Why do ethical companies financially outperform their competitors?

Expert Answers
pohnpei397 eNotes educator| Certified Educator

Some studies have seemed to indicate that ethical companies do financially outperform their competitors.  If this is actually true, it is most likely due to the good will that these companies build up with consumers and with the firms' own employees.

If employees work for a firm that they perceive to be ethical, they may well have higher morale.  They may feel more motivated to work hard because they feel that their firm is one of the "good guys."  This can help to make the firm more successful.

At the same time, some consumers will be attracted to companies that act ethically.  They will want to spend their money with companies that they are proud to be associated with.  The firm's good reputation, then, becomes a selling point that can attract customers.

In these ways, companies can "do good by doing well."  They can use their ethical behavior to get better work from their employees and more business from customers.

figlover | Student

It really depends on the circumstances, economic state, and the leverl of your competitors.

In the past, people said that corporates, companies does not need to operate ethically, only efficiently. That worked, until everyone started doing the same, and being efficient became too competitive.

So, people began to think that being ethical, being good can do no good to survive in the jungle, which is one of the reasons why so many firms conduct illegal businesses.

And they were able to hide their dirty works, and pretend nothing ever happened as long as the insiders kept quiet.

But now, people know via various means like wikileaks, non-profit organizations, etc. If the company is unethical, and people find out about this, there is like anti- movement towards that company. Take Samsung for an example, with insider information leakage, laypeople now know about the dirty business deals, corruption inside Samsung Corporation. and many Koreans are protesting against it by boycotting samsung product.

Yes I think that ethical companies financially outperform their competitiors in the long run because consumer know, and consumers are the key for many companies' survival.