Ethics in Small Business

An important component of many businesses is a stance on business ethics. This can be a challenging concept to address, as there is no clear guideline as to what makes an ethical practice. Ethics in business refers to acting in a right or morally correct way when directing business exchanges. Ethical behavior can encompass everything from offering merchant cash advances and small business loans to marketing and hiring, so it's important to have a good grasp on what constitutes ethical behavior in each context.

Accounting Ethics

Many ethical dilemmas present themselves when it comes time to report how a business is doing financially. It may be tempting to make the numbers look better than they actually are, particularly when applying for small business loans or merchant cash advances. Merchant cash advances in particular are given based on a percentage of future sales. Skewing numbers to make a company look better in the short term may seem inconsequential or even reasonable, but the long-term consequences of deceit can be devastating.

Ethics in Small Business

HR Ethics

Companies cannot function without their staff. Ethics in human resources refers to a company's treatment of their staff and basic workplace standards such as maintaining a safe professional environment, upholding an individual's privacy rights, and eliminating discriminatory practices. Employees who feel valued and protected tend to work harder and more efficiently. As an added bonus, companies who treat their employees well are more favorably perceived by the public.

Intellectual Property

Much of business has to do with intellectual property. Intellectual property includes ideas, designs, and literary works. Stealing someone's intellectual property is tantamount to stealing physical property and can be punished by law. Before taking inspiration from existing logos or company brands, especially on the Internet, it's a good idea to make sure that the idea does not belong to any other party.

Insider Trading

The world of insider trading is fraught with controversy. Insider trading is the practice of using non-public knowledge to trade stocks and bonds. This form of trading can be immensely beneficial, but it's also fundamentally unfair to those who don't have access to the same information. In some countries, insider trading is illegal.

Computer Ethics

Computers are a relatively new introduction to the world of business, and as such, ethics rules for working with them are still in development. A social media presence makes up a huge portion of the identity of modern companies, and many business records are stored in computer systems. Unauthorized access to a computer system could be enough to seriously compromise a company's image or system of operation. The core tenet of computer ethics is to use computers responsibly and to avoid causing damage to other parties.

International Business Ethics

A global economy can be tremendously beneficial, but it can also be difficult to navigate. Different countries and cultures have different ethical standards regarding business practices. One of the most well-known examples of controversial international practices is the use of sweatshop laborers. This difference in work standards may financially benefit a company, but employers must evaluate whether the financial advantage is worth violating workers' rights.

Ethics of Sales and Marketing

Good marketing highlights the benefits of a product without making false promises. However, there are several advertising practices that are fundamentally unethical. One such practice is a pyramid scheme, which is increasingly disguised as multi-level marketing. This scheme benefits only the heads of a company, as it relies on the capital of victims to turn a profit. Another form of shady marketing is called the bait-and-switch, in which inferior products are substituted in place of what was initially promised. If the goods are consistent, competing companies may enter into a price-fixing agreement, where they maintain a base price to guarantee a profit.

Ethics With Competition

Competition among companies helps maintain a free market economy, where prices are allowed to fluctuate according to consumer demand. For example, companies offering small business loans may offer different interest rates, which allows consumers to pick the arrangement that best suits their needs. Companies may seek to reduce competition by forming monopolies, where one company controls all or a majority of a product, or by restricting the supply of a certain product. When the product in question is a necessity, such as fuel or medicine, this artificial restriction of competition can create severe financial pressure on consumers.

Miscellaneous Small Business Tips

  • A Guide to Developing Your Organization's Code of Ethics (PDF): Every business needs a code of ethics, but it can be hard to know where to start or what to include. This guide walks small business owners through the construction of their own code of ethics.
  • Eight Marketing Tips to Help You Make More With Less: Advertising doesn't have to be expensive. Small businesses can develop an Internet presence through social media resources, most of which are cheap or free.
  • 30 Branding Guidelines for Small Businesses (PDF): A business's brand is often the first impression a customer has of the product or service. With a little careful thought, small startup companies can create a memorable, approachable brand.
  • Five Ways to Keep Cash-Flow Strong: To survive, a business must maintain a positive cash-flow. Many first-time entrepreneurs may not be sure how to manage a company's finances. Avoid financial pitfalls with these easy-to-follow tips.
  • Top 10 Secrets for Small-Business Success: Small businesses are a cornerstone of the American economy. These tips from three entrepreneurs provide a first-person perspective on what it takes to achieve success.
  • Protecting Personal Information: A Guide for Business (PDF): Businesses typically have sensitive information to protect, whether it's customer records or pay logs for employees. This guide provides an outline for keeping sensitive information secure, no matter the size of the business.
  • Let's Talk: Social Media for Small Business (PDF): Social media can be a powerful tool to develop a business if used correctly. This comprehensive booklet discusses all components of social media and how to make it work in a business's favor.

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