Advantages and Disadvantages of Business Ethics


Meaning of Business Ethics

  • Business ethics refers to moral principles and social values that business should adopt in its code of conduct.
  • These are rules that businesses must accept and follow in its day to day operations for the welfare of society and all its stakeholders.
  • Business is termed as social organ and therefore it should not indulge in any activity that is harmful to the interest of all its stakeholders.
Advantages and Disadvantages of Business Ethics
Advantages and Disadvantages of Business Ethics

Advantages of Business Ethics

  1. Enhance Business Reputation: Business ethics helps in enhancing the reputation of the organization in the market. Practicing of ethics ensures the legality of business and provide better service to customers. It controls all unfair trade practices and operates all activities ethically. The business operates at a lower profit level and delivers quality goods. This develops a positive image of the company and attracts a large number of new customers.
  2. Positive Work Environment: It helps in maintaining a positive work environment for business. Ethics clearly defines the code of conduct for business and directs the limits within which it should operate. Employees are trained to work efficiently in a team and develop better relationships with their co-workers. Superiors trust their subordinates and grant them proper autonomy for performing their roles effectively. 
  3. Improves Customer Happiness: Ethics leads to improve customer satisfaction with the business. Companies follow ethical principles operate at a reasonable profit and fulfill all needs of their customers at a lower cost. Customers when treated fairly get committed to the business for the long term. They get proper help support and all their complaints are redressed timely. Business via these good ethical principles are able to build a loyal customer base.
  4. Retain Good Employees: Adopting of ethical principles enable business in retaining good employees for a longer period. Employees want to work with such an organization that treats them fairly and recognizes their talent. They need to be compensated for their work and wants appreciation based on their work quality. Companies dealing with their workers fairly and openly are able to easily retain them.
  5. Builds Investor Loyalty: All investor wants to be associated with the ethical business for earning better return. They look for reputation, ethics, and social responsibility of business before choosing the one to invest their funds. Business working on ethical values are able to attract large number of investors. Investors know that ethical values enable organization in enhancing their productivity, efficiency, and profits. 
  6. Avoid legal Problems: Controlling legal issues is another important advantage provided by business ethics. Implementation of ethical principles ensures that organizations comply with all labor laws and environmental regulations. Employees are provided safe working environment and good quality materials for carrying out the operations. Companies maintaining proper ethical standards avoids themselves from any fine and penalties charges by government agencies.

Disadvantages of Business Ethics

  1. Reduce Profits: Business ethics reduces the profit earning ability of the organization by putting limits to its operations. Companies working on ethical values can’t focus on profit maximization by exploiting others. They need to give equal attention to the interest of its stakeholders like customers, employees, society, creditors, and government. Business running on an ethical path needs to forego extra profits which adversely affect their growth and revenue.
  2. Time Consuming: Implementation of ethics within the business practices is a time-consuming process. It is a long process that requires large efforts on the part of the organization. Businessmen need to properly learn about these ethics for their successful implementation. 
  3. Not Ideal for Small Business: Ethical standards are not suitable for small scale business as it lower their profit. Small business cannot afford to lose some profit for the sake of running their operations ethically. It can hamper their growth and survival in today’s stiff competition. Following these principles brings extra cost to the business which is not feasible for small companies.
  4. Instability: Business ethics are not stable and are changed from time to time. Business owners revise them as per the company needs and desires without considering whether they are ethical or not. It becomes inconvenient to change these standards within the business practices many times. Companies needs to educate and guide its employees each time it brings changes to its standards.

Advantages and Disadvantages of Business Ethics PDF