Which of the following business activities encourage unethical behavior Select all that apply

Reprint: R1104C

Companies are spending a great deal of time and money to install codes of ethics, ethics training, compliance programs, and in-house watchdogs. If these efforts worked, the money would be well spent. But unethical behavior appears to be on the rise. The authors observe that even the best-intentioned executives may be unaware of their own or their employees’ unethical behavior. Drawing from extensive research on cognitive biases, they offer five reasons for this blindness and suggest what to do about them.

Ill-conceived goals may actually encourage negative behavior. Brainstorm unintended consequences when devising your targets.

Motivated blindness makes us overlook unethical behavior when remaining ignorant would benefit us. Root out conflicts of interest.

Indirect blindness softens our assessment of unethical behavior when it’s carried out by third parties. Take ownership of the implications when you outsource work.

The slippery slope mutes our awareness when unethical behavior develops gradually. Be alert for even trivial infractions and investigate them immediately.

Overvaluing outcomes may lead us to give a pass to unethical behavior. Examine good outcomes to ensure they’re not driven by unethical tactics.

Companies have poured time and money into ethics training and compliance programs, but unethical behavior in business is nevertheless widespread. That’s because cognitive biases and organizational systems blind managers to unethical behavior, whether their own or that of others.

All these serve to derail even the best-intentioned managers:

• Goals that reward unethical behavior

• Conflicts of interest that motivate people to ignore bad behavior when they have something to lose by recognizing it

• A tendency to overlook dirty work that’s been outsourced to others

• An inability to notice when behavior deteriorates gradually

• A tendency to overlook unethical decisions when the outcome is good

Surveillance and sanctioning systems won’t work by themselves to improve the ethics of your organization. You must be aware of these biases and incentives and carefully consider the ethical implications of every decision.

The vast majority of managers mean to run ethical organizations, yet corporate corruption is widespread. Part of the problem, of course, is that some leaders are out-and-out crooks, and they direct the malfeasance from the top. But that is rare. Much more often, we believe, employees bend or break ethics rules because those in charge are blind to unethical behavior and may even unknowingly encourage it.

A version of this article appeared in the April 2011 issue of Harvard Business Review.

Like finance and marketing, ethics has become an essential business function. But why? In this blog, we shall explore the main reasons why business ethics is important for companies as well as budding business professionals.

What Is Business Ethics?

By definition, business ethics refers to the standards for morally right and wrong conduct in business. Law partially defines the conduct, but “legal” and “ethical” aren’t necessarily the same. Business ethics enhances the law by outlining acceptable behaviors beyond government control.

Corporations establish business ethics to promote integrity among their employees and gain trust from key stakeholders, such as investors and consumers. While corporate ethics programs have become common, the quality varies. According to the 2018 Global Business Ethics Survey (GBES), less than one in four U.S. workers think their company has a “well-implemented” ethics program.

Business ethics is an essential skill.

Almost every company now has a business ethics program. In part, that’s because technology and digital communication have made it easier to identify and publicize ethical missteps. To avoid the negative implications, companies are devoting more resources to business ethics. In one survey of accountants, for example, 55 percent said they believe the importance of business ethics will continue to grow in the next three years. In addition to establishing formal programs, companies are creating ethical workplaces by hiring the right talent. “High integrity and honesty” is the second-most important skill for business leaders, according to a recent survey. Today’s business professionals must understand the link between business ethics and business success.

Business ethics drives employee behavior.

According to the 2018 Global Business Ethics survey, employees are more likely to apply ethical reasoning when their company clearly demonstrates why business ethics is important. Ninety-nine percent of U.S. employees who experience a strong ethics culture said they’re prepared to handle ethical issues. Companies that advocate for business ethics motivate their employees to perform their roles with integrity.

The first step in building this kind of ethical culture is to create an ethics program. According to the U.S. Department of Commerce, a complete ethics program should touch on all of the business functions. That includes operations, human resources, and marketing, to name a few. The global research company Gartner advises companies to integrate their ethics program with business operations.

Doing so can maximize the program’s impact by making ethical processes part of employees’ workflow. According to Gartner, an ethics program should:

1. Define the program mandate
2. Mitigate and monitor risk
3. Establish policies and procedures
4. Oversee allegations of misconduct
5. Provide training and communications
6. Reinforce behavioral expectations
7. Manage the function of behavior ethics

Corporations have a critical role in developing good ethics in business. But educational institutions also play a fundamental part in shaping ethical leaders. U.S. News & World Report reported that ethics education is vital to a well-rounded MBA curriculum. At the University of Redlands, we understand why business ethics is important. Business professionals currently face some of the world’s most significant problems. Complex dilemmas like climate change, safety, and security require critical thinking and ethical reasoning. That’s why we equip students with these skills.

Redlands’ ACBSP-accredited MBA program develops students as competitive and ethical business leaders. Through a cutting-edge, interactive curriculum, we prepare students to meet and advocate for the behavioral expectations of an ethical workplace. Our students investigate the ethical, legal, and social factors of decision-making, and cultivate an ethical framework of business decisions in one of four concentration areas. We underscore ethics throughout our online MBA program, preparing students to promote an exceptional culture of ethics wherever they choose to work.

Business ethics benefits the bottom line.

Another reason why business ethics is important is that it can improve profitability. Honorees on this year’s list of the World’s Most Ethical Companies outperformed the Large Cap Index by 10.5 percent over three years. A well-implemented ethics program can also reduce losses. Twenty-two percent of cases examined in the 2018 Global Study on Occupational Fraud and Abuse cost the victim organization $1 million or more. Companies that practice questionable ethics may also experience a decrease in stock price and severed business partnerships, which can affect profitability. In addition, business ethics is linked to customer loyalty. Over half of U.S. consumers said they no longer buy from companies they perceive as unethical. On the flip side, three in 10 consumers will express support for ethical companies on social media. Business ethics cultivates trust, which strengthens branding and sales.

Understanding why business ethics is important

Amidst growing scrutiny of business practices, it’s more important than ever for companies to carry out work the right way. Ethics programs are an exceptional tool for promoting moral conduct. Organizations also need employees dedicated to ethical decision-making.

Learn more about how our bachelors and masters business programs can help enhance your skills as an ethical business leader today.