What is Ethical Behavior? (Explanation)

Entities, whether individuals, organizations or businesses, make decisions every day. Usually, the premise of these decisions is straightforward. Mostly, these entities base those decisions on underlying information. This information makes the process straightforward and enables the decision-maker to reach a conclusion. In some instances, the premise of a decision may not be as simple.

Sometimes, entities may face decisions that challenge moral principles. Usually, these decisions require them to evaluate the good and the bad. In most cases, the differences between the available options may not be as apparent. Therefore, the decisions made based on those differences can be highly crucial. The higher the level at which this decision-making process occurs, the more risks it will involve.

In modern business environments, the criticality of these decisions has become significantly higher. Consequently, these decisions must consider all the moral dilemmas and challenges. This process falls under ethical behaviour that most entities must ensure to follow. Therefore, it is crucial to understand it and how it works.

What is Ethical Behavior?

The definition of ethical behaviour is not straightforward. In essence, it involves using integrity, fairness and equity in decisions. Similarly, it may also cover the relationship between several entities. Ethical behaviour respects the dignity, diversity and rights of all entities. However, this behaviour may differ from one situation to another. While most entities will have the same principles for ethical behaviour, some may not agree with them.

Ethical behaviour involves the application of moral principles in a moral situation. When entities behave ethically, they must follow the moral standards set by society. Sometimes, these standards relate to a governing body or other sources. Regardless, ethical behaviour involves using moral standards to deal with dilemmatic situations.

Ethical behaviour applies to both individual and professional relationships. For the latter, it has become much more prevalent due to the changes in the perception of modern businesses. The concept also applies to companies and organizations. Regardless of whom this behaviour relates to, ethical behaviour is vital in most cases.

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Ethical behaviour is crucial for the world to survive as a society. Similarly, it helps entities and those involved with them function properly. In some cases, it can introduce entities to several challenges and costs. However, it can also be highly beneficial. In the absence of ethical behaviour, entities and societies may incur significant losses. While not behaving ethically can benefit selective entities, it causes a loss to society.

Overall, ethical behaviour involves using moral principles and values in individual and work relationships. The scenarios when this behaviour is necessary arise regularly. Therefore, entities must behave ethically when they must. By doing so, they can ensure they benefit society as a whole. In business environments, ethical behaviour applies to everyone, including employees, management, etc.

Why is Ethical Behavior important?

Ethical behaviour can have several beneficial impacts on society. In modern business environments, behaving ethically can also provide profits. When applying moral principles to business situations, entities can get significant benefits. Although it may involve some costs, ethical behaviour can be highly critical. Some of these points that elaborate on that importance for businesses include the following.

Enhances reputation

When companies and businesses behave ethically, they build a reputation for themselves. For already established entities, ethical behaviour can enhance their status with customers. Similarly, it can create a positive image in the marketplace, leading to more customers. On the other hand, companies can also lose business if they behave unethically. The use of ethical behaviour in business relates to the reputation of those entities.

Creates customer loyalty

In the modern world, most customers prefer companies that behave ethically. Therefore, ethical behaviour enhances the loyalty that customers have to a company. In essence, companies attract and retain customers with ethical behaviour. However, if they choose not to use moral principles in professional relationships, they can lose their customers.

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Creates a positive work environment

As mentioned above, ethical behaviour applies to all levels within a company. When the management and employees of a company behave ethically, it creates a positive work environment. Furthermore, it enhances their professional relationships and promotes a trusting environment. Therefore, the company can grow more due to this positive environment. In contrast, the absence of ethical behaviour can adversely impact the environment.

Retains employees

When ethical behaviour creates a positive work environment, employees are more likely to remain with a company. Similarly, due to the trusting relationship with the company, they will have higher job satisfaction. Therefore, ethical behaviour can enable companies to retain employees. In most cases, it can lower costs related to hiring expenses.

Avoids legal problems

One of the most significant reasons ethical behaviour is crucial is that it avoids legal problems. When companies behave ethically, they don’t cut corners to achieve profits. It also means they are more likely to follow regulations and laws that promote social responsibility. Therefore, ethical behaviour can help avoid legal problems associated with not complying with those rules.

What are the components of Ethical Behavior?

The components of ethical behaviour may differ from one company to another based on their needs. Every company decides on what these components should be. Sometimes, they may also use a code of ethics to guide them when developing an ethical behaviour strategy. Regardless of that, some of the primary components of ethical behaviour include the following.


Transparency is one of the most crucial parts of any company or business. When companies are transparent, they are more likely to behave ethically. Usually, this process involves representing facts accurately and not hiding them. Similarly, it involves clear communications and openness in general. Through transparency, companies can also promote ethical behaviour internally.

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Integrity is a fundamental part of ethical behaviour. Usually, it involves standing by moral principles regardless of the outcome. Therefore, even if companies suffer losses, they must abide by what they believe is ethically correct. This idea falls under integrity, which is also a crucial component of the code of ethics. Integrity also includes fairness and equality in various relationships.


Accountability relates to companies accepting their roles in society and taking responsibility. When companies behave ethically, they are also like to acknowledge duty. Due to this, they are more likely to admit to any errors or mistakes they commit. Similarly, it also involves accepting the consequences of their decisions.


Ethical behaviour requires companies to respect the rights, privacy, and dignity of others. These may include internal and external stakeholders. It also relates to the social responsibility that companies have towards others. Respect also applies to professional relationships since companies may come across private information from other parties.


Loyalty includes all relationships that a company has with its stakeholders. Through it, companies can make decisions that benefit all those relationships. Therefore, ethical behaviour can positively impact all stakeholders. When behaving ethically, companies consider the needs and requirements of all their stakeholders. Based on that assessment, they make decisions that benefit all parties involved.


Ethical behaviour involves the use of moral principles in individual and professional relationships. However, it is not straightforward in most situations. For companies and businesses, it is of notable concern. When companies don’t behave ethically, they can face significant losses. Ethical behaviour has several components that contribute to its importance.