Importance of ethical business.

I've had several conversations recently about the importance of ethics in business and came across this short piece which really resinated. Ethical behaviour must be at the heart of every organisation.

Most of us would agree that it is ethics in practice that makes sense; just having it carefully drafted and redrafted in books may not serve the purpose. Of course, all of us want businesses to be fair, clean and beneficial to the society.  For that to happen, organisations need to abide by ethics or rule of law, engage themselves in fair practices and competition; all of which will benefit the consumer, the society and organisation.

Primarily it is the individual, the consumer, the employee or the human social unit of the society who benefits from ethics.  In addition, ethics is important because of the following:

1.  Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic human needs.  Every employee desires to be such himself and to work for an organisation that is fair and ethical in its practices.

2.  Creating Credibility: An organisation that is believed to be driven by moral values is respected in the society even by those who may have no information about the working and the businesses or an organisation.  Infosys, for example is perceived as an organisation for good corporate governance and social responsibility initiatives.  This perception is held far and wide even by those who do not even know what business the organisation is into.

3.  Uniting People and Leadership: An organisation driven by values is revered by its employees also.  They are the common thread that brings the employees and the decision makers on a common platform.  This goes a long way in aligning behaviours within the organisation towards achievement of one common goal or mission.

4.  Improving Decision Making: A man’s destiny is the sum total of all the decisions that he/she takes in course of his life.  The same holds true for organisations.  Decisions are driven by values.  For example, an organisation that does not value competition will be fierce in its operations aiming to wipe out its competitors and establish a monopoly in the market.

5.  Long Term Gains: Organisations guided by ethics and values are profitable in the long run, though in the short run they may seem to lose money.  Tata group, one of the largest business conglomerates in India was seen on the verge of decline at the beginning of 1990’s, which soon turned out to be otherwise.

6.  Securing the Society: Often ethics succeeds law in safeguarding the society.  The law machinery is often found acting as a mute spectator, unable to save the society and the environment.  Technology, for example is growing at such a fast pace that the by the time law comes up with a regulation we have a newer technology with new threats replacing the older one.  Lawyers and public interest litigations may not help a great deal but ethics can.

Ethics tries to create a sense of right and wrong in the organisations and often when the law fails, it is the ethics that may stop organisations from harming the society or business environment.