The Importance of Workplace Ethics

Small breaches can create bigger problems if left unchecked.

Written by Jeff Rumage
Published on Feb. 21, 2024
The Importance of Workplace Ethics
Image: Shutterstock

Workplace ethics — the ethical guidelines that define appropriate workplace behavior — are an important aspect of an organizational culture. Companies that live up to their ethical standards may notice that employees trust each other to do the right thing, which can boost performance and loyalty. Job applicants will want to join the company, and customers will be proud to say they do business with them.

What Are Workplace Ethics?

Workplace ethics are the principles that an organization aims to live up to. By agreeing to treat others with respect and act with integrity, companies can build trust with employees, customers and the general public.

Creating an ethical culture requires a concerted effort by leaders, but the onus is on everyone in the organization to maintain an ethical culture by speaking up against unethical practices. After all, it only takes a small crack in a company’s ethical foundation to compromise everything it has worked so hard to build.


What Are Workplace Ethics?

Workplace ethics are the ethical standards that an organization strives to live by. Often defined by a code of ethics or a code of conduct, a company’s workplace ethics usually involve acting with integrity, respecting others and reporting unethical behavior when they see it. 

Ethics extend beyond what is required by law. While certain actions like theft or discrimination are clearly illegal, ethics can help define ethical gray areas that might be at odds with the company’s values and jeopardize the company’s reputation.

Workplace ethics are strongly influenced by a company’s leaders, who must not only put ethical standards in place, but also act ethically in the course of their day-to-day work. When employees see that a company’s ethics are taken seriously and modeled by leadership, they are much more likely to hold themselves to those standards.

Unfortunately, a gap often exists between a company’s stated workplace ethics and its actual workplace ethics. A survey by the Ethics & Compliance Initiative (ECI) found that nearly two-thirds of employees have observed at least one unethical or illegal act in the past year, with only 72 percent of those employees reporting the misconduct. A Gallup study reported more troubling results, with only 40 percent of employees speaking up.

Related Reading What Is Ethical Leadership?

Why Are Ethics in the Workplace Important?

Workplace ethics are important to creating a culture built on trust, which contributes to employee satisfaction, increased collaboration and a stronger brand reputation. Additionally, an organization that acts ethically — and agrees on a shared set of values — is safeguarded from the problems that can result from unethical behavior.

“Leaving things to chance, assuming people will have good intentions, puts a culture at risk of ethical lapse,” Ron Carucci, an author and managing partner at leadership consulting firm Navalant, told Built In.

When leaders don’t act ethically, employees may lose faith in the organization’s ethical integrity and not report wrongdoing. In this way, unethical behavior can beget more unethical behavior and eventually permeate the organization’s culture

“Those companies ultimately trip up over some kind of rule or law and it threatens the viability of the business,” Pat Harned, CEO at Ethics & Compliance Initiative (ECI), told Built In.


Benefits of Having Strong Workplace Ethics

1. It’s Easier to Recruit and Retain Ethical Employees

Employees who see that their organization’s ethical values are being followed often feel a sense of pride and commitment to the organization. When employees see unethical behavior, however, they won’t respect or trust the organization. Those organizations are also more likely to have employees who are treated unfairly, Harned said.

“Not only are you going to have a problem attracting great talent,” Harned added, “but you won’t be able to retain them because people won’t stay in a workplace that is toxic or has questionable practices.”

2. It Contributes to Trust and Collaboration

Employees have a higher degree of trust in leaders they believe are ethical, which in turn strengthens their ability to lead and influence their workforce, said Ann Skeet, senior director of leadership ethics at the Markkula Center for Applied Ethics at Santa Clara University. Employees typically mirror that behavior, which creates a culture where ethical standards are upheld and toxic behavior is called out. A healthy workplace culture rooted in trust and ethical standards can collaborate and operate more efficiently knowing everyone is aligned on values and pulling in the same direction.

Additionally, employees who feel like they are heard are more likely to speak up and share other ideas that would make the company more efficient, more profitable or create a better experience for customers, said Stephen Paskoff, president and CEO at Employment Learning Innovations.

3. It Attracts Loyal Customers

Customers want to support businesses that are transparent, behave ethically and live by their corporate values. When a company gains a reputation as an ethical company, they often attract new customers and referrals. An ethical company will also treat its customers fairly, which leads customers to trust that company and return to them for their next purchase.

4. It Helps You Avoid Legal Trouble

One of the most practical benefits of workplace ethics is legal compliance. A code of ethics will typically offer guidance about preventing conflicts of interest, bribery and other illegal practices. It also sets clear standards against discrimination, harassment and other behaviors that not only create a hostile workplace but could potentially land your company in legal trouble. By regularly communicating these expectations, companies can ensure that employees are informed about the laws that exist and what they need to adhere to these laws.

Related ReadingToxic Work Culture: 18 Examples and How to Improve It


Examples of Ethical Workplace Behaviors

1. Accountability

Accountability means living up to one’s promises and owning up to any mistakes instead of deflecting responsibility. In an ethical workplace, people will not only hold themselves accountable, but they will also hold others accountable by calling out inappropriate behavior, confronting poor performance or questioning unethical decisions.

2. Transparency

An ethical leader will be transparent in how they make decisions. They might cite company values or data when explaining their thought process, Skeet said, and they will pause to consider a decision’s downstream effects and consult with those affected by the decision.

3. Speaking Up

Reporting unethical behavior is crucial to developing an ethical workplace. If an employee doesn’t feel comfortable confronting a colleague or leader about their unethical behavior, they should report that unethical behavior to a manager, the company’s ethics hotline or one of the other channels outlined in the company’s code of ethics policy.


Examples of Unethical Workplace Behaviors

1. Dishonesty or Deceit

Most of us are taught at a young age not to lie, but sometimes the pressures of the working world can push good people toward dishonest or deceitful behavior. A sales representative struggling to meet their monthly quota, for example, might over-promise the benefits of a product to get a customer to sign a sales contract.

2. Misuse of Company Time

Companies may have varying ideas about what is considered an appropriate use of time. For instance, cyberloafing, the habit of browsing websites or social media during work hours, might be considered inappropriate in some occupations, but it might also provide useful information or inspiration in others. That said, there are some clear inappropriate uses of time, like working on a side hustle or freelance business when you have work that needs to be done for your primary employer.

3. Bribery

Giving gifts or treating a client to a meal is not illegal for most private sector employees, but it can muddy the ethical waters nonetheless. If you’re in the market for a payroll software, for example, it would be unethical to accept an expensive gift from a prospective vendor because they would then expect you to purchase their software — even if it might not be the best option for your company. Companies can prevent this by defining appropriate gifts and entertainment standards in their code of ethics.

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Signs of Ethical Danger to Watch For

Pressure to Compromise Standards

Employees can be pressured to cheat or compromise their standards when they are up against unrealistic performance targets or systems that reward cutting corners. ECI’s Global Business Ethics Survey found 29 percent of employees feel this pressure. Of those employees, 84 percent said they also observed misconduct in their workplace.

Fear of Speaking Out

If a company isn’t receiving reports of wrongdoing, leaders might think everything is running smoothly. In actuality, not receiving reports is a red flag. Employees could be witnessing misconduct but not reporting it. They could be afraid of retaliation, which is unfortunately common in some workplaces. About 46 percent of employees surveyed in ECI’s Global Business Ethics Survey said they experienced retribution for reporting misconduct.

Ethics Aren’t Taken Seriously

The more serious the ethical breach is, the less likely it is that the person didn’t realize they were violating the code of ethics, Paskoff said. The real issue is they chose not to follow the ethical standards in the code. This can happen in organizations where cutting corners is necessary to meet goals, creating a gap between an organization’s purported values and its  actual operations

“There’s always a slippery slope as the line slowly moves,” Carucci said. “Over time, as cultures fray, as performance pressures become more unrealistic, people decide they have no other choice but to cheat.”

Related ReadingConflict Resolution in the Workplace: 9 Tips


How to Address Unethical Behavior

Take Reports Seriously

If an employee steps forward to report unethical behavior, they should have assurances that company leaders will thoroughly investigate the incident. If employees sense that reports aren’t taken seriously, they may grow jaded and feel like the company is hypocritical for not living up to its values. The company’s culture will take a hit, and employees will stop reporting unethical behavior, which will only lead to more ethics violations in the future.

Enforce Policies Fairly

A company’s code of ethics or code of conduct should spell out the process for investigating and disciplining employees who violate company protocols. Companies should ensure that employees are treated equally in this process to avoid any perceptions of favoritism. If employees sense that employees are disciplined more than senior leaders, they may lose trust in the company and stop speaking up about ethical violations.

Take Corrective Measures

Disciplining bad behavior is an important practice, but it will take more than that to create an ethical culture. If the employee is returning to work, they (and possibly their team) should receive training about ethical practices. This could be especially helpful if there is an ethical standard that has been routinely ignored on that team. If the incident exposed a systemic process that led to a breach of ethics, leaders should rethink that practice and design a new workflow that promotes more ethical behavior.

Foster an Ethical Culture

To close the gap between what’s in the code of ethics and what’s practiced in the workplace, companies need to nurture an ethical culture.

“Leaders have a responsibility to pay attention to the culture of the organization, because culture really drives conduct,” Harned said. “If you have a culture that tells employees to get it done and it doesn’t matter how you do it, you’re reinforcing the wrong thing.” 

To create that culture, leaders need to not only practice what they preach but also talk about the values and ethics of the organization.

“The C-suite and other leaders have got to talk about these things and integrate them regularly into conversations,” Paskoff said.

Frequently Asked Questions

Workplace ethics are the ethical standards that an organization agrees to live by, such as treating people with respect, being honest and holding others accountable for unethical behavior.

Workplace ethics are important to creating a culture in which employees trust each other to do the right thing, which leads to a happier work environment, more collaborative relationships, customer loyalty and the ability to recruit and retain ethical employees.

Workplaces could face a number of ethical issues, such as discrimination, harassment, unfair treatment, bribery and deceitful or dishonest behavior.

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