How Does Being An Ethical Organisation Benefit Your Employees

Business has a complicated relationship with ethics. Ethics reinforce cooperation and respect among workers and improve workforce relationships. The pursuit of the latter often ends at odds with the pursuit of profits, or better margins, particularly during the times of crisis. The COVID-19 pandemic is a perfect example – according to the EY Global Integrity Report 2022, integrity standards plateaued or declined in 55% of the surveyed organisations since the outbreak.

However, the data collected by Ethisphere, a global think-tank focusing on ethical business practices, has a counter-argument – organisations that ranked high on ethical behaviour outperformed other large cap companies by 24.6 percentage points between 2017 and 2022.

Better reputation, improved customer loyalty, fewer risk of fines and scandals – these are some of the many benefits of ethical organisations according to Harvard Business Review. But how does being an ethical organisation benefit your employees? In this article, we will explore this often-ignored aspect of the benefits of ethics in the workplace.

What is ethical culture in an organisation?

Workplace culture, also known as ‘company culture’, is a fascinating amalgam of various things that evolve over years at an organisation. It is basically made up of employer expectations, shared attitudes and beliefs, normalised/tolerated social interactions between management and employees, and the overall ‘character’ of the workplace.

For a workplace culture to be considered ‘ethical’, it would require the following essential traits:

• Promotes honesty and integrity in business
• Does not tolerate toxic or abusive behaviour in the workplace
• Gives priority to employee welfare
• Ensures fairness and equity in pay and promotion
• Encourages employees to speak up when they see unethical activities
• Promotes sustainable business practices

Employee benefits of ethics in the workplace

You can guess some of the benefits of good business ethics to employees from the points listed above. Let’s now take a closer look at some of these obvious benefits, and some others that are not so clear-cut, yet still have massive implications for employees.

1. A safe and healthy workplace

Ethical organisations usually have effective safeguards in place to protect employees from sexual harassment, abuse, and other types of toxic behaviours. This is a particularly significant aspect in India. Workplace toxicity was a leading cause of stress, depression, and burnout among more than 90% of Indian employees surveyed by the McKinsey Health Institute between 2017 and 2022.

Moral conflicts raised by unethical behaviour of colleagues and managers can cause intense stress in many individuals. When they try to raise the issue, these employees become the target of retribution. Ethical organisations are more likely to encourage and protect such ‘whistle-blowers’.

2. Fair remuneration and rewards

One aspect of employee welfare is fair remuneration and promotions based on your contribution to the company. In unethical organisations, this principle is often not followed. Leaders give preferential treatment to sycophants, or individuals of the same ethnicity or gender.

For instance, gender gap in pay structures persist in India. After decades of steady decline, the gender pay gap rose again in India, from 28% in 2018-19 to 35% in 2020-21. Only through renewed commitment to workplace ethics we can hope to counter such trends.

3. Lower risk of termination and other legal complications

Employees at organisations with compromised ethical standards are more likely to indulge in activities that violate legal statutes and compliance regulations. According to an Institute of Business Access survey from 2018, peer pressure and boss’s orders were among the reasons why 12% of UK employees violated their own organisation’s standards of ethical behaviour.

If they get caught, employees are at risk of facing a wide range of consequences, ranging from minor reprimands to suspension, docked pay, or dismissal. And if it involves accounting fraud or other similar crimes, they could end up in prison. Naturally, there is less risk of this happening in organisations that strongly discourage and penalise unethical workplace behaviour.

4. A better standard of career education

The workplace is also a place of experiential learning, particularly for young employees in the early stages of their career. Human beings are not born as strictly ethical or unethical – based on our experiences and life lessons, we can become more (or less) ethical over time.

If an organisation rewards or condones unethical behaviour, an employee can become habituated to make the same decisions in future situations, or at different companies. It can have a lasting impact on employees’ professional and even personal lives.

Why ethical culture in organisation is important in India

According to the 2022 EY Global Integrity Report on India, many companies have an ‘integrity crisis’ on their hands. A worrying 63% of senior management professionals who were surveyed indicated their readiness to indulge in unethical conduct for career progression.

More than 53% reported that it is easier for managers to by-pass standard business rules in their organisations. Another 59% reported that there were individuals in key positions in their companies who are willing to sacrifice integrity for short-term gains.

By most accounts, Indians are the most overworked, and the least well-paid employees in the world. But this kind of unethical organisational culture is not sustainable. In recent years, we have seen the rise of employee activism with a focus on employee welfare, gender justice, and sustainability.

The new generation of employees are very conscious about employer branding – they are less willing to work at companies with a reputation for unethical workplace culture. If you want to attract and retain young talent for the long term, and reduce the risk of scandals and regulatory penalties, you have to start paying more attention to ethical culture in your organisation.