Ethical Dilemmas in Business and How to Address Them
Trust plays a significant role in how the public perceives a company—and this perception can make or break an organization. This is where business ethics come into play. A 2021 survey by PwC found that 49 percent of consumers began purchasing—or purchased more—from businesses they trusted. Issues such as data protection and cybersecurity, treating employees well, ethical business practices, and admitting mistakes were identified as key drivers of trust among consumers.
Appealing to customers is a motivating factor for making ethical business decisions, but hefty costs attached to unethical practices also play a role. A 2022 report by law firm Seyfeld Shaw found that companies paid damages exceeding $3.19 billion in 2021 from the top ten settlements in employment class action cases alone. A report from Vault Platform found that 45 percent of workers who personally experienced or witnessed workplace misconduct left their role, with businesses expected to lose $20.2 billion on hiring costs annually to replace them.
It’s clear that there are benefits to practicing good business ethics, but measures that reduce costs in the short term, such as putting off expensive maintenance or repairs on old equipment that could become hazardous, can still tempt many businesses to act unethically. Businesses need employees capable of addressing ethical dilemmas with critical thinking, informed decision-making, and well-written policies. Those looking to develop these skills should consider the benefits of an online certificate demonstrating their knowledge in solving ethical dilemmas in business.
What Are Ethical Dilemmas?
Ethical dilemmas are problems for which there are no obvious right or wrong answers. Instead, the solutions are determined by how they align with one’s morals and principles. Ethical dilemmas can manifest as day-to-day choices, such as returning the shopping cart to the store instead of leaving it in the parking lot for someone else to retrieve. However, in a business setting, ethical dilemmas can affect large groups of people—potentially on a global scale.
In the world of business, an ethical dilemma is a situation in which a company must choose between conduct that is most beneficial to them and behavior that is just, fair, and ethically correct for their employees, stakeholders, and customers. When a business, or an individual within the business, does not behave ethically, it’s often due to a desire for personal or business gain.
Some common motivators for making unethical business decisions include wanting to cut costs by going against regulation and policy, abusing a position of power for personal profit, or taking advantage of other company members or customers to achieve a desired outcome.
To help prevent businesses from making unethical decisions, government agencies such as the Occupational Safety and Health Administration (OSHA) have been established to enforce regulations on companies. While many take issue with the tedium that regulations can present, the regulatory bodies enforcing them offer protection by keeping companies in check and deterring them from behaving unethically.
Company policymakers should work internally with these agencies to prevent potential unethical actions. By designing company policies that dictate acceptable behavior when facing an ethical dilemma, companies may prevent unethical behavior or quickly resolve dilemmas when they arise. For example, detailing how to act when offered a bribe can help employees respond appropriately and save business costs from potential lawsuits and poor public relations.
Types of Ethical Dilemmas
Companies face various ethical dilemmas in business scenarios, so those who write the policies and explain their nuances to company stakeholders need to understand them. Differentiating between moral, ethical, and legal decisions is crucial to solving ethical dilemmas. Here are examples of different types of ethical dilemmas and why they require proper policy or guidance.
Harassment
According to the U.S. Equal Employment Opportunity Council (EEOC), any discrimination based on sex (including pregnancy, sexual orientation, and gender identity) is unlawful due to protections from Title VII of the Civil Rights Act of 1964. This includes sexual harassment, which is defined as unwanted sexual approaches, demands for sexual favors, or other sexual verbal or physical harassment. The harasser might be the victim’s boss, another supervisor, a coworker, or even a client or customer.
Many companies attempt to remain impartial when hearing cases of harassment to resolve the issue quickly, but an ethical issue arises in cases where company policy isn’t clear—or if the person handling the complaint doesn’t comply. Companies must implement effective harassment policies to prevent these scenarios and have an ethical course of action in place to reduce damages and harm to any victims.
Harassment in the workplace also extends to gender discrimination. It is unlawful to harass an individual by making derogatory remarks about their identity or gender expression.
Although the law does not ban simple mocking, offhand remarks, or isolated minor incidents, harassment is prohibited when it creates a hostile or offensive work environment. This may be due to frequency or severity or results in an unfavorable employment decision for the victim, such as termination or demotion. Favoring certain employees for promotion based on gender alone is an ethical dilemma.
Discrimination
Discrimination in business is defined as treating individuals or groups unjustly or unequally over protected characteristics such as race, ethnicity, gender identity, age, disabilities, sexual orientation, religious views, or nationality. Employees can be the target of discriminatory promotion or hiring practices, while customers can experience discrimination if service is refused for discriminatory reasons, for example.
Hiring practices that don’t foster a diverse workforce are another form of discrimination. Hiring managers may have biases when selecting new hires, and if companies don’t have policies to prevent this, it can result in a lack of quality applicants. According to a 2020 survey from Glassdoor, one in three employees would choose not to work at companies that lack diversity in their workforce, and two in five would choose not to work at companies with ethnic and racial disparities in employee satisfaction.
According to a 2021 survey by Ten Spot, 70 percent of respondents said they had faced discrimination or abusive conduct at work, with that figure rising to 86 percent among Gen-Z, the youngest generation currently entering the workforce. The survey also showed that 61 percent of Gen-Z said they would be more productive if their company addressed social issues through policy and practice.
Discrimination-based ethical dilemmas in business can create a toxic environment where quality workers leave or refuse to apply. To remain competitive in the job market, companies should implement policies that curtail discriminatory practices.
Unethical Accounting
Unethical accounting can ruin a business. Clients must be able to trust accountants to make choices that align with company values regarding ethical dilemmas. Accounting with too much power and too little scrutiny from superiors might be able to embezzle money from the firm while concealing that they’ve done so or enrich themselves or their company through false accounting reports. Dishonest accounting in corporations may result in modified or intentionally misinterpreted bookkeeping numbers, potentially resulting in fraud or tax evasion.
Some accountants are also pressured by company representatives to act unethically. The UK-based Consultative Committee of Accountancy Bodies (CCAB) found in a 2021 survey of accountants that 27 percent of respondents felt pressured to perform unethically over three years, with six percent being offered bonuses and other incentives to do so.
While there’s always the chance of errors, businesses need to implement an ethical policy for accountants to ensure that they follow proper guidelines and protocols.
Health and Safety Issues
Overlooking or ignoring health and safety concerns to cut costs or speed up production is another example of an ethical dilemma in business. But disregarding worker health and safety can result in expensive consequences. According to a National Safety Council report, occupational injuries cost $163.9 billion in 2020, accounting for missed pay, decreased productivity, and medical and administrative costs. In addition, these injuries cost firms 65 million days of work, restricting potential development and productivity.
The perceived gains from forgoing proper health and safety protocols aren’t worth the monetary losses from an accident or the potential for a public relations controversy. Health and safety issues involve more than simply cleaning up spills or maintaining equipment, as showcased by the top ten most commonly cited standard violations by OSHA as of 2021:
- Fall Protection: Sides and edges on elevated platforms that are unprotected or lack guards
- Respiratory Protection: Lacking emergency procedures and respiratory/filter equipment standards
- Ladders: Not correctly displaying standards for how much weight a ladder can sustain
- Hazard Communication: Not having proper labels and classifications on potentially harmful chemicals
- Scaffolding: Lacking required resistance and maximum weight numbers on equipment
- Fall Protection Training: No adequate training for employees and managers on proper safety techniques and policies
- Lockout/Tagout: Not properly controlling hazardous energy, such as from oil or gas
- Eye and Face Protection: Lacking proper protection when handling chemical, environmental, radiological, or mechanical irritants and hazards
- Powered Industrial Trucks: Lacking safety equipment used for large vehicles
- Machinery and Machine Guarding: Lacking accurate labeling for guards on equipment such as guillotine cutters, shears, power presses, and other machines that require a point of operation guarding
Favoritism
It’s not uncommon to have heard of an executive’s child or friend who has been hand-selected for a position without going through the traditional hiring processes. This is referred to as nepotism, an ethical dilemma that often occurs when a candidate is a known associate or relative of someone with hiring power. Nepotism happens when these candidates are given priority over others, even if they are less suited for the role than other applicants.
While nepotism might benefit some, it can negatively impact the company climate due to its effects on other employees. A study published in the journal Frontiers of Psychology found that employees reacted sensitively to the behavior of managers when greater favor was shown toward family members and friends. In addition, these employees often felt ostracized or “othered” by those who received this perceived beneficial treatment.
It’s best to follow traditional hiring policies for all applicants to avoid this ethical dilemma. This can keep current employees from feeling they have to work harder than others to receive the same promotions or bonuses.
Misleading or Deceptive Advertising
Businesses understand the dangers of fabricating or lying about details on their product or services. The Federal Trade Commission (FTC) prohibits misleading or false advertising based on the idea that buyers have a legal right to know the precise details of what they purchase. However, advertising that skirts the line of what is legal remains an ethical dilemma in business.
Examples include false promises of savings through “limited-time deals” that never expire to encourage immediate spending or convincing customers to buy overpriced additions to their products that don’t last as long as advertised. While these may fall under legal and even standard business practices, deceptive business practices or cheap and ineffective products can ruin a company’s reputation with the public.
Conflicts of Interest
A conflict of interest arises when a business or individual has a vested interest in money, position, expertise, connections, or reputation that they allow to come before professional obligations or responsibilities. This conflict of interest calls into doubt the impartial nature of the company or individual’s activities, judgment, or decision-making.
An example of a conflict of interest is insider trading, where an employee uses confidential internal information within their company to personally profit in another business or through trading stocks. Those who feel they may be tempted by insider trading or other conflicts of interest should work to distance themselves from the conflicting interest for the company’s well-being.
Why Business Ethics Matters
Upholding ethics in business is important for many reasons. Not only does it contribute to a stronger, more unified company culture and structure, it also increases both short- and long-term corporate profitability.
Sound ethics can also improve an organization’s reputation and help build stronger relationships with stakeholders and clients who know that the business or corporation they are working with values integrity. If an organization has a negative reputation for unethical practices, investors and stakeholders will be less likely to financially support that organization.
With an increasing demand for social and ethical responsibility in corporations, organizations can also stand to benefit from exemplifying these values in their practices. By showing that social responsibility is a part of their ethos, organizations can increase profitability and encourage other businesses or corporations to adopt these values, as well.
Uphold Ethics in Business
With highly publicized examples of unethical business practices such as the Enron trading scandal and Bernie Madoff’s Ponzi scheme, it can seem as though too many companies operate unethically. Businesses often choose short-term profit over their stated values when faced with ethical dilemmas, but that doesn’t have to be the case. Many of these ethical blunders could be avoided through the advising of an individual capable of thinking critically and ethically.
Those who feel they could steer a company through ethical dilemmas in business should consider the benefits of the Business Ethics & Writing certificate offered by Suffolk University’s Center for Continuing & Professional Education. This program builds the skills necessary to help companies and their stakeholders navigate through uncharted ethical waters. By the end of this ten-week program, students should be able to navigate moral, ethical, and legal decisions through persuasive writing grounded in an ethical framework designed for businesses.
Discover your potential to uphold ethics in business with Suffolk University.
Recommended Readings
Don’t Have Time to Do it Over? Be Efficient: Do the Right Things the Right Way, the First Time, Every Time.
The Value of Microcredentials
Continuing Education: Definition and Career Benefits
Sources:
American Management Association, “The Latest on Workplace Monitoring and Surveillance”
CCAB, “CCAB Ethics Survey 2021”
Chron, “What Causes an Ethical Dilemma in Conducting Business?”
EEOC, “EEOC Data Highlight April 2022”
Ethics and Compliance Initiative, “2021 Global Business Ethics Survey”
Federal Trade Commission, “Truth In Advertising”
Forbes, “Eight Common Ethical Dilemmas Business Owners Face (And How To Overcome Them)”
Frontiers in Psychology, “How Do Nepotism and Favouritism Affect Organisational Climate?”
Glassdoor, “Glassdoor Survey Finds Three In Five U.S. Employees Have Experienced Or Witnessed
Discrimination Based On Age, Race, Gender Or LGBTQ Identity At Work”
Glassdoor, “How To Calculate Cost-Per-Hire (CPH)”
Investopedia, “The Importance of Business Ethics”
National Safety Council Injury Facts, Work Injury Costs
Occupational Safety and Health Administration, “Top 10 Most Frequently Cited Standards”
PwC, “The Complexity of Trust: PwC’s Trust in US Business Survey”
Seyfarth Shaw, “18th Annual Workplace Class Action Report – 2022 Edition”
Ten Spot. “New Survey Reveals GenZ Holds the Key to the Evolution of Company Culture, with Social Issues, Workforce Engagement, and Treatment of Others at Work Top of Mind”
Vault Platform, “The High Costs of Misconduct: A Closer Look”
Vault Platform, “The Trust Gap: Expectation vs Reality in Workplace Misconduct and Speak Up Culture”