What are the impacts, positive or negative, of conducting business in an ethical manner?

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First off, in this context we generally use the term ethical to mean:

"being in accordance with the rules or standards for right conduct or practice, especially the standards of a profession" (see www.dictionary.com link below).

Likewise, in discussions of this topic, it is common to view "negative" impacts as being...

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First off, in this context we generally use the term ethical to mean:

"being in accordance with the rules or standards for right conduct or practice, especially the standards of a profession" (see www.dictionary.com link below).

Likewise, in discussions of this topic, it is common to view "negative" impacts as being those which reduce a company's profit, market share, or value to its shareholders, while positive impacts improve these metrics.  However, to really discuss ethical business practices, we benefit from considering all of the "stakeholders" in a situation.  These are all of the entities affected by a business's actions, even if those effects aren't captured in the normal market price/profit dynamics.  For example, communities benefit in non-financial ways by having certain types of employers, while people can be affected adversely by pollution without having any way for that to negatively impact the polluter's profits.

Stakeholders generally include the firm and its shareholders, PLUS local communities, labor unions, the environment, and government.  What is "ethical" may not always be clear, as these stakeholders may have differing ideas of what constitutes "right behavior".  Therefore, we have to choose whose perspective we are adopting before we can say an action is ethical or not.  Then we can move on to determining its effects. 

Finally, when it comes to measuring effects, we also need to consider the timeframe.  Many decisions may appear to have positive short-term effects, but in the long run lead to severe negative consequences.  Many "breaches" of business ethics fall into this category.

Here's an example:

A company is considering moving production from its home country to a foreign location with dramatically lower labor costs.  The shareholders may consider this ethical, as it represents their right in a capitalist system to place their business as they wish.  The town losing the production may view this as unethical, perhaps because they consider there to be an "implied commitment" on the part of the employer to support the local community, to be a "good citizen".  The impact can be positive for the shareholders, in that lower labor costs are achieved, but this impact may turn negative in the long run if their "disloyalty" results in loss of consumer goodwill and sales drop.

Examples are endless.  To summarize, the question really has no specific answers, but the key elements of the analytic framework are (a) which entity's perspective are you looking through, and (b) how are you measuring positive and negative, and over what timeframe.

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