Glossary term
Business Ethics
Subject: Governance, Ethics, Conduct and Whistleblowing
Also known as: Corporate Ethics
Business ethics is the set of moral principles guiding how an organisation and its people make decisions and treat customers, staff, suppliers, competitors and society, including where the law is silent.
Explanation
Law sets the minimum; ethics asks what is right inside that minimum. Business ethics covers honesty in sales and marketing, fair treatment of staff, respect for customer data, fair dealing with suppliers and care for the environment. Organisations put it into practice through a code of ethics, training, an ethics officer or committee, a channel for raising concerns, and leaders who set the tone. Compliance with ethics means checking that conduct matches both the law and the organisation's own stated values. Ethical lapses often come before legal breaches, as when pressure to hit sales targets leads to mis-selling. Supervisors now look at ethical culture when they judge how a firm behaves. Directors usually ask about it only after a scandal has made the cost of a lapse public.
Example
A bank rewards its sales team on the number of insurance policies sold with loans. Branch staff begin attaching cover that customers do not need. The ethics committee reviews complaint patterns, finds that the incentive is driving the behaviour, and the bank changes the target to reward suitable sales rather than volume.
Not to be confused with
- Legal compliance
- Compliance means following laws and rules. Business ethics also asks whether an act is right where no rule applies.