The Importance of Ethical Integrity In a Business

Unethical business practices can affect employee moral and confidence.

The business world depends on confidentiality, fairness and honesty. If a company fails to uphold its ethical standards, it risks the stability of its business and its reputation among investors and customers. Teaching ethical standards to current and new employees is fundamental to ensuring a smooth environment free of lies and corruption.

Enticing New Employees

Ethical integrity is essential to hiring new and talented employees from the job pool. Recent graduates and other job seekers are reluctant to sign on with companies that have known ethical problems in their chain of command. Top-tier candidates, provided that the economy is stable, can land jobs almost anywhere; you want those candidates to see your company as a place at which they can work and still sleep at night. Additionally, existing employees may hesitate to recommend the company as a viable place to work to their business contacts.

Implementing Management Decisions

A company with low ethical standards and integrity will have significant trouble maintaining confidentiality among its employees. At any company there are trade secrets and practices that give the company its edge in the marketplace. If management or employees cannot be trusted to keep information in confidence, the operational flow of the business will be hindered. For example, if Coca-Cola could not trust the recipe of its soda to the workers who mix the drink, the company would have trouble maintaining the volume of production needed for the market.

Attracting Investors

Lack of integrity affects a company's ability to lure investors, stock buyers and potential financiers. Ethical integrity problems means weak leadership and possibly shady business dealings. For example, former energy giant Enron told investors that the company was worth more than its actual value. Investors saw the company as a strong investment opportunity, but eventually lost their stock value when the unethical accounting practices of the company were revealed. Examples such as Enron teach investors new lessons about paying attention to company standards.

Legal Considerations

Relaxed ethical practices leads to a slippery slope that compromises the legality of company dealings. Companies that are unethical toward employees, customers or investors may find themselves under the critical eye of the Securities and Exchanges Commission or worse. Creating false earnings reports, harassing employees, developing monopolies or any number of unethical practices will eventually spell disaster for any business. In some cases, if employees or management are found guilty, monetary penalties and jail time may occur.

References

• Managerial Accounting for managers: The Importance of Ethics in Business
• South Source: Ethical Principles for Business