Why Are Business Ethics Important?

You are a small business person with 5 customers.  Why would business ethics be important to you?  Let me take you down the road of possibilities:

1. You can find yourself in a legal dilemma

What laws are relevant to you?  There are many and you need to be aware of them.  You can only market business opportunities in certain ways.  Certain products can only be marketed in certain ways (i.e. Dietary supplements cannot make medical claims).  You have legal obligations to your shareholders if you are incorporated.  You have legal obligations to your employees.  You may have legal obligations to the government or your community.

Note that the written law does not make something illegal.  We are under common law, which means that ultimately the courts can decide what is legal and what is not based on the constitution, written law, and past court decisions.  In addition, people can sue for legal damages if you break a contract, whether written or verbal, or if you cause them harm through neglect or intention.

2. You can find yourself in a moral dilemma

You are a (religion of your choice) and are subject to the moral absolutism that you place yourself under.  Moral absolutism means that you believe that killing is wrong no matter what the circumstance, or that lying is wrong regardless of the circumstance.  So the moral dilemma becomes, what if it is a choice between lying or killing?  Or lying or stealing?  Or stealing or killing?  Often people take on the responsibility of the consequences for their actions, and you must live with those consequences.

For instance, let’s say your company sells advertising, and allows advertising for cigarettes and alcohol.  Is your company responsible for lung cancer and drunk driving deaths?  Or let’s say you work for Bayer and Bayer sells asprin.  Is the company responsible for people that die from asprin overdose?  Companies had a hard time selling small airplanes at one time because people would crash, and then their families would sue the manufacturer.  I know for a fact that Cessna and other manufacturers go to great lengths to provide quality training, and the government goes to great lengths to ensure that airplanes are maintained, but crashes still happen.  Should small airplanes not be made?

A company may make a product that people die or are severely injured using.  Perhaps the company did not recognize, in the beginning of their company, that someday they would have a large enough customer base that 1 in 100,000 customers would use their product improperly and become permanently disabled because of it.  If these kinds of problems were considered at the very beginning, when the company was just starting out, maybe the odds could have been improved to 1 in 1 million or better.

3. You could find yourself in an ethical dilemma

Doing the right thing is the goal, but doing the right thing for whom?  A logging company wants to make their shareholders a good profit, but at the expense of the environment?  Could you imagine McDonalds selling Big Macs in India, where the cow is sacred?  What if you lost your biggest customer, would you lay people off or go bankrupt?  Being prepared in advance of these kinds of dilemmas is key – what is your company’s priority?

Small businesses are not exempt from tough ethical decisions.  You offer a 30 day money-back guarantee… do you give the customer back his money on day 31?  Do you allow product returns from a customer who never ordered from you?  Do you process a return for a customer who says they never received the product, even though you have his signature on delivery returned?  These are customer versus owner ethical decisions, and the policies need to be in place before a problem arises.  Then you may even need to allow more flexibility.  Are your customers generally honest?  How do you prevent fraud without creating an adversarial customer service environment?

You usually cannot think through every ethical quandry you are going to have before it happens.  It is usually a good idea to allow customer service people some flexibility and then consider the situation after it is resolved to see how it can be done better.  You may have to give a little away, but you can improve your processes as time goes on.

As for the larger ethical issues, you just need to consider over and over what the right thing to do is.  Consider all of your stakeholders and try to come up with the best solution for all parties.  Do the best you can and make a decision, however hard it is.  That is what business people do.  Just make sure to do it with a cool and level head.

Leave a Reply