Stakeholders are individuals and entities that are affected by the actions taken by a business organization. A small business can affect its stakeholders in both positive and negative ways, forcing the management team to make tough choices. Actions taken to keep the company’s owners or investors happy by maximizing profits, for example, may not be viewed in a positive light by employees who want to share in the company’s financial success. A business has an ethical responsibility to uphold with each of its stakeholders.
Good business ethics dictate that a business should tell customers the truth from the moment it makes contact with a customer and in all subsequent dealings, including after a purchase. The pressure to make a sale may cause a salesperson to exaggerate the benefits of or need for a product. A heating and cooling system maintenance company, for example, might tell a homeowner she needs a new system when only routine repairs are necessary. An even more serious breach of ethical responsibility would be knowingly selling a product that is unsafe or of inferior quality.
Investors in private companies want the company to maximize profits, because that increases the value of the business and of their ownership share in the company. A company that spends lavishly on executive compensation and perks could be viewed by the investors as not living up to its ethical responsibility to provide the highest possible returns on their investment.
A business owner’s efforts to increase profitability can result in an excessive workload for employees and deadlines that are impossible for employees to meet. Employees expect to be compensated with wages and benefits that are at least up to industry standards. A company owner may choose instead to maximize his own compensation and not live up to his obligations to employees. Employees also seek opportunities for career advancement, which may require the company to provide additional education or training. An unethical organization may decide that employee satisfaction and training aren't the company's concern. The business owner will choose instead to let unhappy employees leave and replace them with new hires.
Companies increasingly recognize that they have an ethical responsibility to the towns or cities where they do business and to society as a whole. Maintaining the highest ethical standards can cost money and reduce profits -- for example, investing in equipment to reduce greenhouse emissions to a degree that goes beyond the minimum compliance required by government regulation. The most ethical companies recognize that their financial and human resources can be used to help those less fortunate in their local communities. They use their name recognition to encourage people in the community to get involved in good causes and may also sponsor charitable events.
The most ethical companies treat their vendors, suppliers and independent contractors as part of their team. They do their best to pay invoices on time, express appreciation for the quality products and services the vendors provide and keep vendors and contractors informed of changes to business operations that may affect them. For example, if a company knows it will be reducing purchases by 25 percent in the upcoming year because of a business slowdown, letting the vendor know in advance will allow that company to adjust its operations accordingly.