What Are the Functions of Ethics in Business?

The small-business reputation is easy to damage when the company focuses on reactive decision-making in terms of ethics, such as doing damage control following a scandal. Small-business owners must build ethics into business activities to build a respected business reputation. The owner and employees must conduct activities in ways that help the company achieve a reputation for ethical business operations.

Accountability

In the present era of business transparency, following corporate scandals such as Enron and MCI WorldCom, a business uses ethical guidelines to show its accountability for all activities. For example, a business accounts for its activities through record-keeping activities. A small-business owner should choose at least one officer or employee to be in charge of ethics, and this duty can reside in the central office or be delegated to managers of business departments, or a mix of the two ideas.

Communication

Ethics also serves an important function in a small business's communication. Employees use formal and informal channels of communication, such as the company grapevine, to explain to each other the acceptable norms of behavior. In a highly ethical organization, this grapevine effectively informs all employees how to act in different business situations. An entrepreneur can focus on using communication formats such as training programs, meetings, emails and newsletters to share with workers what they must do to help the company be accountable to the public for its activities.

Policies and Procedures

Ethics is explained sometimes in the company's employee code of ethics and in various managerial controls, or policies and procedures that govern employee behavior. Small businesses can address employee behavior by reviewing policies and procedures and improving them to explain forms of ethical behavior that are required for successful employment in the company. Managers also must enforce these controls so that employees will demonstrate the appropriate behaviors. In every business situation, then, employees must choose to make an ethical decision according to established controls.

Social Responsibility

Ethical business guidelines also help a small business demonstrate social responsibility to consumers. As a provider of products or services, a small company must choose voluntary actions such as cleaning up factories to become known for social responsibility. A business can market these voluntary actions to increase consumer trust in its brand. The small-business owner is the person who sets the example for all employees in making socially responsible decisions not required by contractual or legal obligations.