Question

Most executives believe that they and their firms behave in an ethical manner and that it is in their best interests to do so. How can a firm's ethical conduct increase its long-term profitability?

a.Ethical corporate behavior attracts customers, employees, and communities who appreciate and support being treated ethically.
b.Good ethics programs are developed from the bottom of the organization up to the firm's leadership. This is because lower-level workers do all the actual work and are in the best position to specify the rules of how the work should be conducted.

Answer 1

A firm's ethical conduct can lead to long-term profitability by attracting customers and employees who value ethics, building a trusted reputation, and fostering customer loyalty. Ethical practices help in adhering to regulatory standards and can attract a dedicated and effective workforce, which contributes to both the perception and reality of a company's commitment to quality and responsibility.

Step-by-step explanation:

A firm's ethical conduct can increase its long-term profitability by attracting customers, employees, and communities who value ethical treatment. As a corporate responsibility, ethical behavior contributes to building a company's reputation and trust with stakeholders.

For example, ethical practices can establish a company as one that is transparent, fair, and dedicated to quality, which in turn can create repeat customers and positive recommendations, fostering customer loyalty and possibly allowing the company to charge a premium for its products or services.

Furthermore, a strong ethical foundation can help companies navigate legal and regulatory frameworks, reducing the risk of costly legal issues and enhancing corporate governance.

To ensure ethical practices, businesses often create a code of ethics that outlines permissible actions for the organization and its employees, addressing issues such as bribery, discrimination, and environmental goals. In alignment with these ethical frameworks, a business can demonstrate its commitment to social and economic responsibilities, positioning itself positively in the eyes of consumers and investors.

Emphasizing ethical conduct can also help in attracting and retaining top talent, as workers increasingly look for employers that reflect their values and contribute to social well-being.

Overall, while Milton Friedman argues for the primary responsibility of businesses to increase profits, integrating ethical practices align with long-term profitability by enhancing reputation, fostering customer loyalty, and building efficient and motivated workforces while adhering to social responsibilities and regulatory standards.