Restaurants and Bars
The food service industry quite often takes a hit during economic downturns. In the aftermath of the 2008 recession, numerous restaurant chains simply went out of business. Others were forced to cut their labor costs by laying off workers. Thousands of restaurant employees lost their jobs—although many did regain employment within the industry as the economy began to recover a few years later. Unfortunately, current recession doesn’t bode well for this industry, which already operates on thin profit margins just barely exceeding 6% of annual sales, on average.
Leisure and Hospitality
Whoever coined the term “staycation” is likely sick of their own concept by now. The global pandemic has created a staycation that looks more like Groundhog Day than anything else. Unfortunately, this extended quarantining means a significant impact on the leisure and hospitality industry. Hotels and rental car companies are suffering massive declines in revenue.
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Understanding Business Ethics
Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses. For example, a
portfolio manager must give the same consideration to the portfolios of family members and small individual investors. These kinds of practices ensure the public receives fair treatment.
The concept of business ethics began in the 1960s as corporations became more aware of a rising consumer-based society that showed concerns regarding the environment, social causes, and corporate responsibility. The increased focus on "social issues" was a hallmark of the decade.
Since that time period, the concept of business ethics has evolved. Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what companies must do legally versus maintaining a
competitive advantage over other businesses. Firms display business ethics in several ways.
Business ethics are meant to ensure a certain level of trust between consumers and corporations, guaranteeing the public fair and equal treatment.
Examples of Business Ethics
Here are a few examples of business ethics at work as corporations attempt to balance marketing and social responsibility. For example, Company XYZ sells cereals with all-natural ingredients. The marketing department wants to use the all-natural ingredients as a selling point, but it must temper enthusiasm for the product versus the laws that govern labeling practices.
Some competitors' advertisements tout high-fiber cereals that have the potential to reduce the risk of some types of cancer. The cereal company in question wants to gain more market share, but the marketing department cannot make dubious health claims on cereal boxes without the risk of litigation and fines. Even though competitors with larger market shares of the cereal industry use shady labeling practices, that doesn't mean every manufacturer should engage in unethical behavior.
For another example, consider the matter of
quality control for a company that manufactures electronic components for computer servers. These components must ship on time, or the manufacturer of the parts risks losing a
lucrative contract. The quality-control department discovers a possible defect, and every component in one shipment faces checks.
Unfortunately, the checks may take too long, and the window for on-time shipping could pass, which could delay the customer's product release. The quality-control department can ship the parts, hoping that not all of them are defective, or delay the shipment and test everything. If the parts are defective, the company that buys the components might face a firestorm of consumer backlash, which may lead the customer to seek a more reliable supplier.
What Is Business Ethics?
Business ethics concerns ethical dilemmas or controversial issues faced by a company. Often, business ethics involve a system of practices and procedures that help build trust with the consumer. On one level, some business ethics are embedded in the law, such as minimum wage, insider trading restrictions, and environmental regulations. On the other hand, business ethics can be influenced by management behavior, with wide-ranging effects across the company.
What Is an Example of Business Ethics?
Consider an employee who is told in a meeting that the company will face an earnings shortfall for the quarter. This employee also owns shares in the firm. It would be unethical for the employee to sell their shares since they would be subject to insider information. Alternatively, if two large competitors came together to gain an unfair advantage, such as controlling prices in a given market, this would raise serious ethical concerns.
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