Bachelor of General Studies (BGS) Degree Practice Exam

According to business ethics principles, why should businesses act ethically?

1. To avoid taxes

2. To improve employee satisfaction

3. To protect business firms from unethical practices

4. To increase shareholder wealth

The correct answer is: To protect business firms from unethical practices

Acting ethically is crucial for businesses as it serves to protect them from a variety of unethical practices that can lead to significant risk and harm. When a business adheres to ethical principles, it not only establishes its reputation in the marketplace but also instills a culture of integrity and accountability within the organization. This helps to prevent fraud, corruption, and other unethical behaviors that could jeopardize a firm’s operations and sustainability. By promoting ethical conduct, businesses can also foster trust among stakeholders, including customers, employees, suppliers, and the community at large. This trust is essential in building long-term relationships and can mitigate legal issues or public relations crises that arise from unethical activities. In this way, acting ethically is not merely about compliance with laws and regulations, but about creating a robust framework that supports ethical behavior throughout the organization. Other possible reasons, such as improving employee satisfaction, increasing shareholder wealth, or tax avoidance, may be associated with ethical practices, but they do not capture the fundamental protective element that ethics provides against unethical conduct. Therefore, the focus on safeguarding businesses from unethical practices fundamentally underscores the importance of ethical behavior in ensuring the long-term health and viability of a business.