ensure the integrity of our platform while keeping your private information safe. It can lead to costly lawsuits and potential loss of reputation. Companies with a strong ethical identity tend to maintain a higher degree of stakeholder satisfaction, positively influencing the financial results of the company. Consequences of Unethical Business Practices Unethical business practices, shady business practices, and poor workplace ethics have many bad effects on a company, including: Decreased Productivity Levels The main goal of any corporation is to drive through sales from customers to maintain a strong presence in the business world. Polluting the environment should be outdated, as companies ought to employ practices that are environmental friendly. Further, the company distorted the data of a diabetic drug that recorded very high sales, and it marketed other drugs improperly. In some . Certainly, if all companies adopt the above named ethical practices, every individual in the world would be very comfortable, whereas, companies will be making honorable profits. Company executives ought to know that legal lawsuits have adverse consequences to the company. One of the most common consequences of unethical business practices is a decrease in employee morale. Which is the most unethical business practice in the world? -Encourage reporting: Employees should feel comfortable reporting any unethical behavior they witness. The executives of the company have turned up to be violent towards their junior employees. There is a very high possibility of the G4S executives in such nations to be drawn into unethical practices that may further portray the companys incompetency. G4S is at the risk of destroying its reputation; therefore, the future of the company is at risk. These cookies ensure basic functionalities and security features of the website, anonymously. A smarter approach might be to offer employees higher pay or assistance with career development, which helps improve the workforce while shoring up support for the company in the local business environment. Moreover, if the courts decide to be very strict with such companies, they may be fined heavily. 1 What are seven consequences of unethical business practices? In extreme cases, it can even result in physical violence. Some companies release chemical pollutants into the air or into water bodies. Genuinely, drugs are meant to enhance human life, and the named unethical practices concerning drugs are so inhumane. This term paper on Unethical Business Practices Essay was written and submitted by your fellow Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. Business ethics enhances the law by outlining acceptable behaviors beyond government control. ranging from the distortion of facts to mislead or confuse, generation of false data to show increase in profits, avoiding penalty or compensation for, unlawful act and a whole lot of others are being perpetrated in todays business world. They find gaps and swindle investors and their customers while being in the legal grey area. By clicking Accept All, you consent to the use of ALL the cookies. Consequences of Unethical Business Practices shareholders, consumers the environment, government and any other aspect of the society external to the organization (Anghel - Ilcu, 2014). The consequences of these scandals can be far-reaching, not just for the businesses involved, but also for the employees, shareholders, customers and suppliers associated with them. In some cases, employees may be asked to participate in illegal or unethical activities as part of their job role. The cookie is used to store the user consent for the cookies in the category "Performance". Finally, companies are requested to have a corporate social responsibility. The legal principles may relate to issues such as fraud, bribery, lying, and misrepresentation. A lack of ethics has a negative effect on employee performance. Take the former accounting firm of Arthur Andersen, for example. Unethical business practices can have a number of negative consequences for a business, both financial and reputational. Business ethics is the study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, and bribery. Distortion of facts to mislead or confuse. Unethical business practices that involves the offering of kickbacks to win customers could have costly legal repercussions. August 1, 2022. https://ivypanda.com/essays/unethical-business-practices-and-their-effects-term-paper/. These actions dont conform to the established standards of the ideal corporate world. What many companies dont disclose is if the data is shared with third-party services. Glaxo agrees to pay $3 billion in fraud settlement. A company that is known for engaging in corruption or fraudulent activities will find it difficult to build trust with its stakeholders. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. This preview shows page 1 - 5 out of 11 pages. Therefore, regardless of how wrong an instruction is, the junior employees are sometimes obliged to abide by the rules of their supervisors and managers. professional specifically for you? However, you may visit "Cookie Settings" to provide a controlled consent. Creation of false documents to show increased profits. How to Buy a Good Business at a Great Price? IvyPanda. Consequently, the world economy is facing a crisis as businesses evade from paying taxes. This, act of unethical business practices continues to capture world attention. & Jones, G.R. From lying to customers to bribing government officials, there are a variety of ways in which businesses can act unethically. However, personal, excessive and rapacious desire has led. They do it to get favorable deals, an upper hand over competitors, or insider information they can use to their benefit. The G4S Company has existed for decades and it has expanded globally, however, the company can collapse within a short period if its reputation is disputed. We take an example of G4S Company, which is one of the largest private companies in the world. It isnt limited to only money. Many businesses operate in an unethical manner, whether they realize it or not. For example, in 2013, two executives of British energy company GDF Suez were found guilty of corruption in relation to a gas supply contract in Bangladesh. Regular reporting and auditing will discourage employees from being unethical. If a business is caught bribing officials or engaging in other illegal activities, it will be subject to fines and other penalties. Companies sales managers are obligated to try all possible ways of making massive sales. Wal-Mart was a victim of unfair business practices in the recent past. In some cases, unethical business practices can lead to criminal charges. They have to ensure that the employees salaries are disbursed at the right time. Ethical issues can arise in a variety of areas, including marketing, human resources, and finance. It is noteworthy that the worst repercussion of unethical behaviors regarding the destruction of the environment is the lowered organizational credibility. Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. However, you may visit "Cookie Settings" to provide a controlled consent. A review system by employees for employees will ensure that the established codes are being followed. What are the consequences of unethical business practices? They have to obey the authority and perform all their commands. While some companies are able to get away with these practices, others are not so lucky. At the end of the day, the government, employees, investors, competitors, and the customers suffer while the crooks enjoy the fruits of their unethical business practices. Spreading lies on social media, defaming for all the wrong reasons, and infringement of trademarks fall under these practices. One of the Mexican subsidiaries that happen to be Wal-Marts major competitors had indeed paid bribes to be allowed to open new stores in Mexico (Clifford & Barstow, 2012). Such acts, even if performed unknowingly, lower the repute of the organization. Once the suppliers find other places where they can sell their products at fair prices, they would stop supplying raw materials for such companies with immediate effect. How do you I stop my TV from turning off at a time dish? An open company culture with transparent communication ensures that everyone knows what is going on all the time. Moreover, company executives evade form paying the taxes using the false statements. As scientific research primarily aims to benefit society (Rull, 2014), ethical standards, which permit discrimination between beneficial ("right") and detrimental ("wrong") research practices are necessary. What are the consequences of unethical practices? "Human Resource Executive Online" reports 30 percent of small businesses . What are the effects of unethical behavior by customers to the company and other customers? Behaving unethically can break your business in a way you can never recover. Business managers should never take advantage of their might to disadvantage their competitors. Some unethical actions are also illegal, and you could be arrested. For example, a clothing company that uses child labor in its factories will likely lose customers who are opposed to this practice. This is IvyPanda's free database of academic paper samples. Such cases may have adverse consequences to the business, which may end up paying heavy fines, or even being ordered to close down because of their unethical practices. Essentially, there are numerous fraud cases in the management of the company, and those practices are driving G4S into the grave. Now, its not wrong to use competitors names in promoting themselves. The cookies is used to store the user consent for the cookies in the category "Necessary". Essentially, any practices that make the employees uncomfortable in the work place are unethical, as they do not comply with the federal working standards. Unethical business practices as those practiced with Wal-Marts competitors will result into bad publicity, and the company may never win the publicity trust in the future even though it struggles to employ ethical conducts. Some executives are even sued for creating false financial statements to deceive the investors. Eventually, the unethical behavior of a business will catch up with them and they will face serious consequences. The data is also used to optimize and maximize the results of marketing campaigns. It is not just shareholders and customers who are affected by unethical business practices; employees can also suffer as a result of their employers actions. Consequently, some investors might lose everything if a company's true financial position is shakier than revealed. Is it Ethical for Employers to Search Social Media for Information about Applicants for a Job. Necessary cookies are absolutely essential for the website to function properly. For example, workers at Foxconn (a supplier for Apple) have been found to be working in conditions that are akin to slavery according Amnesty International. They collect it to understand customers preferences, personalize the experience and have relevant communications. Nestle is the world's largest food and drink corporation. How unethical business practices can lead to a loss of customers and a negative reputation. The burgeoning, proliferation of unethical practices impacts the global financial crisis, deepening the fallout in, human terms and slowing the ability to rebuild (Gill, 2012, P.371 -391), The code of conduct put in place by various governments has so far been very, ineffective in combating or reducing unethical practices. Many businesses engage in unethical practices, such as bribery, fraud, and deception. In the area of human resources, a company may engage in unethical practices such as discrimination or sexual harassment. Here are five examples of businesses that tossed their ethical standards in the bin: Huawei has been in the limelight for copying the design of Apples iPhone. A documented code of conduct specifies the type of conduct and behavior expected in the workplace. The executives of such companies protect their brand names, and they fight to maintain the companys reputation through corruption. Save my name, email, and website in this browser for the next time I comment. Companies should comply with the governments rules of conserving the air, water, and the general environment. Cases have occurred where auditors are bribed to certify false financial statements so that powerful companies can evade from paying the rightful amounts of taxes to the government. The cookie is used to store the user consent for the cookies in the category "Other. (2022, August 1). You can lose your job and reputation, organizations can lose their credibility, general morale and productivity can decline, or the behaviour can result in significant fines and/or financial loss. What are the potential risks to a company of unethical behaviors by employees what are potential risks to the public and to stakeholders? They want to keep such incidences hidden from public knowledge. Further, the courts can even order the company to be closed down. The paper will bring in ideas, information, and examples of unethical business practices in major organizations. Hill, A. Although, unethical research which flouts these standards, can arise by various means. While several factors contribute, a driver of bad business ethics is the desire for immediate gratification on the part of owners and managers. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. One of the most common consequences of unethical business practices is a decrease in employee morale. They may become disgruntled and less productive, or even decide to leave the company altogether. For example, if a company is caught engaging in price-fixing or other anticompetitive behavior, it may suffer reputational harm that causes customers to take their business elsewhere. Employee anxieties, feelings of helplessness, frustration, low job satisfaction, loss of trust toward the leaders, work alienation and related negative consequences for private lives of employees - these all are the malign products of unethical leadership. https://ivypanda.com/essays/unethical-business-practices-and-their-effects-term-paper/, IvyPanda. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc. All business people aim at gaining a competitive advantage over their competitors to win the trust of many customers. The introduction of new regulations that apply to all companies could result from unethical practices. George, J.M. This paper will give a stringent analysis of the various unethical business practices and the effect that they have on the organization. Many companies go to extreme lengths to maximize their revenues. Manipulation and exploitation of employees. 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