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Why Business Integrity Can Be a Strategic Response to Ethical Challenges

To address complex ethical challenges, companies must focus on breaking silos and creating strategic alignment when it comes to governance and risk..

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Governance — the “G” of ESG — has long been overshadowed by discussions of its counterparts, environment and sustainability, despite being a source of strategic advantage. While many companies view investment in governance simply as a means of staying out of trouble, proper corporate governance can — and should — drive company performance. 1

To turn this idea into reality, a growing number of companies are moving toward a more holistic approach to ethical and responsible business. This involves aligning and coordinating across critical integrity functions, reducing box-ticking, and thinking holistically about ethical behavior, risk management, and value creation. 2 In order to gain a deeper understanding of key challenges and success factors driving this approach, we conducted interviews with leaders from over two dozen large companies and multilateral institutions on the different steps they have taken to invest in business integrity as a strategic response to both risks and opportunities.

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This research has also been informed by our ongoing work with and cross-sectoral best practices from the World Economic Forum’s Global Future Council on Transparency and Anti-Corruption and several Business 20 (B20) task forces on integrity and compliance. We’ve found that independent and autonomous leadership plays an important role in progress, as demonstrated by the emerging role of chief integrity officer as a driver of change. But our research also shows that simply appointing a C-level role is not enough. In order to address today’s complex ethical challenges, companies need to break down internal silos to create strategic alignment and collaboration and build a culture of integrity. In this article, we explore how leading companies are demonstrating this holistic approach.

A More Strategic Approach to Integrity

The common thread in our interviews with executives was that leading companies have been adopting a more strategic approach to ethical business, which makes it easier for them to identify blind spots and avoid hypocrisy. For example, there are increasing demands from institutional investors to align sustainability commitments and political spending. And zero-tolerance anti-corruption programs will not be effective unless they look at the design of incentives, particularly sales and growth targets in emerging markets.

Some organizations have chosen to appoint a single leader in the C-suite, such as the chief integrity officer, to oversee a broader set of functions that go beyond compliance .

About the Authors

Daniel Malan is an assistant professor in business ethics at Trinity College Dublin’s Trinity Business School and is cochair of the B20 Integrity & Compliance Task Force. Alison Taylor is executive director of Ethical Systems and a senior adviser at BSR (Business for Social Responsibility). Anna Tunkel is executive director and head of global strategic initiatives and partnerships at APCO Worldwide. Birgit Kurtz is a fellow of the World Economic Forum’s Partnering Against Corruption Initiative. Malan, Taylor, and Tunkel are former members of the World Economic Forum’s Global Future Council on Transparency and Anti-Corruption (2020 – 2022) and current members of the B20 Integrity & Compliance Task Force.

1. The term “corporate governance” is often defined as “the system by which companies are directed and controlled.” See, for example, A. Cadbury, “ Report of the Committee on the Financial Aspects of Corporate Governance ” (London: Gee, 1992).

2. “ The Rise and Role of the Chief Integrity Officer: Leadership Imperatives in an ESG-Driven World ,” white paper, World Economic Forum, Geneva, December 2021.

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7 Ways to Improve Your Ethical Decision-Making

• 03 Aug 2023

Effective decision-making is the cornerstone of any thriving business. According to a survey of 760 companies cited in the Harvard Business Review , decision effectiveness and financial results correlated at a 95 percent confidence level across countries, industries, and organization sizes.

Yet, making ethical decisions can be difficult in the workplace and often requires dealing with ambiguous situations.

If you want to become a more effective leader , here’s an overview of why ethical decision-making is important in business and how to be better at it.

Access your free e-book today.

The Importance of Ethical Decision-Making

Any management position involves decision-making .

“Even with formal systems in place, managers have a great deal of discretion in making decisions that affect employees,” says Harvard Business School Professor Nien-hê Hsieh in the online course Leadership, Ethics, and Corporate Accountability . “This is because many of the activities companies need to carry out are too complex to specify in advance.”

This is where ethical decision-making comes in. As a leader, your decisions influence your company’s culture, employees’ motivation and productivity, and business processes’ effectiveness.

It also impacts your organization’s reputation—in terms of how customers, partners, investors, and prospective employees perceive it—and long-term success.

With such a large portion of your company’s performance relying on your guidance, here are seven ways to improve your ethical decision-making.

1. Gain Clarity Around Personal Commitments

You may be familiar with the saying, “Know thyself.” The first step to including ethics in your decision-making process is defining your personal commitments.

To gain clarity around those, Hsieh recommends asking:

• What’s core to my identity? How do I perceive myself?
• What lines or boundaries will I not cross?
• What kind of life do I want to live?
• What type of leader do I want to be?

Once you better understand your core beliefs, values, and ideals, it’s easier to commit to ethical guidelines in the workplace. If you get stuck when making challenging decisions, revisit those questions for guidance.

2. Overcome Biases

A bias is a systematic, often unconscious inclination toward a belief, opinion, perspective, or decision. It influences how you perceive and interpret information, make judgments, and behave.

Bias is often based on:

• Personal experience
• Cultural background
• Social conditioning
• Individual preference

It exists in the workplace as well.

“Most of the time, people try to act fairly, but personal beliefs or attitudes—both conscious and subconscious—affect our ability to do so,” Hsieh says in Leadership, Ethics, and Corporate Accountability .

There are two types of bias:

• Explicit: A bias you’re aware of, such as ageism.
• Implicit: A bias that operates outside your awareness, such as cultural conditioning.

Whether explicit or implicit, you must overcome bias to make ethical, fair decisions.

Related: How to Overcome Stereotypes in Your Organization

3. Reflect on Past Decisions

The next step is reflecting on previous decisions.

“By understanding different kinds of bias and how they can show themselves in the workplace, we can reflect on past decisions, experiences, and emotions to help identify problem areas,” Hsieh says in the course.

Reflect on your decisions’ processes and the outcomes. Were they favorable? What would you do differently? Did bias affect them?

Through analyzing prior experiences, you can learn lessons that help guide your ethical decision-making.

4. Be Compassionate

Decisions requiring an ethical lens are often difficult, such as terminating an employee.

“Termination decisions are some of the hardest that managers will ever have to make,” Hsieh says in Leadership, Ethics, and Corporate Accountability . “These decisions affect real people with whom we often work every day and who are likely to depend on their job for their livelihood.”

Such decisions require a compassionate approach. Try imagining yourself in the other person’s shoes, and think about what you would want to hear. Doing so allows you to approach decision-making with more empathy.

5. Focus on Fairness

Being “fair” in the workplace is often ambiguous, but it’s vital to ethical decision-making.

“Fairness is not only an ethical response to power asymmetries in the work environment,” Hsieh says in Leadership, Ethics, and Corporate Accountability . “Fairness–and having a successful organizational culture–can benefit the organization economically and legally as well.”

It’s particularly important to consider fairness in the context of your employees. According to Leadership, Ethics, and Corporate Accountability , operationalizing fairness in employment relationships requires:

• Legitimate expectations: Expectations stemming from a promise or regular practice that employees can anticipate and rely on.
• Procedural fairness: Concern with whether decisions are made and carried out impartially, consistently, and transparently.
• Distributive fairness: The fair allocation of opportunities, benefits, and burdens based on employees’ efforts or contributions.

Keeping these aspects of fairness in mind can be the difference between a harmonious team and an employment lawsuit. When in doubt, ask yourself: “If I or someone I loved was at the receiving end of this decision, what would I consider ‘fair’?”

6. Take an Individualized Approach

Not every employee is the same. Your relationships with team members, managers, and organizational leaders differ based on factors like context and personality types.

“Given the personal nature of employment relationships, your judgment and actions in these areas will often require adjustment according to each specific situation,” Hsieh explains in Leadership, Ethics, and Corporate Accountability .

One way to achieve this is by tailoring your decision-making based on employees’ values and beliefs. For example, if a colleague expresses concerns about a project’s environmental impact, explore eco-friendly approaches that align with their values.

Another way you can customize your ethical decision-making is by accommodating employees’ cultural differences. Doing so can foster a more inclusive work environment and boost your team’s performance .

7. Accept Feedback

Ethical decision-making is susceptible to gray areas and often met with dissent, so it’s critical to be approachable and open to feedback .

The benefits of receiving feedback include:

• Learning from mistakes.
• Having more opportunities to exhibit compassion, fairness, and transparency.
• Identifying blind spots you weren’t aware of.
• Bringing your team into the decision-making process.

While such conversations can be uncomfortable, don’t avoid them. Accepting feedback will not only make you a more effective leader but also help your employees gain a voice in the workplace.

Ethical Decision-Making Is a Continuous Learning Process

Ethical decision-making doesn’t come with right or wrong answers—it’s a continuous learning process.

“There often is no right answer, only imperfect solutions to difficult problems,” Hsieh says. “But even without a single ‘right’ answer, making thoughtful, ethical decisions can make a major difference in the lives of your employees and colleagues.”

By taking an online course, such as Leadership, Ethics, and Corporate Accountability , you can develop the frameworks and tools to make effective decisions that benefit all aspects of your business.

Ready to improve your ethical decision-making? Enroll in Leadership, Ethics, and Corporate Accountability —one of our online leadership and management courses —and download our free e-book on how to become a more effective leader.

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What Is Business Ethics?

Understanding business ethics, why is business ethics important, types of business ethics.

• Implementing Good Business Ethics
• Monitoring and Reporting

The Bottom Line

What is business ethics definition, principles, and importance.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Business ethics is the moral principles, policies, and values that govern the way companies and individuals engage in business activity. It goes beyond legal requirements to establish a code of conduct that drives employee behavior at all levels and helps build trust between a business and its customers.

Key Takeaways

• Business ethics refers to implementing appropriate business policies and practices with regard to arguably controversial subjects.
• Some issues that come up in a discussion of ethics include corporate governance, insider trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.
• The law usually sets the tone for business ethics, providing a basic guideline that businesses can choose to follow to gain public approval.

Investopedia / Katie Kerpel

Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses. For example, a portfolio manager must give the same consideration to the portfolios of family members and small individual investors as they do to wealthier clients. These kinds of practices ensure the public receives fair treatment.

The concept of business ethics began in the 1960s as corporations became more aware of a rising consumer-based society that showed concerns regarding the environment, social causes, and corporate responsibility. The increased focus on "social issues" was a hallmark of the decade.

Since that time, the concept of business ethics has evolved. Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what companies must do legally vs. maintaining a competitive advantage over other businesses. Firms display business ethics in several ways.

Business ethics ensure a certain level of trust between consumers and corporations, guaranteeing the public fair and equal treatment.

Principles of Business Ethics

It's essential to understand the underlying principles that drive desired ethical behavior and how a lack of these moral principles contributes to the downfall of many otherwise intelligent, talented people and the businesses they represent.

There are generally 12 business ethics principles:

• Leadership : The conscious effort to adopt, integrate, and emulate the other 11 principles to guide decisions and behavior in all aspects of professional and personal life.
• Accountability : Holding yourself and others responsible for their actions. Commitment to following ethical practices and ensuring others follow ethics guidelines.
• Integrity : Incorporates other principles—honesty, trustworthiness, and reliability. Someone with integrity consistently does the right thing and strives to hold themselves to a higher standard.
• Respect for others : To foster ethical behavior and environments in the workplace, respecting others is a critical component. Everyone deserves dignity, privacy, equality, opportunity, compassion, and empathy.
• Honesty : Truth in all matters is key to fostering an ethical climate. Partial truths, omissions, and under or overstating don't help a business improve its performance. Bad news should be communicated and received in the same manner as good news so that solutions can be developed.
• Respect for laws : Ethical leadership should include enforcing all local, state, and federal laws. If there is a legal grey area, leaders should err on the side of legality rather than exploiting a gap.
• Responsibility : Promote ownership within an organization, allow employees to be responsible for their work, and be accountable for yours.
• Transparency : Stakeholders are people with an interest in a business, such as shareholders, employees, the community a firm operates in, and the family members of the employees. Without divulging trade secrets, companies should ensure information about their financials, price changes, hiring and firing practices, wages and salaries, and promotions are available to those interested in the business's success.
• Compassion : Employees, the community surrounding a business, business partners, and customers should all be treated with concern for their well-being.
• Fairness : Everyone should have the same opportunities and be treated the same. If a practice or behavior would make you feel uncomfortable or place personal or corporate benefit in front of equality, common courtesy, and respect, it is likely not fair.
• Loyalty : Leadership should demonstrate confidentially and commitment to their employees and the company. Inspiring loyalty in employees and management ensures that they are committed to best practices.
• Environmental concern : In a world where resources are limited, ecosystems have been damaged by past practices, and the climate is changing, it is of utmost importance to be aware of and concerned about the environmental impacts a business has. All employees should be encouraged to discover and report solutions for practices that can add to damages already done.

There are several reasons business ethics are essential for success in modern business. Most importantly, defined ethics programs establish a code of conduct that drives employee behavior—from executives to middle management to the newest and youngest employees. When all employees make ethical decisions, the company establishes a reputation for ethical behavior. Its reputation grows, and it begins to experience the benefits a moral establishment reaps:

• Brand recognition and growth
• Increased ability to negotiate
• Increased trust in products and services
• Customer retention and growth
• Attracts talent
• Attracts investors

When combined, all these factors affect a business' revenues. Those that fail set ethical standards and enforce them are doomed to eventually find themselves alongside Enron, Arthur Andersen, Wells Fargo, Lehman Brothers, Bernie Madoff, and many others.

There are several theories regarding business ethics, and many different types can be found, but what makes a business stand out are its corporate social responsibility practices, transparency and trustworthiness, fairness, and technological practices.

Corporate Social Responsibility

Corporate social responsibility (CSR) is the concept of meeting the needs of stakeholders while accounting for the impact meeting those needs has on employees, the environment, society, and the community in which the business operates. Of course, finances and profits are important, but they should be secondary to the welfare of society, customers, and employees—because studies have concluded that corporate governance and ethical practices increase financial performance.

Businesses should hold themselves accountable and responsible for their environmental, philanthropic, ethical, and economic impacts.

Transparency and Trustworthiness

It's essential for companies to ensure they are reporting their financial performance in a way that is transparent. This not only applies to required financial reports but all reports in general. For example, many corporations publish annual reports to their shareholders.

Most of these reports outline not only the submitted reports to regulators, but how and why decisions were made, if goals were met, and factors that influenced performance. CEOs write summaries of the company's annual performance and give their outlooks.

Press releases are another way companies can be transparent. Events important to investors and customers should be published, regardless of whether it is good or bad news.

Technological Practices and Ethics

The growing use of technology of all forms in business operations inherently comes with a need for a business to ensure the technology and information it gathers is being used ethically. Additionally, it should ensure that the technology is secured to the utmost of its ability, especially as many businesses store customer information and collect data that those with nefarious intentions can use.

A workplace should be inclusive, diverse, and fair for all employees regardless of race, religion, beliefs, age, or identity. A fair work environment is where everyone can grow, be promoted, and become successful in their own way.

How to Implement Good Business Ethics

Fostering an environment of ethical behavior and decision-making takes time and effort—it always starts at the top. Most companies need to create a code of conduct/ethics, guiding principles, reporting procedures, and training programs to enforce ethical behavior.

Once conduct is defined and programs implemented, continuous communication with employees becomes vital. Leaders should constantly encourage employees to report concern behavior—additionally, there should be assurances that if whistle-blowers will not face adversarial actions.

A pipeline for anonymous reporting can help businesses identify questionable practices and reassure employees that they will not face any consequences for reporting an issue.

Monitoring and Reporting Unethical Behavior

When preventing unethical behavior and repairing its adverse side effects, companies often look to managers and employees to report any incidences they observe or experience. However, barriers within the company culture (such as fear of retaliation for reporting misconduct) can prevent this from happening.

Published by the Ethics & Compliance Initiative (ECI), the Global Business Ethics Survey of 2021 surveyed over 14,000 employees in 10 countries about different types of misconduct they observed in the workplace. 49% of the employees surveyed said they had observed misconduct and 22% said they had observed behavior they would categorize as abusive. 86% of employees said they reported the misconduct they observed. When questioned if they had experienced retaliation for reporting, 79% said they had been retaliated against.

Indeed, fear of retaliation is one of the primary reasons employees cite for not reporting unethical behavior in the workplace. ECI says companies should work toward improving their corporate culture by reinforcing the idea that reporting suspected misconduct is beneficial to the company. Additionally, they should acknowledge and reward the employee's courage in making the report.

Business ethics concerns ethical dilemmas or controversial issues faced by a company. Often, business ethics involve a system of practices and procedures that help build trust with the consumer. On one level, some business ethics are embedded in the law, such as minimum wages, insider trading restrictions, and environmental regulations. On another, business ethics can be influenced by management behavior, with wide-ranging effects across the company.

What Are Business Ethics and Example?

Business ethics guide executives, managers, and employees in their daily actions and decision-making. For example, consider a company that has decided to dump chemical waste that it cannot afford to dispose of properly on a vacant lot it has purchased in the local community. This action has legal, environmental, and social repercussions that can damage a company beyond repair.

What Are the 12 Ethical Principles?

Business ethics is an evolving topic. Generally, there are about 12 ethical principles: honesty, fairness, leadership, integrity, compassion, respect, responsibility, loyalty, law-abiding, transparency, and environmental concerns.

Business ethics concerns employees, customers, society, the environment, shareholders, and stakeholders. Therefore, every business should develop ethical models and practices that guide employees in their actions and ensure they prioritize the interests and welfare of those the company serves.

Doing so not only increases revenues and profits, it creates a positive work environment and builds trust with consumers and business partners.

New York University Stern Center for Sustainable Business. " ESG and Financial Performance: Uncovering the Relationship By Aggregating Evidence From 1,000 Plus Studies Published Between 2015 – 2020 ."

Ethics & Compliance Initiative (ECI). " The State of Ethics & Compliance in the Workplace ," Pages 16-22.

Ethics & Compliance Initiative (ECI). " 2021 Global Business Ethics Survey Report The State of Ethics & Compliance in the Workplace: A Look at Global Trends ."

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Incorporating Ethics into the Organization's Strategic Plan

Robert Finocchio, former CEO of Informix, offers prescriptions for making ethics part of strategy.

Miriam Schulman is the communications director of the Markkula Center for Applied Ethics.

This article is a summary of a talk by Robert Finocchio on March 22, 2006.

Management guru Peter Drucker was famous for asking his consulting clients the basic strategic question, "What business are we in?"

To integrate ethics into the strategy, businesspeople have to add three more questions, according to Robert Finocchio, Dean's Executive Professor at Santa Clara University:

• What do we stand for?
• What is our purpose?
• What values do we have?

The former president, CEO, and chairman of Informix Corp., Finocchio offered prescriptions for incorporating ethics into the organization's strategic plan and suggestions for implementation at the March 2006 meeting of the Business and Organizational Ethics Partnership , a project of SCU's Markkula Center for Applied Ethics.

As a first principle, Finocchio argued that ethics is not integrated into strategy by proclamation. He also put it more colloquially: "Whenever someone tells me how honest or ethical he or she is, I hold on to my wallet."

While ethics should be part of the company's mission statement, long-term strategic plan, public pronouncements, and codes of conduct, unless it is also a "cornerstone of the organizational culture," it will not be effectively integrated into the business strategy, he said.

To really incorporate ethics, he presented these "prescriptions":

• Don't be in an unethical business in the first place ("In Finocchio's view some people might think tobacco, arms, and pornography may be examples of businesses that fit that description.").
• Obey the law and spirit of the law everywhere you do business.
• Articulate a complete strategy, including purpose.
• Explicitly articulate values as a key component to the strategy. Values must also be real, and must reflect actual behavior, especially among the organization's leaders.
• Don't rely on auditors, ethics officers, compliance officers, cops, regulations, manuals, and audits as the vehicle to insert ethics into the strategy.
• Emphasize principles more than rules. (This is the best way to be more demanding of the organization.)
• Individual ethical responsibility and accountability are never trumped by some corporate or organizational imperative.There is no "my company said it was ok" defense.
• Be totally transparent with your constituents, and make that part of the strategy.
• Have a framework and process for the resolution of ethical issues.
• Have the right organizational structure.
• Have rewards based on the right metrics.
• Make employee development part of strategy and make ethics training part of employee development.
• Encourage all employees to be challenging and demanding in the ethical domain (of everyone in the organization, including the bosses).

Finocchio went on to offer two practical suggestions for implementing his prescriptions: making an ethics performance evaluation part of the organization's standard end-of-year assessment and creating a strategic plan ethics checklist for the coming year.

The ethics performance evaluation would look at how the organization actually behaved, including such issues as transparency and opportunities for celebrating ethical behavior. The company would examine whether its actions over the past year had been consistent with its purpose and values.

In planning for the next year, the company would ask itself a series of questions, including:

• Is our purpose sufficiently well articulated?
• Do we face new legal requirements?
• Do we have new constituents?
• If we acquire another organization, how will it be ethically assimilated?
• Are our rewards structures appropriate?
• Is there any need to change the mechanics (constituent communication, employee training, organizational structure, issue resolution processes)?
• How will we measure our performance?
• Do we have new goals/objectives in the ethical domain?

Finocchio also looked at the issue of corporate social responsibility, acknowledging that some thinkers have argued social responsibility is not an appropriate activity of business. As an example, he quoted economist Milton Friedman: 

In [a free] society, there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say engages in open and free competition without deception or fraud.

On the other hand, Kenneth Andrews, sometimes called the father of corporate strategy, saw social responsibility as crucial not only for the business itself but for "human betterment." Andrews argued that government alone cannot sufficiently constrain negative individual or corporate behavior. Because they wield such vast power, corporations, he believed, must bring their power to bear on social problems if they are to be solved.

Finocchio also put John Gardner, founder of Common Cause, into the pro social responsibility camp. Gardner was interested in how leaders, including business executives, could mobilize the energy and talents of their followers to promote shared values and improve society. In his book On Leadership, he argued, We must hope leaders keep alive values that are not so easy to be embedded in law-our feeling about individual moral responsibility, about caring for others, about honor and integrity, about tolerance and mutual respect, and about individual fulfillment within a framework of values.

In Finocchio's view, a business can be ethical whether it subscribes to Friedman's or to Andrews' and Gardner's view of social responsibility.

He offered these suggestions for those who agree with Andrews and Gardner:

• Be transparent. Make sure your constituents, especially shareholders, know what you are doing with their money.
• When in doubt, let the shareholders decide to whom and how much "to give."
• Beware of the costs of "social responsibility," especially when it involves economic inefficiency. Be sensitive to the fact that benefits may be concentrated and visible, and costs highly dispersed and invisible.
• Beware of elitism. (Because I am some big deal executive and rich, I know what's good for you.)
• Beware of fads
• There is no virtue in being charitable with other people's money, or using other people's money to promote your cause, stay in some club, or maintain social status.
• Beware of the point when "doing good" becomes self-indulgence.

For those in the Friedman camp, Finocchio advised:

• Be transparent with all your constituents.
• Be responsible with your own personal resources and personal actions.
• Test every action against the criterion.
• Maximize the long-term value of the firm.

Finocchio's presentation was part of a two-day meeting of the Business and Organizational Ethics Partnership. Other speakers at the March Partnership meeting included Dan Sweeney from the Center for Corporate Excellence on "Tone at the Top and Executive Compensation"; Stephan Rothlin, general secretary of the Center for International Business Ethics in Beijing on "Business Ethics in China" ; and Frank Daly, Markkula Center Fellow, Eric Pressler, Apple Computer, and Sam Piazza, Hewlett Packard, on "Rules-Driven and Values-Driven Ethical Approaches: Trade-offs."

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8 Current Ethical Issues In Business (and How to Prevent Them)

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Ethical issues in business can be an unforeseen and difficult challenge. 

Discrimination laws and other statutes are in place to keep workers and employers responsible, but they can’t wholly deter employees or employers from acting unethically.

We’ve compiled a list of current ethical issues in business that you might have to confront. Understanding how to detect and, most importantly, deter these issues before they become a problem can keep your focus on business growth instead of remediation.   

Here are the business ethics topics we’ll cover:

• Discrimination and harassment
• Abuse of leadership
• Accounting  
• Employee theft
• Social media
• Data privacy

What Are Ethical Issues in Business?

When referring to ethical issues in business, the meaning essentially comes down to what’s seen as morally right or wrong within an organization and in the eyes of the public, not limited to customers and shareholders. These issues can take the form of company actions, employee activities and business decisions, among others. At the core, they demonstrate character, trustworthiness and integrity (or lack of).

Ethics and Compliance Statistics

Just how prevalent are ethics issues in business? The Ethics & Compliance Initiative released its 2021 Global Business Ethics Survey Report . Some of the most striking statistics included the following:

• The most prevalent forms of misconduct in the U.S. include favoritism, management lying to employees, conflicts of interest, improper hiring practices, abusive behavior and health violations
• 86% of U.S. workers report misconduct within their organization
• 30% of U.S. employees say they feel pressured to compromise their company’s standards of ethics
• However, the global median of companies with strong work cultures is just 14%

8 of the Top 21st Century Ethical Issues in Business Today

Ethical and moral issues in business aren’t new, but fresh technologies can be a breeding ground for new forms of unethical behavior. Additionally, the way companies handle such concerns can evolve. Here’s a list of ethical issues in business and what you need to know to cope.

1. Discrimination and Harassment

Harassment and discrimination are arguably the most prominent contemporary ethical issues in business today. Should an instance occur, the result could be devastating to your company’s finances and reputation. 

Though discrimination and harassment laws have been put in place and continue to be updated, thousands of businesses see complaints levied against them each year. According to the United States’ Equal Employment Opportunity Commission (EEOC), there were 61,331 charges filed in 2021 alone. 

Although discrimination and harassment policies in business settings technically deal with different treatment types, both protect certain classes of employees.

To help combat ethical issues in your business specific to discrimination and harassment, ensure your policies don’t negatively impact the following protected classes: 

• Age: This usually applies to those 40 and older, but any ageist policies or treatment is prohibited.
• Disability: Anyone with a physical or mental impairment. Employers must grant reasonable accommodations and provide equal treatment to a person with actual or perceived disabilities to comply with the Americans with Disabilities Act (ADA).
• Genetic information: Employers can’t discriminate against employees based on information from genetic testing, and this extends to their family’s medical history.
• Race/color: Employee treatment must be consistent regardless of race.
• National origin: An employer can’t discriminate based on a person’s actual or perceived national origin or ethnicity.
• Religion: Accommodations and equal treatment must be provided within reason regardless of an employee’s religion.
• Equal pay: Compensation for equal work must be equal regardless of sex, race, religion, etc.
• Pregnancy: Accommodations and equal treatment must be provided within reason for pregnant employees.

Workplace Discrimination

Discrimination can be any treatment that negatively affects an employee in a protected class when it comes to the job itself. This includes hiring and retention practices, compensation, advancement opportunities, training and reasonable accommodations, among other workplace treatment. 

One of the more significant ethical issues in business is the gender wage gap, where an employer pays a woman less than a man when they have mostly equal skills and experience levels and are performing the same work. Other ethical issues in business examples include firing an employee for being perceived as too old or refusing to provide opportunities for advancement for people of certain races or ethnicities.

Workplace Harassment

Harassment, unlike discrimination, is an ethical issue that involves the social and personal treatment of people within a business. This list of ethical problems includes behavior that creates a hostile work environment, such as teasing, inappropriate sexual behavior and even verbal or physical abuse by a supervisor, co-worker or non-employee. The bullying of an employee with a physical or mental disability would be an example of workplace harassment.

How to Deter Harassment and Discrimination In Your Small Business

Unfortunately, small business owners can’t always make sure employees act ethically. However, what you can control is how your business accommodates and treats its employees of different backgrounds and abilities. 

A few things you can do to ensure a healthy, friendly work environment for all include:

• Putting strong company policies in place for human resources and conflict resolution
• Providing continued education on harassment and discrimination laws 
• Monitoring employee relationships to stay informed and catch any ethical violations before they become a larger problem
• Ensuring employees who bring forward complaints are shielded from retaliation

2. Abuse of Leadership

Another example of ethical issues in business is abuse of leadership. This occurs when individuals who hold positions of power in an organization misuse their authority, whether with staff members or in relation to their administrative functions. 

In addition to harassment, this could present in the punishment of employees who fail to meet unreasonable goals the manager has set. Alternatively, the manager may take credit for the work of a lower-level employee.

Beyond a leader’s interactions with employees, abuse of power can take the form of falsifying reports, including sales, expense or payroll reports. Additionally, it could involve accepting gifts from clients or vendors when the organization has a policy against such action.

Deterring Power Trips

Be sure your company handbook clearly defines acceptable and unacceptable behavior in the workplace. Outline consequences for abuses of power. Additionally, provide leadership training so administrators can learn how to manage themselves and their team appropriately. Finally, intervene when necessary to quash destructive behavior.

3. Compliance

Compliance ethical issues in business are often tied to companies straying from the rules and laws of conducting business. Businesses are required to comply with all environmental, federal and state regulations. If they don’t, they can jeopardize the health and livelihood of those within and outside of their company. 

Some businesses knowingly disregard these regulations to improve profits. An ethical issue in business example regarding compliance is a company that illegally dumps its waste. The company knows it’s wrong but does it anyway because it reduces the cost of finding safe alternatives.

Guarding Against Compliance Issues

To avoid compliance problems in business, enact the following practices:

• Always follow governmental and company bylaws.
• Promote a culture that puts the long-term health of the company ahead of short-term greed and self-interest. 
• Maintain awareness and adherence to any regulation or statute changes that can impact your business’s operations.
• Stay focused on how actions affect others.
• Always act ethically and in the company’s best interest.

4. Accounting

Another ethical issue in entrepreneurship and business can deal with accounting. Numbers don’t lie. But when accountants and companies act unethically, they do.

Deceiving shareholders and others with a stake in your company’s finances is a serious offense by both ethical and judicial standards. 

Penalties can be levied in fines, imprisonment and can often lead to a company’s closure. As an example, in the accounting realm, one of the most infamous business ethics issues in the news was the Enron scandal in 2001, in which company executives used questionable accounting practices to conceal financial troubles and give the appearance of higher profits.

Avoiding Accounting Violations

It’s crucial to have a trusted, honest accountant (or accounting team) who will pore over every number to make sure your records are correct. You should have a part in reviewing every financial statement and report in your company. Also, having an audit system, either internally or externally, for additional oversight can help you avoid ethical problems in your business.

5. Employee Theft

Business owners, especially those in the retail industry, are very aware of how theft can affect their business. Theft is not, however, strictly committed by customers. It’s estimated that 25%-40% of workers steal from their job . Additionally, according to the Association of Certified Fraud Examiners , companies can lose 5% of their annual revenue to employee fraud. 

It is not just stealing inventory. Employee theft also includes other ethical violations that can hurt your company.

Some of the ways employees steal from their companies include:

• Money: Stealing money is the most common type of employee theft.
• Time: Falsifying time sheets is another form of employee theft.
• Supplies: Taking office supplies home, such as pens, notebooks and other property, is an additional way employees steal from a company.
• Information: Stealing company information, trade secrets or client information is a form of workplace theft as well. This could put the business at a risk of loss and open it up to competition or litigation.

Preventing Employee Theft

Help avoid business ethics concerns by being thorough in your hiring process. Make certain you trust the employees you’re bringing in and ensure they will be respectful of your company’s property.

You should also have a policy delineating what constitutes theft and the potential consequences for anyone caught stealing. Employees should read and agree to this policy before starting work at your company. A legally enforceable nondisclosure agreement could also help deter the theft of trade secrets or intellectual property.

6. Social Media

A recent ethical issue in business is social media use, whether you and your employees are on or off the clock. Needless to say, your business should have a social media policy addressing do’s and don’ts when employees work with the business’s social media accounts. 

Ethical issues to address in a business social media policy include how to: 

• Properly seek permission for use or attribute content taken from another creator
• Handle copyrighted content
• Deal with unhappy customers
• Manage public relations concerns
• Use (or not use) personal social media accounts during working hours

While you usually wouldn’t police an employee’s personal social media behavior during non-working hours, their posts could still cause ethical problems in your business. If an employee’s written post, photo or video — even if it was created off the clock — risks damaging your business’s reputation and losing customers and clients, the employee could still face professional repercussions. 

Social media ethical issues in business examples include:

• Posting negative or derogatory comments about your business — including anything libelous or defamatory
• Leaking private information about the company or its clients or customers
• Posting content that denigrates an individual or group based on race, sex or gender, religion or disability

How to Manage Social Media Ethics

A clear, consistently enforced social media policy can help keep some business ethics concerns at bay. Have employees read and agree to your business’s policy when they onboard. Social media also rapidly evolves, so update your policy to reflect relevant changes to the landscape, looping in your employees as you do. Include ethical dilemma examples in your business social media policy to help illustrate behavior your company won’t tolerate.

7. Data Privacy

In a digital world, data privacy is at the forefront of ethical issues today in business. Your business and customer information is largely stored on computers, other smart devices or the cloud, and a shoddy IT governance policy can be just as damaging to privacy as a security hack.

Guarding Against Data Privacy Ethical Problems in Business

Maintaining data privacy is paramount. Consider using the following methods to avoid ethical issues in your business: 

• Enact clear guidelines regarding how data is handled, stored and purged.
• Identify who manages and/or accesses data and ensure they understand how it should be managed; have them sign a contract affirming this.
• Establish and enforce clear consequences for data privacy breaches.

8. Nepotism

Hiring family members or friends isn’t necessarily a negative. Recognizing when it’s an ethical issue in business comes down to understanding when nepotism supersedes competency and shows unwarranted favoritism. 

Additionally, keep in mind, depending on your relationship, the familiar hire may ask favors from you that may conflict with your organizational standards or codes of conduct, such as requesting unreasonable amounts of time off.

Avoiding Unfavorable Outcomes When Hiring Family

Show caution when hiring family or friends, and understand that your existing employees may look upon this negatively, particularly if the individual isn’t qualified to take on the role.

Addressing Ethical Issues In Your Business

Avoiding ethical issues in your business starts at the top. Being a strong leader encourages employees to follow in your footsteps. Weigh decisions against a robust code of ethics and demand the same from your employees. 

Use these final tips to avoid ethical issues in your business:

• Ensure policies outlining ethical behavior are known and understood within your organization.
• Learn more about discrimination laws in your state. 
• Read up on rules and regulations that affect your industry and make sure your business acts accordingly. 
• Work with accountants to maintain transparency and honesty in your financial reports. 
• Set up a confidential system for reporting ethical violations.
• Offer employee training and resources to combat unethical behavior.

If you create a healthy work environment with the right people and the right leadership, you’ll set up your employees and your business for success.

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6 Ethical Issues in Business and What to Do About Them

Emily Barr February 19, 2020 HR Professionals , Leaders , Performance Culture

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Ethical issues in business can be a difficult challenge to navigate for any business owner. Though there are laws and statutes that exist to hold workers and employers accountable, these alone do not entirely deter employees from behaving unethically.  

What Are Ethical Issues in Business?  

Ethical issues in business encompass a wide array of areas within an organization’s ethical standards. Fundamental ethical issues in business include promoting conduct based on integrity and trust, but more complex issues include accommodating diversity, empathetic decision-making, and compliance and governance that is consistent with the organization’s core values. According to the Global Business Ethics Survey of 2019, 25% of employees still feel that their senior managers do not have a good understanding of key ethical and compliance business risks across the organization.

In order to manage the ethical issues in business that arise in your organization, you first need to develop a thorough understanding of what those issues can look like. Understanding how to detect and, most importantly, deter these issues before they become a problem can ensure your focus stays on business growth and success instead of remediation.  

6  Ethical Issues in Business and How to Address Them  

Download our infographic to use as a quick reference and reminder of common ethical issues to avoid.

Ethical Issues in Business

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1. Harassment and Discrimination in the Workplace  

Harassment and discrimination are arguably the largest ethical issues that impact business owners today. Should harassment or discrimination take place in the workplace, the result could be catastrophic for your organization both financially and reputationally.   

Every business needs to be aware of the anti-discrimination laws and regulations that exist to protect employees from unjust treatment. The U.S. Equal Employment Opportunity Commission (EEOC) defines many different types of discrimination and harassment statutes that can have an effect on your organization, including but not limited to :  

• Age:  applies to those 40 and older, and to any ageist policies or treatment that takes place.  
• Disability:  accommodations and equal treatment provided within reason for employees with physical or mental disabilities.  
• Equal Pay:  compensation for equal work regardless of sex, race, religion, etc.  
• Pregnancy:  accommodations and equal treatment provided within reason for pregnant employees.  
• Race:  employee treatment consistent regardless of race or ethnicity.  
• Religion:  accommodations and equal treatment provided within reason regardless of employee religion.  
• Sex and Gender:  employee treatment consistent regardless of sex or gender identity.

2. Health and Safety in the Workplace  

As outlined in the regulations stipulated by the Occupational Safety and Health Administration (OSHA), employees have a right to safe working conditions. According to their 2018 study , 5,250 workers in the United States died from occupational accidents or work-related diseases . On average, that is more than 100 a week, or more than 14 deaths every day. The top 10 most frequently cited violations of 2018 were :  

• Fall Protection , e.g. unprotected sides and edges and leading edges  
• Hazard Communication , e.g. classifying harmful chemicals  
• Scaffolding ,  e.g. required resistance and maximum weight numbers  
• Respiratory Protection , e.g. emergency procedures and respiratory/filter equipment standards  
• Lockout/Tagout , e.g. controlling hazardous energy such as oil and gas  
• Powered Industrial Trucks , e.g. safety requirements for fire trucks  
• Ladders , e.g. standards for how much weight a ladder can sustain  
• Electrical, Wiring Methods , e.g. procedures for how to circuit to reduce electromagnetic interference  
• Machine Guarding , e.g. clarifying that guillotine cutters, shears, power presses, and other machines require point of operation guarding  
• Electrical, General Requirements , e.g. not placing conductors or equipment in damp or wet locations  

However, health and safety concerns should not be limited to physical harm. In a 2019 report conducted by the International Labour Organization (ILO), an emphasis was placed on the rise of “psychosocial risks” and work-related stress and mental health concerns . Factors such as job insecurity, high demands, effort-reward imbalance, and low autonomy, were all found to contribute to health-related behavioural risks, including sedentary lifestyles, heavy alcohol consumption, increased cigarette smoking, and eating disorders.   

3. Whistleblowing or Social Media Rants  

The widespread nature of social media has made employees conduct online a factor in their employment status. The question of the ethics of firing or punishing employees for their online posts is complicated. However, the line is usually drawn when an employee’s online behavior is considered to be  disloyal to their employer. This means that a Facebook post complaining about work is not punishable on its own but can be punishable if it does something to reduce business.  

In the same vein, business owners must be able to respect and not penalize employees who are deemed whistleblowers to either regulatory authorities or on social media. This means that employees should be encouraged, and cannot be penalized, for raising awareness of workplace violations online. For example, a Yelp employee published an article  on the blogging website Medium, outlining what she claimed as the awful working conditions she was experiencing at the online review company. She was then fired for violating Yelp’s terms of conduct. The ambiguity of her case, and whether her post was justifiable, or malicious and disloyal conduct, shows the importance of implementing clear social media policies within an organization. In order to avoid this risk of ambiguity, a company should stipulate which online behaviors constitute an infringement.  

4. Ethics in Accounting Practices  

Any organization must maintain accurate bookkeeping practices. “Cooking the books”, and otherwise conducting unethical accounting practices, is a serious concern for organizations, especially in publicly traded companies.  

An infamous example of this was the 2001 scandal with American oil giant Enron, which was exposed for inaccurately reporting its financial statements for years, with its accounting firm Arthur Andersen signing off on statements despite them being incorrect. The deception affected stockholder prices, and public shareholders lost over $25 billion because of this ethics violation. Both companies eventually went out of business, and although the accounting firm only had a small portion of its employees working with Enron, the firm’s closure resulted in 85,000 jobs lost.  

In response to this case, as well as other major corporate scandals, the U.S. Federal Government established the Sarbanes-Oxley Act in 2002, which mandates new financial reporting requirements meant to protect consumers and shareholders. Even small privately held companies must keep accurate financial records to pay appropriate taxes and employee profit-sharing, or to attract business partners and investments.  

5. Nondisclosure and Corporate Espionage  

Many employers are at risk of current and former employees stealing information, including client data used by organizations in direct competition with the company. When intellectual property is stolen, or private client information is illegally distributed, this constitutes corporate espionage. Companies may put in place mandatory nondisclosure agreements, stipulating strict financial penalties in case of violation, in order to discourage these types of ethics violations.  

6. Technology and Privacy Practices  

Under the same umbrella as nondisclosure agreements, the developments in technological security capability pose privacy concerns for clients and employees alike. Employers now have the ability to monitor employee activity on their computers and other company-provided devices, and while electronic surveillance is meant to ensure efficiency and productivity, it often comes dangerously close to privacy violation.   

According to a 2019 survey conducted by the American Management Association , 66% of organizations were found to monitor internet connections, with 45% tracking content, keystrokes, and time spent on the keyboard, and 43% storing and reviewing computer files as well as monitoring employee emails. The key to using technological surveillance in an ethical manner is transparency. According to the same survey, 84% of those companies tell their employees that they are reviewing computer activity. In order to ensure employee surveillance does not turn into an ethical issue for your business, both employees and employers should remain conscious of the actual benefits of being monitored, and whether it is a useful way of developing a record of their job performance.

Take our Ethical Issues in Business Infographic to go!

Final thoughts on addressing ethical issues in business  .

Avoiding ethical issues in business always starts with top management. Providing clearly written policies and processes that ensure those policies are both acknowledged and adhered to, can ensure transparency and ethical business practices are applied.   

In order to effectively detect and, most importantly, deter ethical issues in business from surfacing in your organization, there are several everyday efforts you can take. Be sure to communicate and enforce a robust code of ethics when making decisions and ask the same of your employees. Remain aware of the discrimination laws that exist in your region. Stay informed on the rules that impact your industry, and ensure your organization is acting in compliance with those regulations. Collaborate with accountants, maintaining transparency and honesty in your financial reports. Be present in your company, making sure your organization and employees alike are always doing the right and ethical thing.

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8 Common Ethical Issues Facing Businesses in 2021

July 7, 2020 ben shabat.

Being a good person isn’t the same as being a ‘good’ business owner. Ethically speaking, what you do in your personal life could directly contradict what you should be doing in your role as a business owner. And vice versa!

It can get tricky sometimes, but addressing ethical issues in business is an essential step to building a strong company that will maintain a positive reputation and track record. Of course, there are some questions you might have, for example:

• Which ethical dilemmas in business should you be focused on?
• Why is it crucial to address ethical issues in business?
• How can you resolve ethical problems in business the right way?

Lucky for you, we give the answers to these big questions – and more – right below. Read and find out!

What are ethical issues in business?

Ethical issues in business affect a variety of aspects related to a business’s general operating standards. The topic of ethical problems in business is focused on what actions a business takes and/or what policies a business creates in its efforts to resolve ethical questions that come up.

The importance of ethical issues in business cannot be overstated, particularly in today’s day and age of social movements and political correctness. All personal feelings set aside, it remains a fact that current events have reshaped current ethical issues in business and, to a large degree, have increased the focus placed on ethics in the workplace.

Establishing a code of ethics for your business to operate by will help you lay a firm foundation of basic trust between you and your employees, clients, partners, suppliers, and so on. Fortunately, the law often gives the answers to questions related to ethical issues in business (we’ll touch on some examples later on), but that’s not always the case. That’s why every business owner should familiarize themselves with what ethical problems in business are, why they matter, and how they should be addressed.

8 Common ethical issues in business and how to address them

It’s not enough to simply know what the biggest ethical dilemmas in business are – you should also be aware of why they’re considered problems and what you can do about it at your business.

Here, we cover it all. Scroll down and find out!

Common ethical issues facing businesses in 2021:

• Sexual Harassment
• Diversity & Discrimination
• Social Media
• Health & Safety
• Environmental Responsibility
• Accounting Practices
• Data Privacy

Note: Ethical issues are even more important for startups and small businesses since their reputations are not as well-established as a big corporation might be. What that means is, if there’s a lawsuit over an ethical issue at your business, the process of defending yourself could do some serious damage. It could even bankrupt your business! Take these ethical problems in business seriously and avoid the risk to your reputation and financial stability.

1. Sexual Harassment

More often than not when we discuss harassment at work the topic quickly shifts to sexual harassment. There’s no doubt that it is an ethical issue in business that should be taken very, very seriously – and if you’re not sure why then you need to read about the #MeToo Movement . While we shouldn’t forget that there are many forms of harassment in the workplace, sexual harassment is one that deserves to be addressed on its own.

According to the U.S. Equal Employment Opportunity Commission (EEOC), in 2018 alone there were more than 7,600 allegations of sexual harassment made. Not only that but the resulting monetary benefits for those plaintiffs were in excess of $56.6 million – an indication of the validity of those claims.

When we take an even closer look at this ethical issue, we find that 54% of women report having experienced unwanted sexual advances in the workplace and 23% said that the instance of sexual harassment actually involved a superior.

These numbers paint a troubling reality and present real challenges to creating a workplace environment where people feel secure and comfortable.

What can your business do about sexual harassment?

The most important step in addressing sexual harassment as a serious ethical dilemma in business is to implement employee training. Start by making sure everybody who works for you is made aware of the rules, that those rules are posted around the workplace, and by enforcing a zero-tolerance policy for sexual harassment.

From there, you’ll want to ensure that leaders in your business are setting good examples, that you continuously monitor for inappropriate behavior, and that you provide employees with a safe and discrete avenue for reporting cases of harassment. Additionally, there should never be any fear of retaliation for reporting sexual harassment – victims, whether alleged or proven, should get your full support.

It’s also best to take preventative steps to reduce the risk of sexual harassment. That can include having employees sign agreements that they will follow company rules, not allowing the ‘little things’ to slide, by limiting the serving of alcoholic beverages during company events, and so on.

If sexual harassment does occur at your business, acknowledge the charge, investigate the case thoroughly, respond with care, and administer discipline if need be.

2. Diversity & Discrimination

Discrimination in the workplace is essentially any aspect about the job itself or the duties related to it which are treated differently with respect to any of the categories listed below. Ensuring diversity and actively preventing discrimination are critical aspects of resolving ethical dilemmas in business.

The EEOC lists the following types of discrimination:

• Equal Pay/Compensation
• Genetic Information
• National Origin
• Retaliation
• Sexual Harassment (as we discussed this above)

Most of us are [unfortunately] aware that some people hold prejudices towards people of a certain ethnicity, race or color, religion, sex or sexual preference, people over a certain age, mentally or physically disabled individuals, and so on. In fact, a shocking 61% of American employees report having witnessed or experienced discrimination based on age, race, gender, or LGBTQ identity at work. On top of that, women currently make $0.81 for every dollar that men earn.

Other categories like genetic information or retaliation might be discussed less frequently, but are important nonetheless. To quickly clarify, genetic discrimination in the workplace is when a business treats an employee differently based on their genetic predisposition to developing a certain disease or disorder (such as a family history of heart disease, for example). Far-out as it may seem, this sort of ethical problem in business is becoming more prevalent as advancements in science continue to make DNA sequencing easier, quicker, and cheaper.

Regardless of how familiar you are with the different categories of discrimination, you can use the set of guidelines for each type of discrimination published by the EEOC to ensure that you operate properly with respect to this ethical issue in business.

Note: The lending industry is not immune to ethical dilemmas in business, but it is taking steps towards leveling the lending playing field for women, minorities, young businesses, young owners, and more.

For example, Become has made huge strides in eliminating human bias from the loan decision-making process by using advanced technology to analyze a business’s financial health & stability. Your LendingScore™ will reflect your business, never your personal background or circumstances.

It’s particularly important that your business positions itself to respond quickly and effectively to any instance of discrimination especially given the current ethical issues in business specifically related to race.

What can your business do about discrimination?

As is the case for all ethical issues in business, the first step to preventing unacceptable behavior is to educate employees, make sure everyone is aware of the rules, and have a system for distributing disciplinary action when needed.

After that, one of the best ways to fight discrimination at work and guarantee a diverse group of employees is to consciously hire people with different characteristics and backgrounds. Having a diverse workforce will not only ensure equal representation for different groups of people but will also, in turn, help your business fight against discrimination by bringing in a variety of perspectives into the fold.

You should also be careful about implementing business policies that may be inadvertently discriminatory towards a particular group of people. For instance, you may require all employees to shave their beards – but if the rule is deemed arbitrary and doesn’t actually have anything to do with the employees’ ability to properly do their jobs, the rule can be considered discriminatory on religious or even race grounds.

The bottom line: Be aware of how your business’s policies may be seen as discriminatory and be open and flexible enough to make accommodations for all of your employees, regardless of their personal characteristics or circumstances.

3. Social Media

One of the more current ethical issues in business is the question of employees’ personal behavior on social media outside of work hours. Granted, there’s still quite a large gray area of situations that may or may not make it ethically justifiable to fire an employee for their social media conduct.

Here are a few questions you’ll want to consider with regards to this ethical dilemma in business:

• Is it right to punish employees for certain types of social media posts?
• Are you obligated to keep an employee who holds distasteful views and expresses them online?
• Should you fill the role of a mediator if employees get into a disagreement with each other on social media?

When it comes to employee etiquette on social media , the bottom line for most businesses is that the employee can be justifiably fired if the activity is deemed disloyal or financially harmful to the company. Of course, neither your nor your employees would want to get to a point like that – so what can you do to minimize ‘bad’ employee behavior on social media?

What can your business do about ethical issues related to social media?

Addressing ethical problems in business connected to social media can be tricky mainly because most situations will fall in the gray area. To help eliminate confusion or disclarity for you and your employees, the best step to take is to create a set of rules and policies that clearly describe what is (and isn’t) acceptable for employees to do on social media.

Your business’s guidelines for employee behavior on social media should be paired with training sessions and periodic company-wide reminders via email. Likewise, if there ever is an instance of misconduct on social media and you’re forced to fire an employee, it may be a good opportunity to readdress the topic with other employees.

4. Health & Safety

There are few ethical problems in business that are more serious than the health & safety of your employees and customers. Besides the obvious ethical implications of people getting hurt or sick while working for your business, there’s also the huge risk to your business’s financial stability and reputation. Don’t be fooled just because this ethical issue in business is number 4 on this list!

In 2018 alone, the U.S. Bureau of Labor Statistics reported 5,250 fatal injuries, the causes of which included everything from injuries by animals to falls/slips/trips to transportation incidents and more. It may come as little surprise to learn that the two industries with the most fatal injuries are transportation (1,379 fatalities) and construction (1,008 fatalities). But regardless of what industry you’re in, what your track record looks like, or how risky you think your business is – addressing health & safety in your workplace is of the utmost importance.

It’s key to also highlight that physical safety shouldn’t be your only focus; psychological well-being is a core component of creating a safe and healthy workspace. Consider this: approximately 63% of the U.S. population is part of the labor force and roughly 71% of adult Americans report at least one symptom of stress (like headaches or anxiety).

It’s not all doom and gloom though; of course, there are actions you can take to ensure health & safety at work.

What can your business do about health & safety?

There’s been plenty of research done on the topic of combating ethical problems in business related to workplace health & safety. The World Health Organization has gathered data to develop some fundamental advice on how to promote safety and health in the workplace:

• Regularly inspect your workplace for any potential hazards
• Train your employees so they’re educated on safety protocols
• Promote healthy living (stock kitchens with healthy snacks & drinks)
• Inform employees that help is available
• Recognize and reward hard work
• Create opportunities for employees to grow
• Hold periodic meetings with employees to understand their needs

5. Environmental Responsibility

Environmental responsibility in business may seem like it’s targeted at big oil companies, lumber businesses, farming, and other businesses that have a more direct impact on the environment. But that’s not the case! Even if your business operates entirely within the confines of an office building, environmental responsibility is still on the list of ethical issues in business that you should pay mind to.

Every business owner is responsible for the carbon footprint that their company produces. That applies to how your business affects air quality, water cleanliness, the safety of endangered species, the use & conservation of other natural resources, the pristineness of protected nature reservations, and so on. Fortunately, the government has made laws to address most of the environmentally-related ethical dilemmas in business. Those laws include the Clean Air Act, the Clean Water Act, the Endangered Species Act, the Resource Conservation and Recovery Act, and more.

All of that said, a recent study found that a whopping 78.2% of small businesses haven’t designed or implemented an environmental management system. It should be noted though that small businesses have reasons for not implementing environmental management systems. Those reasons include the financial burden of making changes, complications that may arise while implementing changes, not having enough guidance on how to go green with the business , and so on. How can your business avoid those obstacles?

What can your business do about environmental responsibility?

There are numerous ways that your business can address environmental responsibility, some of which can be a bit costly and others that you can start implementing today. Either way you’ll want to create an environmental management system:

• Assess for areas to improve
• Choose the ways to go green
• Define the goals for your EMS
• Create an EMS team to implement and oversee changes

Among the easier-to-do tactics your business should be doing: going paperless. Not only will it save trees, but it will also save you money – roughly 31 times the price you spend on the paper itself. In other words, if you buy a $40 pack of paper, you’ll ultimately save around $1,200. The planet will thank you, and so will your bank account.

Of the [perhaps] more complicated and costly routes to environmental consciousness: using renewable energy. Namely solar power. Installing solar panels on your place of business will reduce the amount of electricity you source from the power company and can save you upwards of 80% on your electric bill. How does reducing electricity consumption impact the environment? Consider this example from Fast Company :

“…if every one of 110 million American households bought just one ice-cream-cone bulb, took it home, and screwed it in the place of an ordinary 60-watt bulb, the energy saved would be enough to power a city of 1.5 million people [and]…is equivalent to taking 1.3 million cars off the roads.”

At the end of the day, we all should be doing our best to keep our planet clean and healthy for future generations – your business can play its part!

6. Accounting Practices

This is one of the more ‘classic’ ethical issues in business and comes along with some very serious legal implications as well. Manipulating a business’s financial data to make the company look more successful – also known as “cooking the books” – is the most well-known form of accounting misconduct (and is a federal crime). Beyond the legal boundaries that it crosses, the ethical dilemmas in business related to bad accounting practices can put innocent people in harm’s way.

Say, for example, your business was to misrepresent its earnings and expenses. Not only would you be cheating the IRS and American taxpayers by benefiting from tax deductions your business doesn’t actually qualify for, but you’d also be deceiving your shareholders (if you have any). If you then get caught, you could also be responsible for your employees losing their livelihoods – even if they have no knowledge of the wrongdoing. This is definitely an ethical problem in business that you want to avoid at all costs.

What can your business do about accounting practices?

The solution to this ethical issue in business is quite simple: personally review your financial statements and reports to ensure that they’re honest and accurate. If that’s going to be too time-consuming, hire an accountant you trust to run the numbers – even if they cost a pretty penny. And if cost is stopping you from hiring an accountant, but you’re not sure if you can do it alone, then take some time to look over the top 5 accounting software that can help you keep your books in order.

Important note: After some careful thought, you may find that hiring an accountant is well-worth the investment, but you may still be short on funds to make it happen. Consider taking business loans as a way to clear this hurdle and do what you need to do to keep your business protected from the risks of fraudulent accounting practices.

In any case, this is not something to leave up to chance. Be sure that whoever is handling the accounting end of your business is trustworthy. If they aren’t, replace them with someone who is.

7. Data Privacy

These days you’ll be hard-pressed to find anyone who doesn’t have some sensitive data stored digitally – including your employees. In fact, more than 80% of Americans own a smartphone and the average person uses roughly 25 applications every month. That’s a ton of opportunities for data to fall into the wrong hands!

So what does that have to do with ethical problems in business? Well, the ethical issues have less to do with how your employees conduct themselves on company computers, smartphones, and tablets (although that’s super important to address!). The ethics come into play when you decide how exactly to implement a cybersecurity plan for your business .

What can your business do about data privacy?

To avoid the reputational and financial damage of a data breach, you’ll want to develop a small business cybersecurity plan and put it into action as soon as possible. The ethical questions arise around the specific aspects that make up your cybersecurity plan. To be more precise, when does monitoring your employees’ behavior on company devices cross the line and become unethical? Unlike some other ethical problems in business, this one doesn’t have legal restrictions. Businesses have the legal right to look into your browsing history and company email use, and they do!

Check out this data from the American Management Association :

• 66% of businesses monitor Internet connections
• 45% track content, keystrokes, and time at keyboard
• 43% save and review files on your computer
• 10% monitor social media

Ultimately, the way to avoid these ethical dilemmas in business is to openly communicate about them. There’s no sense in keeping your business’s monitoring a secret from employees. Quite the contrary – if they know you’re monitoring, they’ll be less likely to do the things you have warned them about.

8. Nepotism

Nepotism, in case you’re unfamiliar with the term, refers to a form of favoritism for family members or close friends. While it can definitely introduce issues into the workplace under certain circumstances, nepotism isn’t inherently a bad thing if the family member or friend is fit for the position and gets along well with other employees.

The problem typically arises when that isn’t the case, and you wind up hiring someone based on your personal relationship with them and not on their ability to do the job. But even when they are qualified for the position, hiring a friend or family member can still breed resentment among other employees. That’s why you need to be extremely careful when deciding to bring someone from your personal life to work in your business.

What can your business do about nepotism?

Besides being very careful about who you bring into your business, there’s not much you can do to eliminate the negative views that some employees may have if and when you hire a family member or close friend. Even if yours is a family owned business, you’ll want to pay close attention to the ratio of employees vs. friends/family. After all, as the old saying goes, “you can’t be a boss and a friend”.

Last but not least, theft is one of the most common phenomena worldwide. According to a survey by Finance Online , 39% of businesses have experienced more than one case of employee theft. But what exactly does that mean? Is there more to employee theft than “just” stealing inventory? The answer is yes.

Employee theft is also about violating some other ethical issues, like stealing time; although this issue isn’t talked about often, many businesses are losing a fair amount of money due to false attendance reporting of employees. 

What can your business do about theft?

Preventing theft is a process that should start at the very beginning of the recruitment of employees. Obviously, you’ll want to be rest assured that your potential employees are trust worthy and respectful of your business in all ways. Make sure to conduct background checks, address employee theft in your company policy and occasional updates, and make the consequences of theft clear enough for all your employees. Also, encourage your employees to raise a flag when suspicion arise. 

Be and do your best

Ethical problems in business are something that most if not all owners will encounter at some point in their career. Even if you take all of the necessary precautions and follow the recommended steps, you should always stay prepared to handle ethical dilemmas in business in an appropriate and productive manner. When problems arise, use them as opportunities to learn as an owner and to build a better, fairer, and more ethical business.

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More From Forbes

Navigating the ethical horizon of global business.

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President & Founder at APS Global Partners Inc. | President & Founder at Medias Health Inc.| Forbes Business Council Influencer.

Ethical considerations have become more critical in the ever-evolving landscape of global business. As a seasoned business consultant with two decades of hands-on experience, I have witnessed the transformation of business ethics from a mere checkbox on corporate governance to a cornerstone of sustainable and responsible business practices. In this article, I will delve into the realm of business ethics, exploring its evolution, challenges and the imperative for companies to integrate ethical considerations into their DNA.

The Evolution Of Business Ethics

Over the years, the perception of business ethics has shifted from a regulatory requirement to a strategic imperative. In the early years of my career, ethical considerations were often viewed as a necessary evil, something to be complied with rather than embraced. However, as the global business community faced scandals and crises, the tide turned, and businesses began to recognize the intrinsic value of ethical conduct.

Today, business ethics is not just about adhering to laws and regulations; it's about fostering a culture of integrity and responsibility. It encompasses a broader spectrum of considerations, including environmental sustainability, social responsibility and business transparency. This evolution has been driven by external pressures and a growing understanding within organizations that ethical behavior is a key driver of long-term success.

Challenges In Upholding Business Ethics

While the evolution of business ethics is commendable, the path to ethical business conduct is challenging. One of the primary obstacles is the pressure to deliver short-term financial results, often leading companies to compromise on ethical standards in pursuit of immediate gains. The temptation to cut corners, engage in dubious practices or prioritize profit over principles can be overwhelming, especially in competitive industries.

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Additionally, the interconnected global business environment introduces complexities that demand heightened ethical awareness. Companies operating in multiple jurisdictions must navigate diverse legal and cultural landscapes, requiring a nuanced approach to ethics. Balancing the interests of various stakeholders, including shareholders, employees, customers and the community, poses another significant challenge.

The Imperative Of Business Ethics

As a business consultant who has witnessed the fallout of unethical practices, I firmly believe that a strong ethical foundation is not just a moral imperative but a strategic necessity. Ethical conduct is not merely about avoiding legal repercussions but building trust with stakeholders and creating a resilient and sustainable business model.

Building Trust

Trust is the currency of business. Companies that prioritize ethical behavior build trust with customers and employees, suppliers and investors. Trust is a valuable intangible asset that, once lost, is challenging to regain. Establishing a reputation for ethical conduct can differentiate a company in a crowded marketplace.

Long-Term Sustainability

Ethical business practices are intrinsically linked to long-term sustainability. Companies prioritizing environmental, social, and governance (ESG) factors are better positioned to weather economic downturns, regulatory changes, and public scrutiny.

Employee Engagement and Retention

A commitment to ethical conduct fosters a positive workplace culture. Employees are more likely to be engaged and committed when they perceive their organization as socially responsible and ethically conscious. This, in turn, enhances employee retention, reduces turnover costs and attracts top talent.

Enhanced Customer Loyalty

In an era where consumers are increasingly conscious of the ethical practices of the companies they support, businesses that prioritize ethics enjoy a competitive advantage. Ethical behavior resonates with consumers, increasing brand loyalty and positive word-of-mouth marketing.

Practical Strategies For Integrating Business Ethics

For businesses looking to embed ethics into their DNA, several practical strategies can be employed:

Emphasize commitment from leadership.

Ethical behavior starts at the top. Leaders must demonstrate a sincere commitment to ethical conduct, setting the tone for the entire organization. This involves espousing ethical values and making decisions that align with those values.

Establish robust ethics policies and training.

Establishing comprehensive ethics policies and providing regular training ensures that employees are aware of ethical expectations and understand the consequences of unethical behavior. Regular updates and reinforcement of ethical guidelines are essential in a dynamic business environment.

Use transparent communication.

Open and transparent communication is vital for building trust. Companies should communicate their ethical principles, actions and outcomes openly to stakeholders. This includes acknowledging mistakes, addressing issues promptly and sharing successes related to ethical conduct.

Integrate ESG.

Incorporating environmental, social and governance factors into decision-making processes is critical. This involves considering the impact of business activities on the environment, promoting diversity and inclusion, and ensuring sound governance practices.

Engage stakeholders.

Actively engaging with stakeholders, including customers, employees, suppliers and the community, can help businesses understand and address the diverse expectations and concerns of different groups. This inclusive approach contributes to the development of ethical and sustainable business practices.

The journey towards ethical business conduct is a dynamic and ongoing process. I have seen the landscape evolve from a focus on compliance to a genuine commitment to ethical behavior as a strategic imperative. Businesses that prioritize ethics stand to gain more than just compliance. In an era where ethical considerations are paramount, integrating business ethics into the core of operations is not just a choice; it is the key to a prosperous and sustainable future.

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Importance of Ethical Conduct in a Business

What are some key principles of ethical & moral leadership in business, what are managerial ethics.

• Advantages & Disadvantages of Ethical Compliance in an Organization
• Professionalism Standards

Incorporating ethical considerations means using society’s standards of what constitutes right or wrong behavior as the basis for your business’ plans and policies. Ethics shape the decisions and actions of each individual in a small business, from the owner on down. The owner’s behavior toward customers, employees, the company’s investors, vendors and the community affect the behavior of his employees, who look to him to set the standard. Observing high ethical standards is sound business strategy -- resulting in customer loyalty, higher employee retention and a positive image in the industry and within the community.

Mission Statement

Ethics are a consideration from the very early stages of a company’s development, when the business owner crafts a mission statement in his business plan that describes the kind of company he wants to build. His long-term plan or vision for the company includes a statement of the good he hopes to accomplish through the company. A publisher that specializes in pet care books, for example, could have a mission of using the latest research and information about pet nutrition and health care to enable pets to live longer, healthier lives.

Code of Conduct

A business owner creates a code of conduct to provide specific direction about how his employees should act in situations they encounter on the job. Ethical choices can be difficult because strictly adhering to the highest ethical standards may mean a manager not achieving goals the business owner has set for him. A production manager may be tempted to use lower quality raw materials to keep production costs in line, for example. The code of conduct becomes the set of policies that the owner expects everyone in the company to follow.

Customer Relations Strategy

If a customer believes she was lied to, she may not do business with the company again and could go so far as to post a complaint about the company on Internet forums. The ethical consideration means recognizing that it’s better to lose one sale today then lose many more in the future because the company has a reputation of not being honest. During the planning process, the business owner develops strategies to increase customer satisfaction, which leads to repeat business and customer loyalty. Ethical standards that reinforce these goals include not promising customers something the company cannot deliver and not exaggerating a product’s benefits.

Employee Relations Strategy

The company’s business plan specifies strategies to reduce turnover of personnel and create a more productive organization. Ethical considerations include managers treating employees with respect and co-workers respecting each other. As part of the annual planning process, the business owner assesses whether staff levels are adequate to complete all the tasks he will assign. He is guided by the ethical consideration that imposing unreasonable workloads on employees can lead to poor job performance and high stress levels, both of which can negatively affect the owner’s goal of increasing productivity.

Social Responsibility Strategies

Companies that ignore the community’s needs don’t necessarily face negative consequences, but a small business owner who implements proactive strategies to help members of the community often reaps benefits in terms of favorable publicity and industry recognition. Some companies even include goals in their business plans for recycling, reducing waste, using less energy and contributing to local charities. The ethical consideration involves recognizing that the company and its employees are members of the community and have a responsibility to be positive contributors to the well-being of the community and to protect the environment.

• Inc.: How to Create a Company Philosophy
• Inc.: The Importance of Being Ethical
• Entrepreneur: Ensuring an Ethical Business

Brian Hill is the author of four popular business and finance books: "The Making of a Bestseller," "Inside Secrets to Venture Capital," "Attracting Capital from Angels" and his latest book, published in 2013, "The Pocket Small Business Owner's Guide to Business Plans."

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2.3 Identifying Ethical Issues

Learning objective.

• Identify ethical issues that you might face in business, and analyze rationalizations for unethical behavior.

Make no mistake about it: When you enter the business world, you’ll find yourself in situations in which you’ll have to choose the appropriate behavior. How, for example, would you answer questions like the following?

• Is it OK to accept a pair of sports tickets from a supplier?
• Can I buy office supplies from my brother-in-law?
• Is it appropriate to donate company funds to my local community center?
• If I find out that a friend is about to be fired, can I warn her?
• Will I have to lie about the quality of the goods I’m selling?
• Can I take personal e-mails and phone calls at work?
• What do I do if I discover that a coworker is committing fraud?

Obviously, the types of situations are numerous and varied. Fortunately, we can break them down into a few basic categories: bribes , conflicts of interest , conflicts of loyalty , issues of honesty and integrity , and whistle-blowing . Let’s look a little more closely at each of these categories.

Bribes versus Gifts

It’s not uncommon in business to give and receive small gifts of appreciation. But when is a gift unacceptable? When is it really a bribe? If it’s OK to give a bottle of wine to a corporate client during the holidays, is it OK to give a case of wine? If your company is trying to get a big contract, is it appropriate to send a gift to the key decision maker? If it’s all right to invite a business acquaintance to dinner or to a ball game, is it also all right to offer the same person a fully paid weekend getaway?

There’s often a fine line between a gift and a bribe. The questions that we’ve just asked, however, may help in drawing it, because they raise key issues in determining how a gesture should be interpreted: the cost of the item, the timing of the gift, the type of gift, and the connection between the giver and the receiver. If you’re on the receiving end, it’s a good idea to refuse any item that’s overly generous or given for the purpose of influencing a decision. But because accepting even small gifts may violate company rules, the best advice is to check on company policy.

JCPenney’s “Statement of Business Ethics,” for instance, states that employees can’t accept any cash gifts or any noncash gifts except those that have a value below $50 and that are generally used by the giver for promotional purposes. Employees can attend paid-for business functions, but other forms of entertainment, such as sports events and golf outings, can be accepted only if it’s practical for the Penney’s employee to reciprocate. Trips of several days can’t be accepted under any circumstances (JCPenney Co., 2006).

Conflicts of Interest

Conflicts of interest occur when individuals must choose between taking actions that promote their personal interests over the interests of others or taking actions that don’t. A conflict can exist, for example, when an employee’s own interests interfere with, or have the potential to interfere with, the best interests of the company’s stakeholders (management, customers, owners). Let’s say that you work for a company with a contract to cater events at your college and that your uncle owns a local bakery. Obviously, this situation could create a conflict of interest (or at least give the appearance of one—which, by the way, is a problem in itself). When you’re called on to furnish desserts for a luncheon, you might be tempted to throw some business your uncle’s way even if it’s not in the best interest of the catering company that you work for.

What should you do? You should probably disclose the connection to your boss, who can then arrange things so that your personal interests don’t conflict with the company’s. You may, for example, agree that if you’re assigned to order products like those that your uncle makes, you’re obligated to find another supplier. Or your boss may make sure that someone else orders bakery products.

The same principle holds that an employee shouldn’t use private information about an employer for personal financial benefit. Say that you learn from a coworker at your pharmaceutical company that one of its most profitable drugs will be pulled off the market because of dangerous side effects. The recall will severely hurt the company’s financial performance and cause its stock price to plummet. Before the news becomes public, you sell all the stock you own in the company. What you’ve done isn’t merely unethical: It’s called insider trading , it’s illegal, and you could go to jail for it.

Conflicts of Loyalty

Sometimes you find yourself in a bind between being loyal either to your employer or to a friend or family member. Perhaps you just learned that a coworker, a friend of yours, is about to be downsized out of his job. You also happen to know that he and his wife are getting ready to make a deposit on a house near the company headquarters. From a work standpoint, you know that you shouldn’t divulge the information. From a friendship standpoint, though, you feel it’s your duty to tell your friend. Wouldn’t he tell you if the situation were reversed? So what do you do? As tempting as it is to be loyal to your friend, you shouldn’t. As an employee, your primary responsibility is to your employer. You might be able to soften your dilemma by convincing a manager with the appropriate authority to tell your friend the bad news before he puts down his deposit.

Issues of Honesty and Integrity

Master investor Warren Buffet once told a group of business students the following:

I cannot tell you that honesty is the best policy. I can’t tell you that if you behave with perfect honesty and integrity somebody somewhere won’t behave the other way and make more money. But honesty is a good policy. You’ll do fine, you’ll sleep well at night and you’ll feel good about the example you are setting for your coworkers and the other people who care about you” (Gostick & Telford, 2003).

If you work for a company that settles for its employees’ merely obeying the law and following a few internal regulations, you might think about moving on. If you’re being asked to deceive customers about the quality or value of your product, you’re in an ethically unhealthy environment.

Think about this story:

A chef put two frogs in a pot of warm soup water. The first frog smelled the onions, recognized the danger, and immediately jumped out. The second frog hesitated: The water felt good, and he decided to stay and relax for a minute. After all, he could always jump out when things got too hot (so to speak). As the water got hotter, however, the frog adapted to it, hardly noticing the change. Before long, of course, he was the main ingredient in frog-leg soup” (Gostick & Telford, 2003).

So, what’s the moral of the story? Don’t sit around in an ethically toxic environment and lose your integrity a little at a time; get out before the water gets too hot and your options have evaporated.

Fortunately, a few rules of thumb can guide you. We’ve summed them up in Figure 2.4 “How to Maintain Honesty and Integrity” .

Figure 2.4 How to Maintain Honesty and Integrity

Whistle-Blowing

As we’ve seen, the misdeeds of Betty Vinson and her accomplices at WorldCom didn’t go undetected. They caught the eye of Cynthia Cooper, the company’s director of internal auditing. Cooper, of course, could have looked the other way, but instead she summoned up the courage to be a whistle-blower —an individual who exposes illegal or unethical behavior in an organization. Like Vinson, Cooper had majored in accounting at Mississippi State and was a hard-working, dedicated employee. Unlike Vinson, however, she refused to be bullied by her boss, CFO Scott Sullivan. In fact, she had tried to tell not only Sullivan but also auditors from the huge Arthur Andersen accounting firm that there was a problem with WorldCom’s books. The auditors dismissed her warnings, and when Sullivan angrily told her to drop the matter, she started cleaning out her office. But she didn’t relent. She and her team worked late each night, conducting an extensive, secret investigation. Two months later, Cooper had evidence to take to Sullivan, who told her once again to back off. Again, however, she stood up to him, and though she regretted the consequences for her WorldCom coworkers, she reported the scheme to the company’s board of directors. Within days, Sullivan was fired and the largest accounting fraud in history became public.

As a result of Cooper’s actions, executives came clean about the company’s financial situation. The conspiracy of fraud was brought to an end, and though public disclosure of WorldCom’s problems resulted in massive stock-price declines and employee layoffs, investor and employee losses would have been greater without Cooper’s intervention.

Even though Cooper did the right thing, the experience wasn’t exactly gratifying. A lot of people applauded her action, but many coworkers shunned her; some even blamed her for the company’s troubles. She’s never been thanked by any senior executive at WorldCom. Five months after the fraud went public, new CEO Michael Capellas assembled what was left of the demoralized workforce to give them a pep talk on the company’s future. The senior management team mounted the stage and led the audience in a rousing rendition of “If you’re happy and you know it, clap your hands!” Cynthia Cooper wasn’t invited (Gostick & Telford, 2003).

Whistle-blowing often means career suicide. A survey of two hundred whistle-blowers conducted by the National Whistleblower Center found that half of them had been fired for blowing the whistle (National Whistleblower Center, 2002). Even those who get to keep their jobs experience painful repercussions. As long as they stay, some people will treat them (as one whistle-blower puts it) “like skunks at a picnic”; if they leave, they’re frequently blackballed in the industry (Dwyer, et. al., 2002). On a positive note, there’s the 2002 Sarbanes-Oxley Act, which protects whistle-blowers under federal law.

For her own part, Cynthia Cooper doesn’t regret what she did. As she told a group of students at Mississippi State: “Strive to be persons of honor and integrity. Do not allow yourself to be pressured. Do what you know is right even if there may be a price to be paid” (Waller, 2003). If your company tells employees to do whatever it takes, push the envelope, look the other way, and “be sure that we make our numbers,” you have three choices: go along with the policy, try to change things, or leave. If your personal integrity is part of the equation, you’re probably down to the last two choices (Gostick & Telford, 2003).

Refusing to Rationalize

Despite all the good arguments in favor of doing the right thing, why do many reasonable people act unethically (at least at times)? Why do good people make bad choices? According to one study, there are four common rationalizations for justifying misconduct: (Gellerman, 2003)

• My behavior isn’t really illegal or immoral . Rationalizers try to convince themselves that an action is OK if it isn’t downright illegal or blatantly immoral. They tend to operate in a gray area where there’s no clear evidence that the action is wrong.
• My action is in everyone’s best interests . Some rationalizers tell themselves: “I know I lied to make the deal, but it’ll bring in a lot of business and pay a lot of bills.” They convince themselves that they’re expected to act in a certain way, forgetting the classic parental parable about jumping off a cliff just because your friends are (Gostick & Telford, 2003).
• No one will find out what I’ve done . Here, the self-questioning comes down to “If I didn’t get caught, did I really do it?” The answer is yes. There’s a simple way to avoid succumbing to this rationalization: Always act as if you’re being watched.
• The company will condone my action and protect me . This justification rests on a fallacy. Betty Vinson may honestly have believed that her actions were for the good of the company and that her boss would, therefore, accept full responsibility (as he promised). When she goes to jail, however, she’ll go on her own.

Here’s another rule of thumb: If you find yourself having to rationalize a decision, it’s probably a bad one. Over time, you’ll develop and hone your ethical decision-making skills.

Key Takeaways

• When you enter the business world, you’ll find yourself in situations in which you’ll have to choose the appropriate behavior.
• You’ll need to know how to distinguish a bribe from an acceptable gift.
• You’ll encounter situations that give rise to a conflict of interest —situations in which you’ll have to choose between taking action that promotes your personal interest and action that favors the interest of others.
• Sometimes you’ll be required to choose between loyalty to your employer and loyalty to a friend or family member.
• In business, as in all aspects of your life, you should act with honesty and integrity.
• At some point in your career, you might become aware of wrongdoing on the part of others and will have to decide whether to report the incident and become a whistle-blower —an individual who exposes illegal or unethical behavior in an organization.

Despite all the good arguments in favor of doing the right thing, some businesspeople still act unethically (at least at times). Sometimes they use one of the following rationalizations to justify their conduct:

• The behavior isn’t really illegal or immoral.
• The action is in everyone’s best interests.
• No one will find out what I’ve done.
• The company will condone my action and protect me.

1. (AACSB) Analysis

Each December, Time magazine devotes its cover to the person who has made the biggest impact on the world that year. Time ’s 2002 pick was not one person, but three: Cynthia Cooper (WorldCom), Coleen Rowley (the FBI), and Sherron Watkins (Enron). All three were whistle-blowers. We detailed Cynthia Cooper’s courage in exposing fraud at WorldCom in this chapter, but the stories of the other two whistle-blowers are equally worthwhile. Go to the Time.com Web site ( http://www.time.com/time/magazine/article/0,9171,1003988,00.html ) and read a posted story about Rowley, or visit the Time.com Web site ( http://www.time.com/time/magazine/article/0,9171,1003992,00.html ) and read a posted story about Watkins. Then answer the following questions:

• What wrongdoing did the whistle-blower expose?
• What happened to her when she blew the whistle? Did she experience retaliation?
• Did she do the right thing? Would you have blown the whistle? Why or why not?

2. (AACSB) Analysis

You own a tax-preparation company with ten employees who prepare tax returns. In walking around the office, you notice that several of your employees spend a lot of time making personal use of their computers, checking personal e-mails, or shopping online. After doing an Internet search on employer computer monitoring, respond to these questions: Is it unethical for your employees to use their work computers for personal activities? Is it ethical for you to monitor computer usage? Do you have a legal right to do it? If you decide to monitor computer usage in the future, what rules would you make, and how would you enforce them?

Dwyer, P., et al., “Year of the Whistleblower,” BusinessWeek Online , December 16, 2002, http://www.businessweek.com/magazine/content/02_50/b3812094.htm (accessed January 22, 2012).

Gellerman, S. W., “Why ‘Good’ Managers Make Bad Ethical Choices,” Harvard Business Review on Corporate Ethics (Boston: Harvard Business School Press, 2003), 59.

Gostick, A., and Dana Telford, The Integrity Advantage (Salt Lake City: Gibbs Smith, 2003), 103.

JCPenney Co., “Statement of Business Ethics for Associates and Officers: The ‘Spirit’ of This Statement,” http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-govconduct (accessed April 24, 2006).

National Whistleblower Center, “Labor Day Report: The National Status of Whistleblower Protection on Labor Day, 2002,” http://www.whistleblowers.org/labordayreport.htm (accessed April 24, 2006).

Waller, S., “Whistleblower Tells Students to Have Personal Integrity,” The (Jackson, MS) Clarion-Ledger , November 18, 2003, http://www.clarionledger.com/news/0311/18/b01.html (accessed April 24, 2006).

Exploring Business Copyright © 2016 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Published: 22 December 2023 Contributors: Amanda McGrath, Alexandra Jonker

Corporate social responsibility (CSR) is the idea that businesses should operate according to principles and policies that make a positive impact on society and the environment.

Through CSR, companies make decisions driven by financial gain and profitability, and the impact of their actions on their communities and the world at large. CSR goes beyond legal obligations: by voluntarily adopting ethical, sustainable and responsible business practices, companies seek to deliver benefits to consumers, shareholders, employees and society.

Learn about the processes used to manage environmental performance data and the steps required to account for greenhouse gas (GHG) emissions.

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Often, a company’s business model and practices are built around financial goals. However, CSR programs encourage business leaders to consider corporate citizenship or the larger impact of the business on society when making decisions. Corporate social responsibility helps companies ensure that their operations are ethical, safe and delivering positive impact wherever possible. Through CSR initiatives, companies work to limit environmental impact, contribute to solving societal problems (such as poverty and inequality) and ensure their brand identity reflects their values.

The theory of the “ triple bottom line ” can help organizations as they pursue corporate social responsibility. As a financial framework, the triple bottom line refers to the idea that a company’s business model should revolve around the three P’s: people, planet and profit. By maximizing all three, a company aims to make a positive impact on the world and remove barriers to growth.

Corporate social responsibility initiatives generally fall into four categories: environmental, ethical, philanthropic and economic. Each type of CSR contributes to a company’s overall CSR strategy.

More companies are assessing their overall environmental impact and engaging in CSR efforts that aim to protect natural resources and minimize any contribution to climate change. CSR encourages sustainability in business through eco-friendly practices, such as by reducing energy consumption, using renewable resources and minimizing waste.

Environmental responsibility hinges on eliminating negative impacts of business operations (primarily through limiting pollution-causing activities) as well as offsetting them through actions such as planting trees and engaging in programs that support biodiversity.

CSR initiatives often focus on social impact and human rights concerns, such as ensuring fair wages, safe working conditions and proper treatment of employees and suppliers. They also encourage accountability both internally and externally. Ethical CSR may include abiding by fair labor practices, ending workplace discrimination and ensuring supply chain transparency.

CSR practices include donating money, resources or time to positive causes and organizations, such as local and national charities, educational programs, disaster relief and more. Businesses who adopt philanthropic CSR engage with the communities where they operate, offering support through volunteer work, sponsoring local events, making contributions to local nonprofits or supporting skills training programs.

Corporate social responsibility involves ensuring that money is not a company’s sole motivator. To demonstrate this, companies enact policies and procedures to make sure their choices align with values, even if the alternatives may save money or boost profitability. Economic CSR also includes efforts to support the economic development and growth of the communities in which a business operates—for example, supporting job training and job creation efforts and forging local partnerships.

The benefits of CSR include:

CSR can have a positive impact on an organization’s brand identity as well as its bottom line. Some CSR efforts, such as improving energy efficiency, can reduce operating costs and might lead to savings in the end. Consumers increasingly prefer brands that share their values, and CSR policies offer ways for organizations to demonstrate those values, building trust and loyalty to fuel a competitive advantage.

CSR can also help attract top talent and drive employee engagement and retention, as more workers seek employers whose values align with their own. Additionally, a proactive approach to ethical and social issues has the potential to prevent legal problems, fines and reputational damage.

CSR initiatives can help people become more responsible consumers, making it easier for them to access products and services that align with their values and educating them on issues of sustainability and ethical consumption. It can encourage companies to prioritize and invest in testing, quality control and safety measures. CSR can also minimize the likelihood of defective or harmful products reaching consumers.

CSR can have a positive impact on the overall health of the planet, as it encourages environmental responsibility and sustainable practices. CSR initiatives can help companies reduce their greenhouse gas emissions or pursue net-zero emissions goals that are key to slowing climate change. They might also help conserve natural resources, reduce pollution and limit disruption of ecosystems. Additionally, a focus on CSR can support investment in research and development of eco-friendly products and practices.

Corporate social responsibility can help support local communities and address societal issues, such as poverty, inequality and environmental concerns. CSR initiatives can fuel economic growth by creating jobs. They can also shape public opinion as companies leading the way inspire others to follow suit, creating a positive ripple effect. A focus on ethical behavior at the corporate level reinforces a broader norm of ethical behavior across other parts of society.

Consumers are increasingly seeking products and services from socially responsible companies. Meanwhile, many investors are prioritizing companies whose values are clear and aligned with their own. To meet these demands, businesses are integrating CSR into their operations. In addition, global expansion and the increasingly interconnected nature of supply chains pushes companies to comply with a growing web of regulatory environments and to better confront the impact of their business on communities around the world.

With increased awareness of environmental issues, labor practices and ethical concerns, combined with better research and communication, CSR is now more central to business strategies. Some companies even have dedicated CSR departments.

Examples of CSR include:

• Donating a percentage of profits to environmental or social causes
• Committing to using recycled and eco-friendly materials
• Sourcing fair-trade materials and ingredients
• Engaging in social activism or fundraising on behalf of social causes
• Using technology such as artificial intelligence (AI) to drive energy efficiency and reduce carbon footprints
• Creating programs for the ethical use and disposal of products, such as electronics recycling programs
• Instituting diversity, equity and inclusion (DEI) programs that support efforts to diversify and grow the workforce in new ways
• Supporting programs that replenish the natural resources, such as water or timber, used for production
• Turning to renewable energy sources and other strategies that help in the pursuit of net-zero or carbon-neutral goals
• Establishing employee well-being programs that support their physical and mental health

Corporate social responsibility is the overall ethos that drives a company to adopt policies and practices that support sustainability, societal and other ethical ends. Environmental, social and governance (ESG) is about the ways in which their impact is measured or quantified. While both CSR and ESG are about reflecting the company’s values, CSR is typically seen as more of an internal framework, while ESG frameworks are often used externally as a way of demonstrating real-world impact.

Because the parameters of corporate social responsibility are continually evolving, there is no single standard by which CSR initiatives are measured or governed. Companies that embrace CSR are guided by local and international laws, including environmental regulations, labor rules and consumer protection standards.

Some efforts are also held to industry-specific standards; for example, the Global Reporting Initiative (GRI) provides reporting standards for sustainability. Organizations like the United Nations have introduced global guidance, such as the Sustainable Development Goals (SDGs), which encourage businesses to adopt sustainable practices.

Many companies that embrace CSR will also engage in CSR reporting , through which they document performance of non-financial metrics and provide transparency on social and environmental impact. CSR reporting is typically voluntary; however, some jurisdictions mandate that large organizations disclose social and environmental performance, so that investors and consumers can assess CSR efforts.

Some organizations have designated corporate social responsibility teams that oversee a company's CSR activities. People on these teams plan and run the social and environmental programs that align with the company's values and goals. They work with company leadership to devise the overall CSR strategy and engage stakeholders, including employees, customers, investors and community partners, to help them succeed. They also typically track and report on their progress by using metrics and other methods of assessment, deal with compliance and regulatory issues and manage communication about the company’s CSR efforts both internally and externally.

Simplify the capture, consolidation, management, analysis and reporting of your environmental, social and governance (ESG) data.

CSR reporting is the practice of reporting an organization’s performance of non-financial metrics, providing transparency on the organization’s impact on society and the environment.

Net zero is the point at which greenhouse gases emitted into the atmosphere are balanced by an equivalent amount removed from the atmosphere.

The goal of the CRSD is to provide transparency that will help stakeholders better evaluate EU companies’ sustainability performance as well as the related business impacts and risks.

The triple bottom line (TBL) is a sustainability framework that revolves around the three P’s: people, planet and profit.

Sustainability in business refers to a company's strategy and actions to eliminate the adverse environmental and social impacts caused by business operations.

Decarbonization is a method of climate change mitigation that reduces greenhouse gas (GHG) emissions, as well as removes them from the atmosphere.

Simplify the capture, consolidation, management, analysis and reporting of your environmental, social and governance (ESG) data with IBM Envizi ESG Suite.

Legal, Ethical and Cultural Issues of Business Continuity

May 2, 2018 - The laws and regulations of business continuity planning are pretty well known at this point, but ethical and cultural considerations may not be. These ethical and cultural issues are not illegal, but, as some have called some such practices, are "lawful but awful." You need to consider all these issues in your planning to prevent problems and even liabilities.

QUOTE OF THE WEEK "Ethics is knowing the difference between what you have a right to do and what is right to do."  -- Potter Stewart, American Judge --

1. Legal Considerations in Businesses' Disaster Planning

The wide reach of disasters can create business risks with equally broad consequences. Imagine the "butterfly effect" in business caused by flooding in northern California or civil unrest in an oil-producing country. Disasters may force manufacturers in a directly affected region to close their doors and "weather the storm." Of course, lost production probably means lost profits. A closure also probably means disappointed business partners, suppliers, and customers. As a result, many large companies require suppliers to maintain business continuity plans to mitigate the risk of disruption. https://www.manufacturingindustryadvisor.com/legal-considerations-in-businesses-disaster-planning/

2. Ethical & Cultural Issues in Business Continuity Planning

American and international populations have increasingly held business leaders to higher moral and ethical standards. Today's social and business environment requires companies to consider their impact on the environments and communities in which they exist. When companies look at their long-term plans and strategies, they have new and very serious considerations. http://smallbusiness.chron.com/ethical-cultural-issues-business-continuity-planning-2555.html

3. Ethics and Business Continuity Plan Best Practice

Keeping a business going is what business continuity is all about, but at what price? Ethics have more than one role to play as part of business continuity plan best practice. Not only are they important in order to prevent continuity from being jeopardized, but they are also a crucial part of any response to cure any continuity problem. Ethics can be a complex subject, all the more so because they go beyond what is prescribed by the law. http://www.opscentre.com/ethics-and-business-continuity-plan-best-practice/

4. Avoiding Ethical Misconduct Disasters

Most organizations have long acknowledged that business continuity planning is an essential priority for effectively anticipating, preventing, mitigating, and surviving natural disasters, data loss, accidents, and deliberate malevolent acts. What many are only now discovering is that integrity continuity planning is also due diligence. Ethical issues must be on the strategic agenda. Such planning must go beyond compliance issues and reactive disciplinary policies to actually manage integrity. https://gbr.pepperdine.edu/2010/08/avoiding-ethical-misconduct-disasters/

5. How Resilient Company Cultures Ensure Business Continuity

To stay on top, a business must remain relevant and be prepared to make the most of the constantly shifting market. Endless ideas and tips are thrown at business owners as a result---with the number one focus on adopting an agile company culture. Is agility the only key to success? https://www.forbes.com/sites/danielnewman/2016/11/15/how-resilient-company-cultures-ensure-business-continuity/

6. Creating a Continuity Culture: How Your Organization Can Make Business Continuity a Habit

In this article, the authors sketch out the rise over the past few decades of what might be termed "safety culture," define an envisioned "continuity culture," and set forth how such a culture can be brought into being at your organization. https://www.mha-it.com/2018/01/continuity-culture/

Copyright (C) 2018 Attainium Corp - All rights reserved.

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Business Ethics Lesson Ideas

Activities, discussion questions, and suggested readings.

We offer a growing list of lesson plan ideas and resources for high school and college students learning about business ethics.

Introduction to Business Ethics Beyond obedience to the law, what responsibility do corporations have to act ethically or in the social interest? This lesson introduces students to the concept of business ethics through the film "The Corporation." It includes discussion questions as well as suggested readings and additional resources.

What is the Role of the Corporation in Society? What is the best way to promote sustainable business practices and solve global problems? This lesson plan outlines an activity for students to create a business with a social goal. It also includes suggested reading and multimedia to learn more about best social business practices.

Ethics and Supply Chains How can multinational corporations effectively manage supply chains and promote sustainable practices throughout their operations? This lesson plan has a research activity for students, discussion questions, and accompanying resources.

Shell in Nigeria: Corporate Responsibility and the Ogoni Crisis ( Case Studies Series ) Using the response of Shell to the attacks on its record in Nigeria, this study examines the way in which one transnational corporation has reacted to demands that it accept responsibilities beyond maximizing profit.

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How private equity rolled Red Lobster

Angry that your favorite Red Lobster closed down? Wall Street wizardry had a lot to do with it.

Red Lobster was America’s largest casual dining operation, serving 64 million customers a year in almost 600 locations across 44 states and Canada. Its May 19 bankruptcy filing and closing of almost 100 locations across the country has devastated its legion of fans and 36,000 workers. The chain is iconic enough to be featured in a Beyoncé song.

Assigning blame for company failures is tricky. But some analysts say the root of Red Lobster’s woes was not the endless shrimp promotions that some have blamed. Yes, the company lost $11 million from the shrimp escapade, its bankruptcy filing shows, and suffered from inflation and higher labor costs. But a bigger culprit in the company’s problems is a financing technique favored by a powerful force in the financial industry known as private equity.

The technique, colloquially known as asset-stripping, has been a part of retail chain failures such as Sears, Mervyn’s and ShopKo as well as bankruptcies involving hospital and nursing home operations like Steward Healthcare and Manor Care. All had been owned by private equity.

Asset-stripping occurs when an owner or investor in a company sells off some of its assets, taking the benefits for itself and hobbling the company. This practice is favored among some private-equity firms that buy companies, load them with debt to finance the purchases and hope to sell them at a profit in a few years to someone else. A common form of asset-stripping is known as a sale/leaseback and involves selling a company’s real estate; this type of transaction hobbled Red Lobster.

In recent years, private-equity firms have invested heavily in all areas of industry, including retailers, restaurants, media and health care. Some 12 million workers are employed by private equity-backed firms, or 7% of the workforce. Companies bought out and indebted by private equity go bankrupt 10 times more often than companies not purchased by these firms, academic research  shows . In a  report  this month, Moody’s Ratings said leveraged buyouts like those pursued by many private-equity firms drive corporate defaults higher and reduce the amounts investors recover when the companies are restructured.

The sale/leaseback that helped sink Red Lobster involved the July 2014 sale of premium real estate underneath 500 of its stores, which generated $1.5 billion. But that money didn’t go back into Red Lobster; it went instead to the private-equity firm to finance its purchase of the chain, Red Lobster's press release said . That firm was San Francisco-based Golden Gate Capital, with $10 billion in assets.

Golden Gate had paid $2.1 billion to buy Red Lobster in May 2014, so the real estate sale was crucial to the firm’s financing. “Red Lobster is an exceptionally strong brand with an unparalleled market position in seafood casual dining,” Josh Olshansky, managing director at Golden Gate, said at the time, a press release announcing the deal  shows .

The $1.5 billion sale crippled Red Lobster. After the real estate was sold, Red Lobster had to pay rent on stores it had previously owned, significantly increasing its costs. According to the bankruptcy filing, by 2023 its rents totaled $200 million a year or approximately 10% of its revenues.

Asked about the negative impact the sale/leaseback had on Red Lobster, a Golden Gate spokeswoman declined to comment.

The company that bought the properties, American Realty Capital Partners, got a very good deal, the press release announcing the sale/leaseback said. It characterized the Red Lobster stores it had purchased as “irreplaceable locations” and “high-quality real estate located at main intersections in strong markets,” but noted the properties were sold “at below replacement cost.” Under the terms of the sale, Red Lobster would also see regular rent increases of 2% a year, the release noted.

American Realty Capital Partners was acquired by Realty Income in 2021. Realty Income did not respond to a request for comment on the sale/leaseback.

The sale of the Red Lobster stores hurt the company several ways. First, it meant the chain would not benefit from any upside in the commercial real estate market. In addition, the new owner of the real estate did not appear to give Red Lobster good deals on rents. As Red Lobster’s CEO noted in a bankruptcy court filing, “A material portion of the Company’s leases are priced above market rates.”

As is typical in private-equity buyouts, Golden Gate’s purchase of Red Lobster significantly increased the chain’s debt, adding higher interest costs to its burden. In 2017, Moody’s Ratings, an independent ratings agency, downgraded Red Lobster to a negative outlook from stable. Moody’s cited the chain’s “persistently high leverage,” or debt.

“Carrying a lot of debt and not owning your real estate puts companies at a disadvantage,” said Andrew Park, senior policy analyst at  Americans for Financial Reform , a nonprofit and nonpartisan organization advocating for a stable and ethical financial system. “Red Lobster is yet another example of that private-equity playbook of harming restaurants and retailers in the long run.”

In 2020, Golden Gate exited its Red Lobster investment, selling to Thai Union Group, a Bangkok-based company, and an investor group. Thai Union calls itself the “world’s seafood leader” and its brands include Chicken of the Sea tuna products and King Oscar sardines. Terms of the transaction were not disclosed.

Regarding the bankruptcy, a company spokesman provided a statement saying, “Thai Union has a been a supplier to Red Lobster for more than 30 years, and we intend for that relationship to continue. We are confident that a court-supervised process will allow Red Lobster to restructure its financial obligations and realize its long-term potential in a more favorable operating environment.”

Bankruptcies of companies like Red Lobster have a multiplier effect on the overall economy and contribute to a sense of unease among consumers and workers, said Robert  Reich , a former labor secretary under President Bill Clinton.

“One of the reasons people feel so insecure is you’ve got in the background, behind the curtain, a lot of these financial games that ultimately are making the very rich richer, and hurting America’s working and middle class,” Reich said in an interview. “All of the people who were supplying Red Lobster, all of the people who are essentially providing services to Red Lobster, the small businesses in the communities affected by mass layoffs, they are next in line, they are experiencing the ripple effect.”

Red Lobster’s employees are bearing the brunt of the collapse. Austin Hurst is one, a former grill master at a Red Lobster in Arizona. In an interview, he said he learned from a friend his store had closed and has not heard from his manager or any higher-ups at the company. He said he was told his store had been profitable until about 3 months ago.

“About a month before the close, the district manager came in and was like, ‘Yeah, this Red Lobster is looking really bright. And you guys are going to stay open for sure,’” Hurst recalled. 

Hurst said he was offered a job at another Red Lobster location but it requires a longer commute and pays $17 an hour, down from the $19 he was making before. 

Sen. Edward Markey, a Democrat from Massachusetts, where eight hospitals operated by bankrupt Steward Health Care are, recently held hearings on private equity and health care. He has also proposed legislation that would require greater transparency from health care entities owned by private-equity firms, including the disclosure of sale/leaseback arrangements as well as fees collected by the private-equity firm, and dividends paid by the health care entity to the private-equity fund.

“My legislation is quite simple,” Markey said in an interview. “To make sure that these financial shenanigans don’t have a profound impact upon communities across our country, the Department of Health and Human Services has to determine whether or not the sale of the land underneath these hospitals and then having that land rented back to the hospitals isn’t having a negative impact on the provision of health care in that community.”

Private equity is emerging in all parts of our economy, Markey added, but its most profound impact is in health care. “The more private equity gets into the hospital business,” he said, “the more this is just a preview of coming atrocities affecting our health care system.”

Gretchen Morgenson is the senior financial reporter for the NBC News Investigative Unit. A former stockbroker, she won the Pulitzer Prize in 2002 for her "trenchant and incisive" reporting on Wall Street.

Responsible innovation in the age of generative AI

Image generated using Adobe Firefly.

Generative AI is changing the way we all think about creativity. Type “3D render of a paper dragon, studio style photography” and you’re instantly offered multiple variations of a portrait of a ferocious origami creature — or combine a few data points with simple instruction and a chatbot can spit out a compelling marketing email. It’s easy to see the power this technology can unlock for individual creators and businesses alike. Generative AI lets people paint with text instead of pixels (or paint). On the business side, it lets you connect with customers efficiently through auto-generated texts, emails, and content. And implemented the right way, generative AI brings precision, power, speed, and ease to your existing workflows — allowing people to focus on more strategic or creative parts of their work.

In this article

Grounded in ethics and responsibility, transparency builds trust, respecting creators’ choice and control, an ongoing journey.

Generative AI also opens the door to new questions about ethics and responsibility in the digital age. As Adobe and others harness the power of this cutting-edge technology, we must come together across industries to develop, implement and respect a set of guardrails that will guide its responsible development and use.

Any company building generative AI tools should start with an AI Ethics framework . Having a set of concise and actionable AI ethics principles and a formal review process built into a company’s engineering structure can help ensure that AI technologies — including generative AI — are developed in a way that respects their customers and aligns with their company values. Core to this process are training, testing, and — when necessary — human oversight.

Generative AI, as with any AI, is only as good as the data on which it’s trained. Mitigating harmful outputs starts with building and training on safe and inclusive datasets. For example, Adobe’s first model in our Firefly family of creative generative AI models is trained on Adobe Stock images, openly licensed content, and public domain content where copyright has expired. Training on curated, diverse datasets inherently gives your model a competitive edge when it comes to producing commercially safe and ethical results.

But it’s not just about what goes into a model. It’s also about what comes out. Because even with good data, you can still end up with biased AI, which can unintentionally discriminate or disparage and cause people to feel less valued. The answer is rigorous and continuous testing. At Adobe, under the leadership of our AI Ethics team, we constantly test our models for safety and bias internally and provide those results to our engineering team to resolve any issues. In addition, our AI features have feedback mechanisms so that when they go out to the public, users can report any concerns and we can take steps to remediate them. It’s critical that companies foster this two-way dialogue with the public so that we can work together to continue to make generative AI better for everyone.

On top of training, companies can build in various technical measures to improve the ethics of their products. Block lists, deny lists, NSFW classifiers can be implemented to mitigate harmful bias in the output of an AI model. If a company is still unsure or unsatisfied with the output, they can always add or require a human in the loop to ensure the output meets their expectations.

And whenever a company is sourcing AI from an outside vendor — whether they’re integrating it into company workflows or into their own products — making sure the AI meets their ethical standards should be part of their vendor risk process.

We also need transparency about the content that generative AI models produce. Think of our earlier example but swap the dragon for a speech by a global leader. Generative AI raises concerns over its ability to conjure up convincing synthetic content in a digital world already flooded with misinformation. As the amount of AI-generated content grows, it will be increasingly important to provide people with a way to deliver a message and authenticate that it is true.

At Adobe, we’ve implemented this level of transparency in our products with our Content Credentials. Content Credentials allow creators to attach information to a piece of content — information like their names, dates, and the tools used to create it. Those credentials travel with the content, so that when people see it, they know exactly where the content came from and what happened to it along the way.

We’re not doing this alone; four years ago, we founded the Content Authenticity Initiative to build this solution in an open way so anyone can incorporate it into their own products and platforms. There are over 900 members from all areas of technology, media, and policy who are joining together to bring this solution to the world.

And for generative AI specifically, we automatically attach Content Credentials to indicate when something was created or modified with generative AI. That way, people can see how a piece of content came to be and make more informed decisions about whether to trust it.

Creators want control over whether their work is used to train generative AI or not. For some, they want their content out of AI. For others, they are happy to see it used in the training data to help this new technology grow, especially if they can retain attribution for their work. Using provenance technology, creators can attach “Do Not Train” credentials that travel with their content wherever it goes. With industry adoption, this will help prevent web crawlers from using works with “Do Not Train” credentials as part of a dataset. Together, along with exploratory efforts to compensate creators for their contributions, we can build generative AI that both empowers creators and enhances their experiences.

We’re just scratching the surface of generative AI and every day, the technology is improving. As it continues to evolve, generative AI will bring new challenges and it’s imperative that industry, government, and community work together to solve them. By sharing best practices and adhering to standards to develop generative AI responsibly, we can unlock the unlimited possibilities it holds and build a more trustworthy digital space.

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Boeing Gives F.A.A. Plan to Address Systemic Quality-Control Issues

The action plan is the latest in a series of moves by the F.A.A. to push for safety improvements throughout Boeing during a tumultuous year for the company.

By Mark Walker and Niraj Chokshi

Boeing’s top executives delivered a plan to improve quality and safety to the Federal Aviation Administration on Thursday, vowing to address systemic issues that have damaged the company’s reputation and put the aircraft manufacturer at the center of several federal investigations.

Boeing detailed these and other steps during a three-hour meeting with the F.A.A.’s administrator, Mike Whitaker, where the company submitted a “comprehensive action plan” that the regulator ordered in February.

Mr. Whitaker had given Boeing 90 days to develop a plan to make sweeping safety improvements after a midcabin panel known as a door plug blew out of a 737 Max 9 jet flying at about 16,000 feet on Jan. 5. No one was seriously injured during the flight.

The F.A.A. said in a statement on Thursday that “senior” leaders from the agency would “meet with Boeing weekly to review their performance metrics, progress and any challenges they’re facing in implementing the changes.”

Boeing was also required to address findings, from an expert panel convened by the F.A.A. last year, that revealed persistent issues with the company’s safety culture. Mr. Whitaker said Boeing had accepted all of the recommendations the panel made in the report.

“We need to see a strong and unwavering commitment to safety and quality that endures over time,” Mr. Whitaker said during a news conference on Thursday. “This is about systemic change, and there’s a lot of work to be done.”

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Boeing promises big changes as the plane maker looks to rebuild trust and quality

The Federal Aviation Administration says it will continue to hold Boeing accountable after reviewing "the company’s roadmap to fix its systemic safety and quality-control issues." The 90-day review follows the in-flight door plug blowout on an Alaska Airlines 737 Max in January. Boeing finishes final assembly of its jets at at its facility in Renton, Wash. Jovelle Tamayo for NPR hide caption

WASHINGTON — Boeing is promising sweeping changes to its manufacturing operations as the troubled plane maker tries to rebuild trust with federal regulators, airlines and the flying public.

It’s been just over 90 days since the Federal Aviation Administration ordered Boeing to come up with a comprehensive plan to fix its quality control problems after a door plug panel blew off a new 737 Max jet in midair .

Boeing leaders, including CEO Dave Calhoun, presented the final plan in a three-hour meeting with FAA officials in Washington on Thursday morning.

Boeing CEO Dave Calhoun to step down, part of a shakeup after 737 Max problems

After the meeting, federal regulators vowed to continue their enhanced oversight of the company for the foreseeable future. 

“This plan does not mark the end of our increased oversight of Boeing and its suppliers, but the beginning of the next chapter,” said FAA administrator Mike Whitaker. "Boeing has laid out their roadmap and now they need to execute.”

Boeing released an executive summary of the plan, promising to strengthen the company’s safety management system, to train employees better, and to increase oversight of suppliers.

No one was seriously injured in the midair blowout on Alaska Airlines Flight 1282 in January. But the incident renewed serious concerns about safety and quality control at Boeing after the deadly crashes of two 737 Max jets in 2018 and 2019 that killed a total of 346 people.

A preliminary investigation by the National Transportation Safety Board determined that four key bolts that were supposed to hold the door plug in place were missing when the plane left Boeing's factory.

The incident prompted the FAA to undertake a six-week audit of Boeing’s production lines. Regulators say they found quality control problems at Boeing and Spirit AeroSystems , one of its top suppliers, which builds the fuselage for the 737.

Boeing also responded to the FAA audit's findings in the plan it delivered on Thursday. And the company laid out a list of metrics that regulators will use to track the company’s progress.

Whitaker promised that the FAA would be watching closely. He said the agency would continue to put more inspectors in Boeing’s factories, as well as those of its suppliers, and that regulators would meet weekly with Boeing leaders to track their progress. 

Whitaker said the FAA would not lift its production cap on Boeing’s 737 line until it’s satisfied that the company is following through on its promises. 

“We need to see a strong and unwavering commitment to safety and quality that endures over time,” Whitaker said at a press conference Thursday. “This is about systemic change, and there's a lot of work to be done.”

The FAA did not put a timeline on when Boeing can begin to increase production of the 737. The company has slowed production to well below the FAA’s cap of 38 planes per month as it works to improve quality. 

But Boeing has said it aims to ramp up that number in the second half of the year. That’s something airlines desperately need, as they’ve been forced to cut flights and scale back their growth targets.  

The Alaska Airlines blowout also triggered a management shakeup at Boeing. Several top executives in the commercial aviation division left the company, and CEO Dave Calhoun announced he would step down at the end of the year.

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