APRIL 2022 - MONTHLY REPORT

 

Business Ethics

What Is Business Ethics?

Business ethics is the study of appropriate business policies and practices regarding potentially controversial subjects including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities. The law often guides business ethics, but at other times business ethics provide a basic guideline that businesses can choose to follow to gain public approval.

Understanding Business Ethics

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. 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.

Why Are Business Ethics Important?

Business ethics are important because they have lasting implications on several levels. With increased investor awareness on environmental, social, and governance issues, a company's reputation is at stake. For instance, if a company partakes in unethical practices, such as poor customer privacy procedures and protections, it could result in a data breach. This, in turn, may lead to a significant loss of customers, erosion of trust, less competitive hires, and share price declines. 

According to Gartner, an ethics program should:

1. Define the program mandate
2. Mitigate and monitor risk
3. Establish policies and procedures
4. Oversee allegations of misconduct
5. Provide training and communications
6. Reinforce behavioral expectations
7. Manage the function of behavior ethics
8. Principles of Business Ethics
   Accountability: Ethics is all about taking individual responsibility. It goes both ways. Individuals are responsible for unethical practices of the firm because they did not come forward to become whistle-blowers. Similarly, when an employee indulges in unethical business practices, the firm is responsible.
   Care and Respect: Professional interactions between co-workers should be responsible and respectful. Firms should make sure that the workplace is safe and harmonious.
   Honesty: The best way to gain the trust of the employees is to have transparent communication with them.
   Avoid Conflicts: Firms need to minimize conflicts of interest in the workplace. Excessive competition within the workforce can end disastrously.
   Compliance: Firms need to comply with all the rules and regulations.
   Loyalty: The employees should be faithful to the organization and uphold the brand image. Grievances, if any, should be dealt internally.
   Relevant Information: It is necessary to provide information that is comprehensible. All the relevant facts, whether positive or negative, must be disclosed. It is unethical to hide unreasonable terms and conditions in the fine print.
   Law Abiding: Corporate laws protect the rights of every section of society. Any kind of discrimination is unethical. Personal biases of individuals should not affect the decision-making of leaders.
   Fulfilling Commitments: It is unethical to justify non-compliance by interpreting agreements unreasonably.