Business Ethics FAQs
This section provides answers to some Frequenty Asked Questions about Business Ethics.
- What are ethics and how do they relate to business conduct?
- Can you provide a list of ethical companies? How can I find out if a company is ethical?
- How are business ethics and corporate social responsibility (CSR) related?
- What is a code of ethics?
- Why should my organization have a code?
- What are the essential elements of a code of ethics?
- Where can I find more information about how to develop a code of conduct?
- What is the difference between ethics and compliance? (i.e. values versus rules)
- What is ethical decision making and how can I find out more information?
- How to you develop and maintain an ethical corporate culture?
What are ethics and how do they relate to business conduct?
The nature of ethics has been studied by philosophers for thousands of years and you can find several different definitions for the word "ethics". Fundamentally, ethics are the guiding principles by which people make decisions and conduct their lives. Because businesses are social constructs and make decisions that affect society, there is an ethical dimension to their conduct.
Business ethics involves applying ethical principles to the activities of business and to the relationships between businesses and various stakeholders. It applies to a wide range of business activity such as relationships with suppliers, employees, and consumers as well as the overall system by which a company is directed and controlled (i.e. governance).
Can you provide a list of ethical companies? How can I find out if a company is ethical?
Your definition of an "ethical company" depends on the ethical values and principles that you believe a company should address in its business activities. Your perspective, as a consumer, employee or investor for example, may also determine the ethical issues that are relevant to you. There are organizations that rank or rate companies (typically large, public traded companies) on a variety of ethical issues such as labour relations, sourcing and procurement, environmental performance and community relations, which may be useful to you. There are also rankings on specific issues such as governance or employment measures (i.e. Report of Business Magazine, Canadian Business, 100 Best Companies to Work For and Great Places to Work). Many businesses also provide relevant information to interested parties (i.e. company website, Annual Report, Corporate Social Responsibility or Sustainability Report) that may be useful in explaining how the company addresses the ethical, governance, social and environmental issues that are important to you.
It is also helpful to contact a company directly with any questions or concerns. Depending on your relationship with the company (i.e. consumer, employee, investor, etc), there are various lines of communications such as customer relations, ethics office, ethics hotline, ombuds office, or investor relations.
How are business ethics and corporate social responsibility (CSR) related?
The terms "business ethics" and "corporate social responsibility" are used differently by various organizations, companies and media. Other related terms include: sustainability, governance, corporate responsibility, stakeholder engagement, corporate citizenship, and environmental, social and governance (ESG) performance.
All of these terms relate to how a company or organization interacts with a various stakeholders including shareholders, employees, the environment, civil society and the community in general.
Typically at EthicsCentre CA we refer to "business ethicss" it relates to the conduct of an organization with its internal stakeholders and business partners. Business ethics deals with how ethical issues are addressed within the culture of the organization. Corporate Social Responsibility refers specifically to relationships with external stakeholders such as representatives of the community and environment and often relates to businesses role in society.
What is a code of ethics?
A code of ethics or code of conduct is a way of communicating the purpose, values and objectives of an organization. It usually proposes specific principles and rules of conduct. A key objective of a code is to provide guidance on expected behavior as well as rationale for that behaviour. A code also provides a way for a company to measure and monitor performance designed to achieve objectives and to instill values.
Why should my organization have a code?
As referenced above a code can be used as a management tool to help an organization communicate, measure and monitor its values and objectives. Having a code is often a regulatory requirement, particularly for large companies. Many key stakeholders including investors, regulators and employees expect a company to document its values and goals in a code. While it is not possible for a code to have a rule that guides human behavior for every situation, everyone (management, employees, investors and other stakeholders) has a right to know what behaviours are to be expected of the organization and of the people operating within it. It is important to note, however, that articulating corporate or organizational values in a code is a starting point, not an end point to, for encouraging ethical behaviour.
Non-profit organizations and small-medium sized business often do not have the same resources, nor the same societal or regulator expectations, that led to a code. The advantages of having a code, however, can benefit an organization of any size. An organization without a code of conduct should still have a way of communicating ethical values to their employees and other key stakeholders.
What are the essential elements of a code of ethics?
Typically a code is a combination of ethical values as well as rules. It should cover all the ethical risks applicable to the organization and contain provisions for monitoring conduct and for dealing with breaches in the code. Ideally a code should recognize a range of stakeholders and emphasize the organization's responsibilities to them and to the communities in which they operate.
Where can I find more information about how to develop a code of conduct?
The Resources section of this website lists several articles and links to a variety of examples and how-to resources. A search for "Developing and Implementing a Code of Ethics/ Code of Conduct" using the drop-down menu will provide a list of useful resources.
What is the difference between ethics and compliance? (i.e. values versus rules)
Ethics (i.e. values), as stated previously are the guiding principles by which people make decisions and conduct their lives. Compliance (i.e. rules) is the state or the process of being in accordance with established guidelines or legislation. Compliance, in the current business environment, is a prevalent concern because of an ever-increasing number of regulations such as Sarbanes Oxley (SOX), which was enacted in the US in response to the high-profile Enron and WorldCom financial scandals.
Both ethics and compliance are used by organizations to encourage preferred behaviours. Ultimately ethical behaviour is grounded in values not rules.
What is ethical decision making and how can I find out more information?
Ethical decision-making is a process that allows individuals to recognize ethical problems and analyze them fully. There are some sniff tests and common rule of thumb such as: Would you want your actions published on the front page of the newspaper? Would you want someone to act that same way towards you? and Would you want your mother to know? More comprehensive ethical decision making frameworks that include stakeholder impact analysis and allow for weighing various considerations are also used by organizations.
The Resources section of this website lists several articles and links to further information. A search for "Ethical Decision Making" using the drop-down menu will provide a list of useful resources.
How to you develop and maintain an ethical corporate culture?
"A good, ethical system requires more than just signposts pointing employees in the right direction. Corporate value statements and codes will not necessarily result in the desired behaviour. An all-out effort should be directed at developing and maintaining a culture a set of beliefs, values, norms and practices that comprise an ethical culture.
In an organization with an ethical corporate culture, ethical values shapes the search for opportunities, the design of organizational systems, and the decision making process used by individuals and groups. They provide a common frame of reference and serve as a unifying force across different functions, lines of business and employee groups."
The above is an excerpt of a practical resource that the EthicsCentre is in the process of updating and publishing entitled "How to Developing and Maintain an Ethical Corporate Culture". For more information please contact EthicsCentre CA at firstname.lastname@example.org.
The Resources section also lists several articles and links to several related sites. (provide link). A search for "Ethical Corporate Culture and Ethics Programs" using the drop-down menu will provide a list of useful resources.