Business Ethics

Business Ethics Definition

Business Ethics can be defined as studying, applying, implementing and practicing self-defined principles, policies and standards on various aspects like corporate governance, whistle blowing, corporate culture, corporate social responsibility, fair and honest dealings, etc. which are been prescribed by various statutes, governing bodies non-compliance of which may lead the business to fines and penalties with/without punishments.


Business is an activity that involves one entity doing the exchange of goods and services for valuable consideration. This process takes place in a productive organization where the purpose is to create good and service for sale at a profit. Many times business owners face difficulty in decision making as to choose one aspect i.e., either be ethical in dealing or strive for profit due to controversy in-between achieving profits and being ethical both. In such a situation, guidelines laid in business ethics may help business owners to decide their future course of action. Study of ethical dimensions in each business activities like production, distribution, consumption of goods, and services is referred to as business ethics in finance.

Business Ethics

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  • Protection of Social Groups – The objective of business ethics is to provide protection to various groups involved in a business like consumers, government, creditors, shareholders, etc.
  • Based on Moral and Social Values – It includes moral and social rules and principles for conducting business. Social principles consumer protection, welfare, fare treatment to social groups, service to society.
  • Code of Conduct – It gives a prescribed code of conduct that provides guidelines regarding what to do and what not to do for the welfare of the society and running of ethical business.
  • Basic Framework – It ascertains social, cultural, legal, and other economic limitations for doing business.
  • Requires Education and Guidance – Businessman must be informed and motivated about the advantages of following ethical business practices. The Chamber of commerce and trade associations plays a key role in this matter.
  • Voluntary – Businesses should be fair and honest in all their dealings. Although to keep a check on compliance, there are statutory laws, but these are not something to be enforced by law but should be self-imposed and followed.
  • Relative Term – Ethics changes from business to business models. It may so happen that one ethical business practice may prove to be a taboo for another.


Below are the examples of business ethics –

Examples of Business Ethics

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  1. Being  Transparent – In business, clear communication and transparency is of paramount importance. Every stakeholder, like consumers, employees, etc., should never be misguided about any of the concerned facts.
  2. Customer Needs Should be Prioritized – Each organization should try to work in the best interest of its consumers, customers and their needs should be given top priority.
  3. Workplace Diversity – Management tends to hire the same types of persons for similar work; they may ensure providing everyone with an equal opportunity by introducing different perspectives to the hiring process.
  4. Respecting Customer Information – In finance, it is important to maintain the secrecy of the client’s information regarding its financial Accounts balance, account statements, etc., or any other sensitive information of its clients. This information must not be leaked and poured out in public.


Types of Business Ethics

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  • Corporate Responsibility –  Corporations work as a separate legal entity that has certain moral and ethical obligations. These responsibilities cannot be compared with the personal moral code of the managers who run the company. The obligations may be external or internal.
  • Economic Responsibility – These responsibilities are based on the economic nature of an individual’s actions. For example, some businessmen think it fine to borrow, while others may consider it immoral.
  • Technical Morality – Ethical standards that are established by competent bodies’ customs or persons must be adhered to by the organization, professionals, etc. These codes of conduct bind Chartered Accountants, lawyers, doctors, etc.
  • Loyalty Towards Organisation – There are people who develop a deep sense of loyalty towards the organization where they work. It is developed out of love and affection. This helps in effective stimulation of this factor as people will work harder and help in achieving the goals of an organization.
  • Legal Responsibility – All the responsibilities imposed by law get covered under this ethic. Every citizen is expected to be abiding by the law, and hence all illegal activities are considered unethical.
  • Personal Responsibilities and Loyalties – Personal responsibilities include personal beliefs of an individual such as honesty, obedience to elders, promptly settling the dues, willingness to perform excepted duties, avoiding criminal acts, etc. Also, there are loyalties of a subordinate towards the superior, which he follows.
  • Official  Responsibilities – A person who has achieved certain positions must strictly follow norms and standards set in that official capacity.

Business Ethics Principles

  • Honesty – In finance, an individual must act with full honesty and integrity as it includes financial matters.
  • Avoid Conflicts – Avoid conflicts of interest in their professional relationship is involved. There should be no room for the appearance of such conflict.
  • Compliance – All the rules and regulations must be complied with regarding the positions of individuals and his company.
  • Relevant Information – It is necessary to provide people with understandable and accurate information. All the relevant information, whether positive or negative, must be disclosed.
  • Law Abiding – Financial executives, must abide by laws rules and regulations that are related to their business activities.
  • Fulfilling Commitments – Ethical executives are trusted only if they keep their commitments in full letter and spirit. The agreements are not interpreted unreasonably in order to rationalize non-compliance.

Influential Factors on Business Ethics

  • Leadership – The most important aspect of ensuring the following of ethical business practices is appointing an ethical leader. Suppose the leader of business leads in ethical ways than only it motivates the workforce to perform work legally.
  • Strategy in Performance – Performance of a company influences the business ethics. Different strategies work in different companies, and hence ethics are varied.
  • Government Rules and Regulations – Guidelines are provided by the government regarding working conditions, product safety, and statutory warning to determine the standards and practices.

Business Ethics Importance

It helps in keeping business working within the boundaries of the law, ensuring that crimes are not committed against employees and clients of other parties. Business ethics builds trust between business and consumers by incising brand equity overall. With the motive of leading a long run business, every organization should ensure being ethical, fair, and honest in each of its dealings. A non-ethical company may end up itself once after getting indulged in fraud or any other unethical practices. Ethics are based on a very small concept, like what resources a business has taken from the environment; it should strive to generate returns at the same level or at a higher level. Non-ethical companies are more likely to attract fines, penalties, prosecutions, etc., and as a result, may lead to disruption in a brand name.


In the present competitive scenario, it is most for organizations, to be honest, ethical, and fair in their dealings, reporting, compliance, etc. Being ethical automatically generates brand name and leads to an increase in its product/ service sales. This has become a necessary tool for the smooth functioning of business in finances. It helps in providing fair treatment to all stakeholders like investors, employees, customers, creditors, government, etc. by building a certain level of trust between the parties involved.  Each organization should be ethical in its dealings/transactions.

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