Ethical compliance within an organisation is done for the benefit of the company and the employees. A well-crafted ethical compliance policy will help you and your employees make day-to-day decisions that advance your business goals without venturing over to the “dark side.” The use of ethical standards can both reduce the chances of a workplace lawsuit and help to create a positive work environment.

Reputation is one of the most valuable assets a firm can have. Leaders, managers, and employees care about their social reputation: They want to be seen as competent, generous, efficient, honest, and fair. However, an emerging body of research suggests that focusing too much on reputation can sometimes have a negative effect: Attempts to maintain the appearance of doing what’s morally right can lead decision makers to engage in various wrongs.

Take, for example, the Hallmark Channel’s stance on an advertisement it recently ran, featuring two brides kissing at the altar. After receiving public pressure from an advocacy group, Hallmark decided to stop running the ad because the brand did not wish to be “divisive” or “generate controversy.” However, this desire to appear impartial and stay out of the fray conflicted with the organisation’s stated value of “helping all people connect.” In an attempt to preserve its reputation for inclusivity, Hallmark ended up creating division.

Another example is represented by the events that led up to the great economic recession in 2008 and 2009 have placed a renewed emphasis on business ethics. Questionable financial reporting, inflated executive compensation and worthless public assurances undermined consumer and investor confidence and reignited the debate about whose interests a business should serve. While it seems that only good things should arise from business ethics, a business may be restricted in its freedom to maximise profit.

Companies increasingly recognise the need to commit to business ethics and measure their success by more than just profitability. This has led to the introduction of the triple bottom line, also known as “people, planet, profit.” Companies report on their financial, social and environmental performance. The Dow Jones Sustainability Index benchmarks companies who report their performance based on the triple bottom line. This type of performance reporting acknowledges that companies must make a profit to survive, but encourages ethical and sustainable business conduct.

Overall Management Strategy

One of the disadvantages of an ethical compliance program is that it requires the comprehensive support of management to be effective. If members of the management team decide to apply their own version of corporate ethics to the way they manage their departments, then this clash of principles can cause confusion in the workplace.

For example, a manager who tends to look the other way when his employees are committing sexual harassment sets a precedent that can start to undermine the entire corporate culture. As the ‘MeToo’ movement has made crystal clear, even with detailed policies in place, senior managers all too often act as if the rules do not apply to them.

Lack of Profit Maximisation

Developing, implementing and maintaining an ethics compliance program within your organization can be expensive and time-consuming. Ethics policies need to be continually updated to reflect changes in workplace laws and changes in your company culture as the organisation grows.

Proper administration of an ethics program often requires the hiring of an ethics officer and the commitment of company financial and personnel resources. Companies with international activities not only have to adhere to domestic laws in the United States, but have to monitor compliance with the laws and norms of behaviour in other legal systems and other cultures.

Another example in this category is, having factories in developing countries can reduce costs. This is because companies can have practices in place, such as child labour and low wages, which help to maximise profit. But although these practices are legal in those countries, they’re also incredibly unethical and will obviously never be tolerated by a company following ethical practices.

Improvements in working conditions, such as providing workers with living wage and having proper health and safety standards in place, are ethical but raises the amount it costs to run these factories. This, in turn, reduces profit which might not be an issue for large companies who can afford to allocate costs. But it can be an issue for small businesses, especially if they’re evolving.

Luckily, there are many different ways to operate ethically so companies can choose the ethical practices and approaches that best suit them. For example, advertising can considerably boost a company’s brand awareness. If you choose an outdoor print solution from a print specialist who can produce these products ethically, you can boost your reputation among your target audience even more.

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Sources:
https://blog.dominionprint.com/advantages-and-disadvantages-of-business-ethics-in-the-real-world
https://smallbusiness.chron.com/advantages-disadvantages-business-ethics-10414.html
https://hbr.org/2020/02/research-the-downsides-of-trying-to-appear-ethical