Business Ethics and Small Business Can Coexist

Small Businesses Tend to be More Ethical

How can business ethics and small business coexist? Traditionally, business was seen as an activity with the sole objective of maximising owners' profits and wealth. This approach led to numerous problems.

Before we look at the problems, let us see what business ethics involves.

Unethical Business Practices

In the search to maximize profits, businesses tended to adopt practices like the following:

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• Exploiting Employees: In the medieval ages, and even now in some developing countries, workers are made to work continuously for long hours. If the worker became ill owing to the harsh working conditions or was disabled by an accident, the person was simply sacked.
• Environmental Pollution: Manufacturing methods often harmed the environment. Harmful waste products were thrown out without being treated. Natural resources were consumed excessively and in a wasteful manner. These cost-saving practices resulted in degrading the environment and qualify of life.
• False and Misleading Claims: Substandard products, and even products that were unsafe or harmful, were sold by making false or misleading claims. Consumers got cheated, and had no remedy for the losses and damage they suffered.
• Monopolistic Practices: Entrenched businesses adopted practices that made entry of newcomers into the business extremely difficult if not impossible. Businesses ganged together as a cartel to charge unreasonably high prices.
• Corrupt Practices: Businesses bribed their way out of trouble, or paid bribes to get undue favors from corruption-prone customers. Sometimes the corrupt practices were internal as when senior managers sought to drain company resources for their own personal benefit, eroding shareholder value.

Consequences of Unethical Business Practices

Loss of reputation is the major consequence of unethical business practices. And reputation is becoming increasingly important for success in today's environment of widespread public awareness of different issues. Add to it the fast spread of news made possible by Internet and blogs, and reputation becomes extremely critical to success.

Closely connected to reputation is the issue of skilled personnel availability. If your business has a bad reputation, you would find it hard to attract talented employees who can help you achieve high levels of performance. Even if a few such persons join you, they might leave if they get an opportunity to work in a more reputable company.

Environmental pollution is worsening quality of life all over the world. Climate changes, desertification, polluted waterways and diseases are making our planet an unsafe place. Increasing public awareness of the issue has meant that companies disregarding environmental issues run the risk of losing business.

Reputable companies also find it easier to raise money through public issues and other sources. They get into less trouble with governments and the public. The environment in an ethically managed company is more likely to encourage innovation and higher productivity.

Business Ethics for Small Business

A surprising finding has been that small businesses tend to be more ethical than large corporations. It is the large corporations, where non-owner professional managers take charge of operations that have earned most notoriety for unethical practices. Enron, WorldCom and Adelphia are examples.

Small businesspersons are closer to their communities, and are likely to feel more responsible to the community. They also need a good reputation to attract talented employees and raise finances.

Recent studies have indicated that reputation is becoming a major factor in business success. The issues discussed in the previous section explain why reputation has become so critical. Small businesses can thus tap their growth potential best if they take care to create a culture of ethical business practices in their firms.

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