Business ethics is defined as “the study of appropriate business policies and practices regarding potentially controversial subjects including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities.” It’s the application of a moral framework to the way organizations do business, and it shapes and changes the way businesses operate. It can be both normative (e.g., how employee behavior is related to cultural or social issues) or descriptive (e.g., how to incorporate best practices into an organization’s policies and procedures).
Failure to implement certain ethical principles may hurt a company’s bottom line. These principles include managing financial or other customer data in a responsible way, avoiding fraud and misrepresentation in operations, treating employees and customers with respect and dignity, and giving back to the organization’s community.
Business ethics is especially important in HR. As the department that deals directly with people employed by a company, HR holds a large part of the responsibility for upholding business policies and practices in an ethical manner. SHRM’s code of ethics for professional responsibility in HR states:
As HR professionals, we are responsible for adding value to the organizations we serve and contributing to the ethical success of those organizations. We accept professional responsibility for our individual decisions and actions. We are also advocates for the profession by engaging in activities that enhance its credibility and value.
(Indeed, ethics plays such an important role in HR that as of January 1, 2021, HRCI requires anyone seeking PHR or SPHR recertification to have at least one credit in ethics.)
Hiring is one of the areas for HR that is most affected by business ethics. For example, if an employee is found to have falsified information on a job application after they have already been hired, if HR does not have policies in place to address this specific situation, the organization could face potential wrongful termination lawsuits. Also, in order to achieve legal compliance as well as ethically sound decision making, at the earliest stage of recruitment the company must address issues of equal opportunity, antidiscrimination policies, and legal compliance with regards to hiring practices
Another issue that HR has to address with some frequency is the ethics relating to employee privacy. For example, companies routinely perform background checks on job applicants before extending offers of employment. From the employer’s perspective, these checks are necessary because they reduce liability by verifying that the information the applicant provided is true. However, employers must follow reasonable guidelines in obtaining this information: inquiries must be related to the job to which the applicant is applying, and the applicant must be told what information will be checked and then give written consent for the potential employer to obtain it.
HR is also responsible for legal compliance with regard to recordkeeping. For example, the Americans with Disabilities Act specifies that employers must keep employee disability records separate from personnel files and in a secured location. Other laws, such as the Health Insurance Portability and Accountability Act and the Genetic Information Nondiscrimination Act, also have their own confidentiality requirements for the treatment of medical records. HR professionals must be aware of how federal and state laws affect the collection or storing of employee information.
In HR, the application of ethics means helping an organization embed and uphold its values at all levels in order to maintain and increase trust. Accountability, or taking responsibility, is a key aspect of that role. Ethical policies and procedures for the company are in place not just to ensure that employees and company leaders do the right thing but also to protect the company from liability. HR is the department that develops, distributes, and enforces these policies and procedures.
Jessica Miller-Merrell is a workplace change agent focused on human resources and talent acquisition. She’s also the founder of Workology (formerly Blogging4Jobs) and can be contacted on Twitter at @jmillermerrell.
1 Alexandra Twin. 2020. “Business Ethics.” Investopedia, July 1, www.investopedia.com/terms/b/business-ethics.asp.
2 SHRM. 2014. “Code of Ethics.” SHRM website, November 21, www.shrm.org/about-shrm/pages/code-of-ethics.aspx.