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 2020:
- 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
- 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.
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”.
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.