong firm will always be the stronger firm.

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