The Importance of Ethics in Organizations

August 10, 2017

The dire state of governance in certain state owned entities has been much in the press– in some instances, there is talk that the state may look to recover losses from members of the implicated boards. Ways to address this rampant unethical behaviour need to be found.

In order to better understand the issue, we need to understand what ethics are. Ethics are the principles and values individuals use to govern their activities and decisions. In an organisation, a code of ethics is a set of principles that guide the organisation in its programs, policies and decisions for the business. The ethical philosophy an organisation uses to conduct business can affect the reputation, productivity and bottom line of the business.

Leaders and employees adhering to a code of ethics create an ethical organisational culture. The leaders of a business should create an ethical culture by exhibiting the type of behaviour they'd like to see in employees. The organisation can reinforce ethical behaviour by rewarding employees who exhibit the values and integrity that coincide with the company code of ethics and disciplining those who make the wrong choices.

A positive and healthy corporate culture improves the morale among workers in the organisation, which may increase productivity and employee retention; this, in turn, has financial benefits for the organisation. Higher levels of productivity improve the efficiency in the company, while increasing employee retention reduces the cost of replacing employees.

Just as we see public interest groups around the country working hard to encourage members of the public (and parliament!) to resist and speak out against unethical behaviour, so too can we as business leaders encourage ethical behaviour in our own organisations.



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