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Understanding a Code of Ethics

Business ethics refers to how ethical principles guide a business’s operations. Common issues that fall under the umbrella of business ethics include employer-employee relations, discrimination, environmental issues, bribery and insider trading, and social responsibility. While many laws exist to set basic ethical standards within the business community, it is largely dependent upon a business’s leadership to develop a code of ethics.

Both businesses and trade organizations typically have some sort of code of ethics that their employees or members are supposed to follow. Breaking the code of ethics can result in termination or dismissal from the organization. A code of ethics is important because it clearly lays out the rules for behavior and provides the groundwork for a preemptive warning.

Regardless of size, businesses count on their management staff to set a standard of ethical conduct for other employees to follow. When administrators adhere to the code of ethics, it sends a message that universal compliance is expected of every employee.

Key Takeaways

  • A code of ethics is a guide of principles designed to help professionals conduct business honestly and with integrity.
  • Breaking the code of ethics can result in termination or dismissal from the organization.
  • In some industries, including banking, specific laws govern business conduct. In others, a code of ethics may be voluntarily adopted.