Ethics is a term that gets thrown around all over the place, but what does it mean? Why should small business owners care about ethics in their work when they are just trying to make ends meet. Ethics can help keep your company’s reputation intact and avoid legal consequences. To read more on this topic, check out these three articles:
Business owners should think about ethics before they start their business. Ethics are important in any business, but especially for small businesses. Small businesses have to be careful not to overstep the bounds of what is ethical and illegal. Read more in detail here: importance of ethics in small business.
An offer was presented to retirement advisor Josh Markowitz by an investor. The investor had asked that the late-morning meeting be place at a cigar bar since he was not dressed professionally. Markowitz felt compelled to inquire more about the investing approach.
The investor assured Markowitz that if he put $250,000 in for two years, he would earn a 15% annual return.
The investor indicated that he loans money to struggling businesses at a 20% interest rate. If the debtor firm couldn’t pay back the money within six months, the lender may acquire shares in the company at a 40% discount, according to their agreement. The investor’s plan was to sell the shares on the open market as soon as feasible.
The strategy, as predatory as it seemed, wasn’t illegal—yet. “Our major worry is regulatory,” the investor told Markowitz when questioned about the company model’s hazards.
With less than 20 workers, over 98 percent of U.S. firms are tiny—very small. Entrepreneurs have their hands full between paying costs, complying with rules, resolving tax concerns, and really operating the firm. Every day, difficult choices must be made.
Are you doing business in an ethical manner?
Entrepreneurs should ask themselves two questions when presented with an ethical dilemma, according to Aileron, a nonprofit for small company owners.
- Do you take advantage of suppliers or put off paying some of your workers when you’re low on cash?
- Do you scrimp on environmental or workplace compliance to save a few dollars?
If you responded “yes” to either question, you could be on the verge of an ethical quagmire.
So, why should ethical concerns be a concern for small company owners?
Because moral mistakes may harm the bottom line, whether you’re a software company or a taco truck, argues Shanté Roddy, CEO of Intuitive Risk Management International.
“Top leadership is responsible for treating people ethically, maintaining strong public relations, and sharing accurate information with stakeholders, all of which have a direct influence on the company’s overall success,” Roddy adds.
Small choices must be sweated by company owners because, as Aileron puts it, “business ethical difficulties often start small.”
Juliette Gust is the creator of Ethics Suite, a platform that allows workers in the restaurant and hospitality sectors to anonymously report employer malfeasance. She uses the following as an example: A local company owner approaches a restaurateur with a request to arrange an event at her establishment. The restaurant owner requests that the evening’s liquor sales be included as food items since the business owner’s regulations do not allow alcohol at workplace functions.
“If I say’sure, no problem,’ then my team knows I’m prepared to make an immoral judgment to increase my earnings,” Gust explains.
Employees may be more prone to behave unethically as a result of seeing the unethical conduct, she claims, endangering the company’s brand and revenue.
Gust mentioned the “broken window phenomenon,” which holds that crime is more likely to occur on a street with broken windows because they indicate a lack of discipline and the rule of law. The notion was controversially implemented by former New York Mayor Rudy Giuliani in the 1990s, although the commercial comparison is evident.
The ethical judgments “trickle down”
Tracy Miller, a professor at Dayton University’s MBA@Dayton online MBA program, emphasizes the importance of tone.
According to Miller, a company’s ethical approach is “led from the top.” “As a result, your leaders must believe it. Your company’s senior management must feel that this is essential enough to devote resources on. Successful businesses have discovered the appropriate formula for ensuring that their words and actions are in sync.”
The best option isn’t usually the one that pays the most money, but it may have other advantages. If a content company owner employs subcontractors, for example, he may pay them the day rate that they want, even if it costs him a little more. He’s earning less than he might for a given project, but he understands that there are less tangible—but as valuable—advantages to being recognized as a fair employer.
To begin with, he recognizes that he isn’t pushing down market prices in his own, highly competitive business. Second, the quality of his product is only as excellent as the individuals who create it. So it’s critical for him to know that the subcontractor will answer the phone the next time it rings.
According to Miller, when profit is the sole drive, a corporation is setting itself up for failure.
“You may speak about organizations that have all the correct rhetoric but different practices,” she remarked. “As a result, they turned a deafening deafening deafening de They didn’t hold personnel responsible for these business activities because “earnings were more essential to the firm than ethics,” and “profits were more important to the organization than ethics.”
Miller likes to use the example of Enron, which sought bankruptcy protection from its numerous creditors in 2001 after being accused of corporate fraud.
Small enterprises may not operate on the same scale as Enron, but they follow the same ethical rules. “An ethical firm performs honestly, competes fairly, offers a decent environment for its workers, and forms relationships with customers, suppliers, and investors,” says Reddy.
When you look at a small business as a network of stakeholders, you can see how one unethical choice may alienate customers, burn bridges with subcontractors, devastate lives, ruin a company’s brand, and even land it in legal problems.
Returning to Markowitz’s real-life example, he understood he could have gained money for his customers by investing in a predatory loan operation while legally doing nothing illegal. He turned down the chance because the long-term danger did not justify the short-term gain.
Businesses should make ethics a part of their culture and value system, according to MBA@Dayton’s Miller. This entails allocating money to training in order to safeguard a company’s long-term image. Employees will know not to make a choice that may break the regulations or to seek extra assistance if they are presented with one. In the end, ethics take precedence over profits.
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The “why should managers be ethical” is a question that many small business owners ask themselves. The answer to this question is not always clear, but there are some important factors to consider when thinking about how to act ethically.
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