Managing Ethical Behavior

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Recent ethical scandals have brought ethical behavior in organizations to the forefront of public consciousness. The general public, the government, and businesses alike began to question the importance of ethics. Today, after learning from the past and understanding the role that ethics plays in running a business, the question is no longer whether ethics is important, but how to maintain ethical behavior in an organization when often times the lines of ethics are blurry and poorly defined.

Employees: Companies lacking an ethical code have a worsened problem of employee fraud than those that do. Also, it fosters distrust between coworkers and/or their supervisors. With this, morale decreases significantly, stress reaches a high, and worker productivity is devitalized. Such low morale, high stress work environments decrease employee job satisfaction, driving many of them to quit. Many employees will be discouraged from reporting misconduct in the workplace to coworkers or managers as the low-trust factor sets in. As in the case of Enron, many employees may find themselves out of a job or without pension packages.

Legal: Whenever unethical business behavior occurs, several legal implications may follow. It can cause civil charges which increase the chances of negative publicity and more severe financial penalties. Criminal charges are another consequence of unethical behavior. Once a company has a public image that is perceived as corrupt, a lot of damage has already been done—the tainted image lives a long life. Financial: Dishonest behavior amongst employees and employers can cause a company’s financial condition to take a nose-dive. Often, people decide to buy a firm’s goods or services as well as a firm’s stock partly based on their perception of its ethics. As employee productivity decreases due to unhappiness in the workplace, output is debilitated. This would cause a drop in average return on capital employed. Employee theft...
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