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Starting a business

The Importance of Ethics in Business

In business, ethics determine the best course of action that reflects those moral values. A small business should establish a code of ethical conduct and implement a program encouraging adherence to the code.

How Ethics Apply to Various Business Situations

Ethics issues can arise in a wide variety of business situations. For example, conflicts of interest arise when an employee has personal interests, relationships or commitments that may override an unbiased and impartial exercise of independent business judgment or interfere with the fulfillment of the employee’s duties to the company. Misuse or theft of company assets and property is another area where employees might breach business ethics. Outside activities and other employment by employees, managers and officers can violate business ethics when the demands of those activities interfere with work performance or if those activities create a conflict of interest. Unfair competition can involve a wide range of ethics violations, from making false statements about a competitor or its product to offering kickbacks to customers. Unfair competition can take place within a particular business when sales representatives undermine the efforts of other team members. The Canadian Centre for Ethics and Corporate Policy offers several helpful resources for developing a code of conduct for your business.

Ethical Responsibility of a Small Business to Its Employees

A business should establish and communicate guidelines for ethical conduct to its employees. The business should carefully consider whether any of its policies might motivate unethical employee behaviour. Setting unrealistic goals or targets might prompt employees to engage in unethical behaviour to reach those targets. A business should not characterize the need to comply with legal regulations as an inappropriate restraint; doing so might encourage employees to violate laws or other regulations. Businesses have an ethical responsibility to treat employees fairly by honestly adhering to the obligations imposed by law.

How a Small Business Can Set Ethical Policies

When establishing a set of ethical policies for your business, consider the goals of your business as well as the values to which it adheres. Delineate the boundaries between appropriate and inappropriate competition, promotion and other activities conducted by your staff. Specify actions that are strictly prohibited. Establish clear guidelines for appropriate employee action, and consult with your employees when creating those guidelines. Staff participation in the creation of ethical policies can result in guidelines that are more useful and practical. Staff participation in this process facilitates an increased understanding of the ethical policies and why they are important.

Monitoring Ethical Standards

Monitoring ethical standards should begin during the hiring process. Discuss the company’s code of ethics with each prospective employee. Invite the applicants to explain how the code aligns with their own values and how it will affect their job performance. Intermittent workshops and surveys can provide an indication of how well staff members are adopting the code of ethics into their daily activities.

References & Resources

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