Business Ethics

What is Business Ethics? Definition, Features, Types, & Importance

It is said that business ethics is the supporting pillar for organizations to succeed and prosper in the long run. Due to globalization and ever-growing competition, no matter what the size and nature of the business, none of the organizations can sustain itself with a generosity of time, market situation, and its customers without ethical standards.

So, what the business ethics is, and why it is important? Let’s find out.

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What is Business Ethics?

Business ethics is the study of conduct as what is right and what is wrong in the workplace. It studies how businesses act in ethical dilemmas during their entire business activities.

In simple words, as in society, we have to act upon what is right, wrong, or acceptable to our society’s people. Similarly. business ethics refers to performing organizational activities that are acceptable, fair, and beneficial to the business itself, employees, competitors, customers, society, and other stakeholders.

It is a moral code of conduct that a business has to abide by. To Andrew Crane “Business ethics is the study of business situations, activities, and decisions where the issues of right and wrong are addressed.” This definition gives us a simple yet broad view regarding following only the right decisions and actions in the workplace.

Similarly, another significant definition of business ethics is given by Raymond C. Braumhart as “the ethics of responsibility in which the businessman must promise that he will not harm society knowingly”. This definition speaks one step ahead and states that it is to contribute to the social benefits of the organization.

Here, business ethics or corporate ethics goes beyond customers and includes all other components of an organization. For example, an organization must provide quality products regularly to customers at a reasonable price. Business organizations should avoid unfair trade practices like adulteration, misleading advertisements, black marketing, etc. The employees, should provide fair payment, implement fair treatment, healthy working conditions, growth opportunities, etc.

Related: What is Managerial Ethics?

As an ethical business, organizations should avoid any type of exploitation of the consumers, channel members as well as employees. They must encourage fair competition in the market, regularly pay taxes, and contribute to society’s well-being.

All these are included in the practice of business ethics – by means of it, we can easily differentiate the correct and false business activities of business organizations.

What is the Objective of Business Ethics?

Business ethics’ main objectives include the following:

  • Ensure a moral code of conduct in the workplace.
  • Promotes a healthy working environment.
  • Fair treatment to the employees.
  • Valuing customers, society, investors, and other stakeholders’ interests.
  • Ensure sustainable success for a business.

Characteristics of Business Ethics

Business ethics is developing and following the basic code of conduct of any business. The following are the common features of business ethics.

Code of Conduct

The set of guidelines to be followed when engaging in business operations is known as a code of conduct. A code of conduct simply outlines what should and should not be done in business for the benefit of customers, channel partners, society, and the government.

There could be an internal code of conduct developed by business organizations and an external code of conduct developed by regulatory bodies.

A Framework of Business Activities

It offers a structure for conducting business. It outlines the social, cultural, legal, and other boundaries of business activities. It provides fundamental standards for conducting business, as a result.

Also Read: What is Pestle Analysis?

Moral and Social Values

Typically, corporate ethics are developed and applied in accordance with the moral and social ideals of the organization. This implies that social values, guiding principles, and moral considerations serve as the foundation for corporate ethics.

For instance, selling alcohol to customers who have registered is ethical, but selling it to schoolchildren under the age of 18 is against moral and societal norms.

Relative Term

Business ethics is a relative term that is understood in different ways in different situations, different contexts, and for different people. For may be different from business to business.

Focus on the Protection of Stakeholders

The preservation of the rights of various stakeholders, including consumers, employees, creditors, channel members, small business groups, competitors, the government, shareholders, society, etc., is a key component of corporate ethics. The rights and interests of many stakeholders can be safeguarded by engaging in moral behavior.


In general, business ethics are formed and implemented willingly. Nevertheless, the regulators create a code of conduct for regulation. However, the sincere application of corporate ethics necessitates each organization’s voluntary acceptance. Business ethics must be self-enforcing, just like self-control, not like enforced by law.


It must be thorough, taking into account all parties involved in the business, including management, employees, channel members, and other parties. Thus, moral principles must be comprehensively acceptable and contribute to all the people in the business process.

Types of Business Ethics

Business ethics as a field of study is incredibly diverse, but many concepts can be divided into a few basic principles. Every business should strive to follow these guidelines in pursuit of success.

Also Read: Types of Business Environment


Transparency and honesty in all business actions and communications are often required to establish trustworthiness. Being reliable can benefit you both inside and externally.

It helps people envision their work and gives them valuable insights into how a firm runs. Employees also appreciate the quality of the business that they work for.


Respecting employees and clients entails keeping all commitments, offering honest regrets when something goes wrong, and compensating appropriately.

Customers will avoid engaging with a business and reputation if you act disrespectfully. Additionally, it will negatively affect staff morale and result in higher turnover.


One aspect of corporate ethics is treating customers and employees equally and fairly. Being unhelpful and immoral at the same time are manipulative practices, thus helping customers and employees should be a top focus for every organization. Equal treatment of all persons is also crucial.

Importance of Business Ethics

Every business operates within the boundaries of the laws. It keeps the business working within the boundaries of the law and ensures that they are not committing crimes against the employees, customers, society, and other parties.

There are a number of advantages business organizations have that will help them succeed if they are aware of corporate ethics. These include,

Develop Trust

Businesses can increase customer trust by practicing good business ethics. Customers are more inclined to choose a company over its rivals if they have confidence in it.

Some companies are adopting corporate ethics as a marketing strategy, especially if they choose to draw attention to a significant societal issue. Effectively utilizing such ethics can increase brand loyalty in general.

Appealing To Investors

Being an ethical business is also appealing to investors and shareholders. If so then they will be more likely to sink money into the company. Ethical business practices can be a path to success for many businesses.

Credibility in the Public

Credibility among the public is created by business ethics. If people think the company is trustworthy and provides good value, they are more likely to purchase the goods. Public relations campaigns for these businesses are sure to be successful and persuade consumers that their products are risk-free and free of all pesticides.

Credibility with Employees

If employees are convinced of the ethical values of the organization they will work in high esteem and increase morale. The HR manager will have credibility with the employees just because the organization has credibility in the eyes of the public. Perceived social uprightness and moral values can win the employees more than any other incentive plan.

Better Decision Making

Respect for ethics will force managers to take various economic, social, and ethical aspects into consideration while making decisions. Decision-making will be better if the decision is in the interest of employees, the public, and the company’s own long-term goal.


Being ethical does not mean not making any profits. Every organization has a responsibility towards itself too. Ethical organizations are bound to be successful and more profitable in the long run even if in the short run they lose money.

Protection of Society

Ethics can also protect society in a better way than even the legal system of the country. Where the law fails, ethics always succeed. The government can not regulate all the activities that are harmful to society.

Read Next: What is Marketing Philosophy?

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