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What Is the Relationship Between Business Ethics and Profits?

Poor business ethics can cause customer dissatisfaction and profits to decrease.
Deciding from the beginning to be truthful in all aspects of a business is the single most important factor affecting the image of a corporation.
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  • Written By: Jacob Queen
  • Edited By: Lauren Fritsky
  • Last Modified Date: 05 December 2014
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Many experts suggest that the relationship between business ethics and profits can be very complicated. In some cases, the values needed to make a profit will totally conflict with an ethical viewpoint, leading to unethical business behavior as company leaders strive to bring in the most money possible. In other cases, companies actually benefit in numerous ways from operating with higher ethical standards, and the overall mindset of companies that consider ethics to be a high priority often seem to have advantages in unrelated areas. A complicating factor that may muddy the water in regards to the relationship between business ethics and profits is that each culture may have slightly different ethical ideals and expectations when it comes to corporate behavior.

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According to a lot of conventional wisdom, business ethics and profits are often in complete opposition, and many situations exist where this may be true, at least on a short-term basis. Businesses may often encounter circumstances where they have an opportunity to increase or protect profits by ignoring certain ethical standards. Sometimes companies may do unethical things, like dumping illegal toxic materials into the environment or selling faulty products without warning customers, as a way of maximizing earnings. There are many cases where unethical behaviors that maximize profits hurt the customers or society as a whole, but they can also hurt the company’s own employees. For example, if a company finds itself in a situation where it needs to lay off workers to survive, the leaders at the company may decide to keep that fact a secret until the very last moment in order to avoid frightening shareholders, leaving the workers who lose their jobs very little time to make alternate plans.

Even though there are some obvious reasons for business ethics and profits to work against each other, many experts believe that this isn’t necessarily always true. A bad reputation can hurt a company in a big way in the long-haul, and sometimes a major ethics scandal can destroy a company completely. Studies that have attempted to analyze the impact that ethical standards can have on profits have generally found that many companies that put ethics at the forefront of their thinking often do very well from a financial perspective in comparison to those who may lack in that area. Some experts believe this is because a heightened concern about the company’s reputation is an indicator of good overall management, ultimately leading to success in every facet.

Defining ethics from a corporate standpoint isn't always necessarily straight-forward for a lot of different reasons. For example, corporations in different countries may have totally different standards of corporate ethics because of differences in the societies and their predominant belief systems. Additionally, sometimes ethical standards can be a very subjective thing on a personal level, and the behaviors that one company leader may consider perfectly acceptable might be seen as irresponsible or unethical by another.

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Discuss this Article

Contentum
Post 3
There is no reason for companies to have to answer to the government if they have a few crooked and immoral individuals working for them. Just have those people thrown in jail.
Realited
Post 2
After all the scandals and various events that have taken place in the news involving the giant corporations and businesses that we used to trust, are there any questions as to why businesses have this issue of ethics over profits?

I would like to see something like this addressed in Congress, maybe even made into a movement. And I realize there are a lot of better business projects and agencies, but what about making it a *law* that if a business is caught doing something unethical, they just have their profits seized or something?

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