Business Ethics Meaning and Importance of Business Ethics

Ethics is the study/guidelines of what we understand to be good and right behavior and how people make those judgments. Ethics is the set of morally correct principles and rules guiding individual behavior. It is the basis of determining right or wrong. Managerial ethics is the standard of behavior that guides individual managers in their work.


Ethics is the set of morally correct principles and rules guiding an individual’s behavior. It is the basis of determining right or wrong in a given situation. It is individual personal perception and belief while taking a decision. The ethical behavior of an individual depends upon the moral standard or codes of conduct determined by society.

Managerial ethics is the standard of behavior that guides individual managers in their work. It is the moral principles and rules of conduct that are applied in the business. It is generally accepted that business should be conducted according to the certain self-recognized moral standard of the managers. Making ethical choices can often be difficult for managers. Though it is compulsory to obey the law but acting ethically goes beyond mere compliance with the law.

Famous Business Ethics Definitions :

According to Decenzo and Robbins, “Ethics commonly refers to a set of rules or principles that defined right and wrong conduct.”

According to Webster’s Ninth New Collegiate Dictionary, “Ethics is defined as the discipline dealing with what is good and bad with moral duty and obligation.”

According to Verne E Henderson, “Ethics commonly refers to principles of behavior that distinguish between what is good, bad, right and wrong.”

According to Ricky W. Griffin, “Ethics is an individual’s personal beliefs about whether a behavior, action or decision is right or wrong. Managerial ethics are the standard of behavior that guides individual managers in their work.”

According to Clarance D. Walton, “Business ethics is concerned with truth and justice and has a variety of aspects such as the expectation of society, fair competition, advertising, public relations, social responsibilities, consumer autonomy and corporate behavior in the home country as well as abroad.”

From the above definitions, it may be concluded that ethics are personal beliefs of an individual about right or wrong.

Similarly, managerial ethics is the standard of social norms and values, truth and justice that is accepted by the managers in the decision-making process. Regardless of one’s view, whether a manager acts ethically or unethically will depend on many factors. These factors involve an individual’s morality, values, personality, and experiences.


Ethics is derived from society and the norms, values, beliefs, culture, and standards of society determine it. A businessman is a part of society and he has to maintain business ethics accepted by society. Business ethics is the moral behavior of a businessman. An ethical businessman can promote goodwill and reputation in the society, gain benefit in the long run and promote uniform growth of the business.


The following are the answers to why business ethics is important –

  • Promotes goodwill and image
  • Helps to maintain better relationships with stakeholders
  • Less interference from the government
  • Promotes fair competition
  • Promotes social responsibility
  • Improve the working environment
  • Helps to increase market share

Promotes Goodwill and Image

Ethical business dealing helps to promote goodwill and image in society. The supply of goods and services by considering quality, quantity, time and price expected by the customer’s facilities to gain their trust. For this, considering the concept of artificial shortage, black marketing, inferior quality, etc must be avoided.

Helps To Maintain Better Relationships With Stakeholders

Ethical behavior helps to maintain better relations with different interested groups consisting of employees, customers, suppliers, lenders, government, etc. An ethical manager always tries to fulfill the needs and requirements of these stakeholders.

Less Interference From The Government

In case a business is not ethical, it will certainly attract the intervention of the government. However, an ethical businessman never performs any business activity by violating government rules and regulations.

Promotes Fair Competition

Business ethics helps to promote fair competition among firms. It discourages businessmen from involving in unfair trade practices like an artificial shortage, black marketing, adulteration, obsolescence, etc.

 Promotes Social Responsibility

The manager performs business in society to fulfill his economic objectives. business ethics guides managers to involve in social welfare programs like participating in education, health, sports, environmental protection.

Improve Working Environment

Business ethics guides managers to develop a better working environment in the organization. He tries to motivate employees by introducing a feeling of justice, equality, freedom, belongingness, and a sense of responsibility.

 Helps To Increase Market Share

The ethical business practice of a manager helps an organization gain prestige and reputation in society. In the long run, it helps increase the market share of the business firm.