Just because something isn’t illegal doesn’t mean you should do it.
There’s been a sharp change over the last 20 years of corporations taking more firm, public stances about hot button issues and getting involved with their community. At the same time, we’ve also seen companies in hot water over not technically illegal but still shady businesses practices.
These two drastically different stories of the path a company can take might not seem like they have a lot in common, but they do. Both are examples of how business ethics and social corporate responsibility can shape the public image, culture, and success of a company's GRC program.
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What are business ethics?
The question of what is and isn’t ethical is a tricky one to answer. It’s something that’s still being debated in major news publications as well as on every major news network. The key to knowing where to draw the line in regard to business ethics starts with understanding what business ethics are.
Business ethics definition
Business ethics are the guiding principles by which a business conducts their behavior with both their employees and the outside world.
Simply put, business ethics are meant to ensure a level of transparency and trust between a business and everyone involved with them. The tricky thing about business ethics is that there is no set standard for how a business should practice them. Unlike legal standards, which equally apply to everyone in a certain industry, business ethics are usually decided by the company itself.
Sound confusing? Let’s break down the difference between ethical and legal standards to gain a bit more clarity.
What’s the difference between ethical vs. legal standards?
To truly understand business ethics, we need to define how the differ from legal standards.
In the simplest terms, legal standards are the laws set forth by the government that every company must adhere to in order to stay complaint. Regulatory compliance is a universal experience that all businesses deal with.
On the flip side, ethical standards do not have any grounding in legal obligation. These are not laws that businesses are required to follow. Rather, they are based on what we as humans deem right and wrong.
A perfect example of the blurry line between ethical and legal standards comes in the case of Martin Shkreli. The former CEO of Turing Pharmaceuticals came into the national spotlight after it was revealed his company raised the price of the drug Daraprim by 5,000%, increasing the cost for consumers from a mere $13.50 per pill to $750 per pill overnight.
Shkreli was unmoved by the public outcry of such a price hike and defended his decision, claiming that what he did was perfectly legal. And he was right. Shkreli broke no laws when he decided to raise the price of Daraprim. He later doubled down on his decision, saying the only thing he regretted was not raising the price even higher.
But does that make what he did right? This is where business ethics come into play. What responsibility do businesses have to the public? And should a company do whatever is takes to maximize profits – even if it’s legal – if it means consumers suffer for it? These are the questions that need to be considered when discussing business ethics and social corporate responsibility.
Understanding the importance of business ethics
Now that you understand the similarities and differences between business ethics and social corporate responsibility, it’s time to dig into why you should care.
For more seasoned employees and older generations, the thought of corporations getting involved in charity might seem weird. At the very least, it might not seem like it’s worth the trouble. But there’s some serious data that suggests it’s exactly the sort of thing companies should be doing.
1. Ethical behavior helps attract top level talent
A study from Bentley University recently found that 86 percent of millennials consider it a main priority to work for a business that conducts itself ethically and responsibly. The same study showed that most most millennials would be willing to take a considerable pay cut to work for such a business.
If that number doesn’t strike you as important, it should. Research shows that millennials will make up 75% of the workforce by 2030. By not participating in business ethics and corporate social responsibility, you could be alienating your largest talent pool.
2. Your competition is already doing it
There are more companies doubling down on this idea than ever before. Eighty-one percent of Fortune 500 companies published sustainability reports, up from 20 percent in 2011, according to a report released by the Governance & Accountability Institute in 2015. This number has only grown and will likely continue to trend upward as more businesses find value in publicizing their ethics and initiative programs.
3. There’s some serious money involved
Just how much money is already being invested in business ethics and social corporate responsibility? Try 22.29 trillion dollars. That’s how much money is being professionally managed on behalf of companies on responsible investment strategies.
To put that into perspective, that number is so large it exceeds the entire GDP of the United States economy. There’s serious money already being invested by other companies and they show no signs of slowing down.
Paying it forward pays off
Above everything else, supporters of business ethics and social corporate responsibility will tell you the main reason to get involved is because it’s the right thing to do. You’ll win more supporters for your business by giving back to the community than you would conducting shady (but legal) business dealings to make a quick buck.
At the end of the day, people want to work with a company they trust.
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