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written by | March 9, 2022

Most Common Ethical Issues in Businesses and How to Prevent them

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Navigating ethical difficulties in the company is one of the most challenging tasks for any business owner. While some ethical difficulties in business are regulated by legislation, others have more unclear standards.

It's up to the business owner and management in these situations to hold employees accountable for unethical behaviour, and of course, conduct themselves ethically as well. Furthermore, a workplace ethic-related dilemma might be very costly.

But how can you spot the most prevalent ethical concerns that organizations face today, and what can you do about them? Continue reading to learn everything you need to know as a business owner.

Did You know?

40% of employees believe that their organization has a weak ethical culture and little effort has been made to mitigate misconduct, according to the Global Business Ethics Survey in 2018?

What is an Ethical Dilemma in a Business?

In business, ethical issues are influenced by the individual's operational and decision-making styles. Furthermore, how companies handle problems might indicate how morally responsible they are. This is why it is critical to comprehend current ethical challenges and implement regulations that successfully prevent them.

The importance of ethics has grown dramatically as individuals become more aware of social movements and accountability has increased dramatically as a result of that. If you're a startup or a small business, creating an ethical code for your organization should be a top priority. It's also worth remembering that establishing a reputation takes time, and unjustified lawsuits over ethical issues can wreak havoc. In some circumstances, ethical difficulties can lead to bankruptcy, regardless of the size of the issue. To minimize dangers, controversies, and financial problems, it is critical to shield your company from any ethical related issues.

Also read: Super Tips To Start A Small Business By Yourself

What are the most Common Ethical Issues witnessed at Workplace?

If you're planning to become an entrepreneur in 2022, then it is imperative that you should start learning about the most common ethical challenges in your chosen industry. Lack of diversity and discrimination, harassment, favouritism or nepotism, health and safety, environmental responsibility, data privacy, social media, and accounting-related problems are all examples of ethical issues. Local rules and statutes, for the most part, establish criteria for establishing proper workplace behaviour. Having said that, both employers and employees have been known to act carelessly and break the rules and regulations set by the authorities on a number of occasions. You can avoid future business troubles by correctly mitigating these concerns and learning about how to prevent them.

  • Discrimination: Discrimination is one of the most important ethical challenges facing the corporate sector in 2022. Many companies have been under scrutiny in recent months for not having a diverse workforce, which is sometimes due to discrimination. Discrimination, on the other hand, can occur in firms of all sizes. It refers to any activity that causes an employee to be treated unfairly. Discrimination is not only unethical; it is also unlawful in certain circumstances. Employees are protected by laws that prohibit discrimination based on age, gender, ethnicity, religion, disability, and other factors. Nonetheless, pay disparities between men and women suggest that discrimination persists. Other prevalent forms of discrimination include terminating employees when they reach a specific age or offering ethnic minorities fewer promotions.
  • Harassment: Harassment, which is frequently linked to racism or sexism, is the second significant ethical challenge that businesses face. Verbal abuse, sexual abuse, teasing, racial slurs, and bullying are all examples of this. Harassment can come from anyone in the organization, including customers. If a supervisor is aware of client harassment and does nothing to stop it, it is an ethical concern for the company. Harassment, in addition to creating a hostile workplace, can force employees to leave the company early, which is a second reason why some companies lack diversity. Harassment has a long-term effect on employees, both psychologically and financially, and it can even affect a person's entire career path.
  • Nepotism and favouritism: Due to a personal connection, some business owners choose to hire someone they know or are connected to a particular individual. While this isn't usually a problem as long as the regulations are followed, some employees may perceive it as nepotism or favouritism. Favouritism can also arise when senior managers treat some employees better than others for no reason. These types of ethical difficulties in the workplace can demotivate other employees, lowering productivity. Furthermore, job satisfaction may suffer as employees believe they must work longer or harder than others to be rewarded.This is why human resources and hiring are such important aspects of business structures. To minimize nepotism and favouritism among employees, it's critical to carefully assess all applicants based on talent. 
  • Safety and Health: According to the International Labour Organization, almost 2.3 million people die each year as a result of workplace accidents or diseases. Health and safety issues are brought to light by a lack of fall protection, weight and resistance regulations, safety equipment, and uncontrolled risks. Important necessities like electricity and wiring procedures are frequently overlooked. Leaving electric cables in damp environments, for example, might result in serious accidents and even death. Injuries from sliding, falling, and being bitten by animals are also prevalent.Mental health disorders, such as stress and headaches, can potentially cause ethical issues in the workplace. Low job satisfaction, a lacklustre reward system, and excessive hours can all contribute to undesirable lifestyle choices, such as alcohol consumption. Prioritizing the health and safety of your employees is critical for promoting a healthy atmosphere and optimum performance.
  • Social Media and Whistleblowing: Because of the growing use of social media, what employees do online has become a factor in their employment status. The ethics of terminating or penalizing employees for their online posts is a difficult one to answer. When an employee's online activity is deemed to be disloyal to their employer, however, a boundary is frequently established. This means that while a Facebook post complaining about employment may not be punishable on its own, it may be if it reduces business.Similarly, business owners must be able to recognize and not penalize employees who report wrongdoing to regulatory agencies or on social media. This suggests that employees should be rewarded for raising awareness of workplace breaches online rather than punished. For example, a Yelp employee wrote an article for the blogging platform Medium about the "terrible working circumstances" she claims to be suffering at the online review organization. She was then fired from Yelp for breaking the company's terms of service. The ambiguity of her case, and whether her post was justified or nasty and disloyal, highlights the significance of establishing explicit social media policy inside a company.
  • Privacy of Data and Abuse of technology: It may appear that using your company's internet connection to surf the web is harmless. Most businesses monitor their internet connections and track their employees' surfing habits. This is usually stated in your job contract and can have an impact on performance reports. This is lawful because it shows that the company's technology and resources have not been abused. It also demonstrates that working hours are being abused, costing the company time and money if the employee surfs about non-company related activities. Companies have been known to mishandle sensitive data obtained from employees and customers. If this data enters into the wrong hands, it might cause serious ethical problems in the workplace.We've all heard stories about data breaches and hacking. Unfortunately, even well-established businesses have been targeted, with customer and staff information being released online. Data and technology could cause legal, financial, and reputational harm if sufficient security measures and access limits are not in place.
  • Accounting related Ethics: All businesses must follow proper bookkeeping procedures. Organisations, particularly publicly traded firms, are concerned about "cooking the  account books" and other unethical accounting practices. The Satyam computer services accounting scandal that took place in 2009 is a classic example. It was a Hyderabad based company that mainly provided IT services and back-office accounting facilities to its clients. After a series of investigations by India’s Central Bureau of Investigation (CBI) in 2009, it was discovered that the organisation misrepresented its total revenue for several financial years, and the total amount of revenue fraud was $1.5 billion. To this day, this is the largest accounting scandal that took place in India. Apart from revenue misrepresentation, the founder of the company, Ramalinga Raju, has falsely stated profit margins and the overall cash balances of the company for a number of years. As a result of this scam, the overall corporate governance landscape of India was completely restructured.
  • Non Disclosure: Many firms are concerned about current and former employees stealing information, including customer data that could be exploited by competitors. Corporate problems occur when intellectual property is stolen or confidential customer information is illegally disclosed. To deter these types of ethical issues, businesses may implement mandatory nondisclosure agreements with stiff financial penalties if they are breached.

Also read: Business Tips Archives

How can you overcome bias and nepotism in your company?

There isn't much that can be done to resolve this ethical challenge aside from strict employment standards and rules. You should provide an equal chance as a business owner. You have to hire a person based on competencies and talent rather than connections. Furthermore, if you hire people you know, make sure they are treated and promoted fairly. 

In addition, make sure that the percentage of employees with personal connections is always lower than the average.

If this happens, different perspectives and viewpoints may have an impact on corporate decisions. Always seek advice from the human resources management team.

How can your company address health and safety issues?

Before you start as an entrepreneur, make sure you've done your homework on the health and safety regulations set by your state or local government. Ensure that these criteria are followed consistently to avoid mishaps. Employee training is also necessary to promote understanding of proper health and safety measures. Entrepreneurs should aim to create a work culture that allows employees to grow and prosper. You may improve morale and efficiency by providing incentives for hard work and acknowledging effort. Make more opportunities for your employees to perform and a safe environment for them to work in. Employee retention is also improved as a result of this. Hold meetings or talk with your personnel regularly to learn what they require. If they have issues, you can also encourage them to speak with top management at your company. You can also create a healthier workplace by substituting healthier snacks or organizing group sports activities. 

Also read: Advantages And Disadvantages of An Online Business

How can your company prevent data privacy issues?

As an employer, make sure all surveillance and usage limits are clearly stated in all of your employment contracts. Encourage open dialogue about workplace messaging and surfing history surveillance. If you fail to do so, you risk being accused of unethical access, which could result in lawsuits and financial losses. Employees should always read their contracts carefully to see what kind of monitoring the organization does. Some firms, for example, monitor all employee behaviour on devices such as phones and laptops. To prevent data breaches, your IT staff or specialist should be able to implement a cybersecurity plan. If you save personal information, for example, keep an eye on access to ensure that sensitive data does not get into the wrong hands. Furthermore, always conduct background checks before hiring anyone, as theft for monetary gain or better work opportunities is frequent.

How to avoid ethical issues in business?

Denying the existence of an ethical problem is a typical strategy used by businesses to deal with ethical difficulties. This is frequently combined with an internal order to prevent staff from speaking. It is the worst thing you can do if you want to keep your reputation in place.

After all, unethical activity will be exposed sooner or later. A better technique is to take the initiative and actively seek out and correct unethical behaviour as soon as possible.

There are a few important strategies that any business owner should employ.

  1. Create Company policies
  2. Provide Ongoing training
  3. Take an Active role in Daily Activities
  4. Double-check your books regularly
  5. Reward your employees based on performance.

Also read: This Is How You Draft The Best Ever Consulting Business Plan

Conclusion

We hope that this article is useful for you in knowing about the current ethical issues in business, examples of ethical issues, and how to solve them. Following the steps mentioned in this post will keep your company’s reputation in check as well as your employees accountable for their behaviour.

Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: What are some steps to solve ethical problems in business?

Ans:

Create Company policies, provide Ongoing training for employees regarding the ethical issues faced by your company, take an active role in monitoring your employee’s behaviour, double-check your accounts related books regularly, and reward your employees based on their performance. When you follow these steps carefully, there is less possibility of your organisation getting into ethics-related issues.

Q: Is Whistleblowing an ethical business issue?

Ans:

Yes. It is a business ethical issue if it damages the reputation of a business.

Q: What are the three major examples of ethical issues in businesses?

Ans:

Harassment, Discrimination, and Non-disclosure of any kind are the 3 major examples that can damage the reputation of the business.

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The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.