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What Is Considered Bad Business Ethics?

By Angela Colley
Updated May 16, 2024
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Bad business ethics covers a rage of corporate behaviors that violate the law, damage the confidence of customers, or both. Business ethics is a broad and somewhat subjective field, and a lot of what is included depends on the circumstances. There is often a fine line between behaviors that are simply poor decisions or damaging practices and those that are truly unethical. In most cases, actions that fall into the latter category are those that violate some written or unwritten code about honesty and fair dealing. These actions can be either outward, which means that they directly concern the customer, or inward, such as policies governing employees and internal corporate policies. Dishonesty, intentional negligence in product manufacturing, and major customer service failures are some of the most common examples. Financial scandals and payroll discrepancies are another. In some cases these can result in criminal or civil prosecution and fines, but other times they just result in a damaged reputation and a loss of “good will,” a business term that relates to the company’s image in the public.

Dishonesty

Dishonesty is a common example of bad business ethics. For example, if a company makes false claims in its advertising, there is an argument to be made that the company is being dishonest to its customers by leading them to believe something that isn’t entirely accurate. Being dishonest is sometimes against the law, but not always. A lot depends on the circumstances and the likelihood of actual harm from the deception. Companies often dance the line very closely between what is punishable and what is technically permissible, usually in order to boost sales. Many experts consider this practice to be unethical, or at least “bad” ethics.

Sales and profitability aren’t the only reasons companies lie or twist the truth, though, Sometimes business leaders are dishonest in order to get credit for things they haven’t actually done, usually as a means of improving their social capital or general image. Claiming to have committed a certain amount of money to a specific charity, for instance, or pledging to support non-profit groups but then never following through are some examples. Stalling or delaying clean-up efforts during environmental crises like oil spills or emissions problems can also fall within this category.

Negligence in Manufacturing

A business can also face lawsuits or costly recalls if it intentionally manufactures poor or faulty products. While not all faulty products are created intentionally, a company that knowingly makes and markets products that could hurt a customer is generally understood to be practicing bad ethics, as well as breaking consumer protection laws in most places. Customers often get together under these circumstances to file a class action lawsuit against the company. The company may have to recall the products sold and notify the public of the problem, which can also damage the corporate image.

Customer Service Failings

While civil lawsuits and illegal activity can damage the reputation of a business, poor business ethics can also include activities that involve no violation of the law. Poor customer service is not only a bad business practice but also might be considered unethical as well. Participation in immoral or illegal acts by business executives or key employees can also harm the company's reputation, and can be considered examples of bad ethics especially if behavior occurs in the course of conducting business.

Failing to replace damaged or defective products or to refund their purchase price to consumers who complain is one of the key examples of this sort of behavior, but even broad policies about how customer inquiries are handled can cross the line into the realm of “unethical” if the company treats its critics with hostility or disrespect. Many companies have dedicated customer service teams to handle problems, but much of how they respond to problems is usually driven by the corporation’s overarching stance to handling conflict. Simply being rude to a customer isn’t usually considered unethical, but a pattern and practice of not dealing with disgruntled patrons or intentionally dealing with them in a disrespectful manner might be.

Financial Scandals

Many business ethics problems center around payroll and executive compensation. Companies that are losing money and laying off employees in order to save money while at the same time giving their top executives raises and bonuses are often viewed by the public as corrupt, at least from an ethical standpoint. Similar issues come up when it comes to how corporate assets are invested, particularly those related to public shares and the stock trade. Top executives sometimes make choices about investments that lead to a “bubble” of profitability for the short term, during which time they themselves are able to capitalize, before the whole thing collapses, usually at the expense of employees and shareholders.

Common Consequences

Companies that consistently practice bad business ethics face several problems. Most immediately, loss of business relationships and a poor reputation with the public can hurt sales. Lawsuits and settlements can be costly and can also result in lost profits. The final result of bad business ethics may be bankruptcy or business closure, though this doesn’t usually come quickly. It's often the case that companies face no consequences at all, at least not for many years, and this is one of the reasons why unethical practices persist.

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Discussion Comments
By pleonasm — On Jul 18, 2012

@KoiwiGal - Sometimes they are stung and sometimes they aren't. I think the problem is that the people with the most money can afford the best lawyers.

But bad business ethics aren't only the domain of big business. I mean, anyone can really indulge in them, unfortunately. Whole small businesses are based around taking advantage of people, either by not telling them something important, like the quality of a product, or by actively trying to get money out of people for no reason at all.

The unfortunate thing about this is that there isn't enough publicity to warn people about this kind of thing. So, it pays and even if people are caught, they will just move and start over.

By KoiwiGal — On Jul 17, 2012

@indigomoth - Well, the consequences are never that bad for the big businesses as far as I can see. Look at what happens to oil companies after big spills that kill thousands of animals and wreck fishing communities and so forth. Pretty much nothing happens. At the most, they have to pay a fine, or maybe spend a bunch of money on cleaning up the spill. Other than that, people don't seem to care.

A lot of the time these bad ethical practices are done by people at the top and they end up getting what's known as a golden handshake when they are made to leave the company. So they get millions of dollars and probably don't have any trouble finding another job because of their connections, but everyone knows they have been corrupt.

If people want bad business ethics to disappear they need to vote with their wallets and also to put pressure on politicians to regulate businesses more.

By indigomoth — On Jul 16, 2012

I could never understand why businesses take the chance of using bad ethical practices. I mean, it seems almost inevitable that they are going to be caught and it's not just that most of the time the practices are illegal, but in this world with the prevalence of mass media, it can really damage your reputation.

And there are plenty of people snooping around, trying to find a story, so you will inevitably be found out. And most business ethics are in place because they are unsustainable in the long run anyway.

It just seems like such a terrible idea I can't understand why any business would risk doing it.

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