Unethical practices to look out for in your business

Unethical practices can take place in any business, as individuals can have reasons to act against the interests of the company or its stakeholders. The main reason is usually personal gain. We will explore some ways in which personal gain can cloud judgement and how circumstances can make it easier for employees to take part in unethical practices. 

What are unethical practices?

There are many examples of unethical practices and some businesses may be harsher in some areas than others. Unethical practices sometimes may also be illegal in some circumstances. Some common examples of unethical practices are:

• Nepotism
• Discrimination
• Insider trading
• Misappropriation of assets
• Harassment and sexual harassment
• Misleading customers 
• Bribing
• No respect for customer data

Nepotism

Nepotism occurs when an employee shows favouritism towards a family member, either during the hiring process or during daily business operations. This type of unethical behaviour can mean that the most deserving employee may not receive the right recognition or the right candidate may not be hired. The individual usually does not disclose that the candidate or employee is a relative or friend. They may try to influence decisions with comments or opinions that seem fair.

Discrimination

When an employee treats another employee unfairly due to certain characteristics, such as age, ethnicity, gender, sexuality and/or religion, it can be classified as discrimination. Discrimination is a topic that companies often discuss but some individuals may be discriminating against a colleague without realising it. Some examples of discrimination are:

• Excluding an individual from a work event or team get-together
• Making fun of an employee, especially because of one of their characteristics
• Making negative remarks (indirectly) about someone’s characteristics (e.g. Oh you wouldn’t know what this is, you probably didn’t have it back in your country)
• Not giving an employee the same promotion and training opportunities as other employees

These are only a few examples, but discrimination can take many shapes and forms. Among other unethical practices, discrimination is one that could greatly impact an employee’s well-being and self-esteem. 

Insider trading

Insider trading refers to employees buying and selling stocks based on information only they have and is not yet available to the public. This gives employees an unfair advantage as they are able to handle the shares based on what they know, which could lead to higher profits for them and help them prevent potential losses. 

What could insider trading look like? If an employee within a company knows that there is an innovative product announcement that will receive great approval from the public, then they can buy shares at the current (lower) price. Once the announcement is made and the product receives a lot of positive publicity, this can increase the share price of the company. The employee can then choose whether to sell and make a profit, or hold on to the shares that are now worth substantially more. 

Misappropriation of assets

Misappropriation of assets occurs when an employee uses company assets and resources for their personal interests rather than the interests of the company. Misappropriation of assets can take place in a number of ways including:

• Skimming
• Stealing assets
• Misusing assets
• Payroll fraud

When employees take cash from transactions, before recording them in the system, that is referred to as skimming.

Stealing assets can include stealing inventory, intellectual property or services. 

When an employee uses company assets such as computers, internet or subscriptions (without permission) for personal use, this is an example of misusing assets. 

An example of payroll fraud is an individual creating a false employee that they pay money to or not removing an employee who has left the company from the payroll. 

Harassment and sexual harassment

Harassment and sexual harassment are unethical practices that should be prevented and heavily discouraged. Harassment is intimidating, aggressive, offensive or humiliating behaviour against an individual and includes name-calling, bullying and actions that intend to cause harm. Sexual harassment can refer to inappropriately touching another employee, making comments of suggestive and sexual nature, sharing explicit photos and/or making sexual jokes. In 2021, more than 1 million women in Australia had experienced sexual harassment.

These types of unethical practices can have a negative influence on the workplace, employees and the company as a whole. It is strongly advised that all companies develop a strong, zero tolerance policy against all types of harassment as this will create a friendly and welcoming work environment. 

Misleading customers

Another example of unethical practices is employees misleading customers. This can occur in a number of ways such as the employees presenting customers with a “better price” when the price is actually higher, or employees citing false terms and conditions. The most common reason for this type of unethical behaviour is monetary benefits for the employees. 

Bribing

Bribing is another example that is both illegal and unethical. It occurs when an individual gives money, gifts and promises favours to a recipient with the goal to influence their decisions or behaviour. An employee may benefit by making a deal with a partner or a supplier, so they can get a higher invoice. This makes it seem like the employee pays more, while in reality, they are secretly pocketing the money. The supplier in turn may benefit from more business or exclusivity (being the sole supplier). 

No respect for customer data

The last one on this unethical practices list is the lack of respect for customer data. Lack of respect can refer to an employee who keeps sending emails to a customer who has unsubscribed or, the worst case scenario, an employee selling customer data to a third party. Scammers always look to buy new victim numbers and names, hence why it may seem like a good option for an unethical employee. There are more examples and it may look different for each individual. For example, instead of selling customer data, they might not store it securely or forget to record data correctly. 

Please keep in mind that while we have provided you with some examples of unethical practices, there are so many more out there. We could write a book about unethical practices if we included all of them!

What can lead to unethical practices in a company?

Similarly to the fraud triangle, for an individual to be unethical, there are some conditions that need to exist that allow the individual to be unethical. Some of these include:

• Lack of policies and enforcement: The business’s policies may not target unethical behaviour and consequences for people who are engaging in unethical practices.
• Lack of enforcement: While policies may have been developed, the business may not take them seriously and may not have reminders in place that deter employees from unethical practices.
• Lack of training: For policies to be effective, businesses need to train employees to make them more familiar with expectations and work culture. If employees are informed of how seriously the company takes its ethical and legal commitments, they may be less likely to act against business expectations. 
• Lack of reporting lines: Unethical practices may go unnoticed for a long time if there are no reporting lines in place or at least a confidential method of notifying the business of unethical behaviour. 
• Tone from the top: If your leaders are engaging in unethical behaviour, or setting requirements – e.g. sales targets – that cannot be met except through unethical practices, then the blame for these practices should fall on your leaders.

What can prevent unethical practices?

Unethical practices are not positive news for any business. In the short term, for some unethical business practices someone may think “Well, it doesn’t hurt me” but it does. If unethical practices are uncovered, the business can damage its reputation and credibility and lose the loyalty of its customers. This means lower sales and revenue and potential long-term distrust by the public as consumers will look to do business with an ethical company. 

The actions of one individual can impact the whole company. This is why it’s important for the organisation to take action. Some steps the company may consider are:

• Creating a strong, zero-tolerance policy against unethical behaviour
• Making the policy easily accessible for employees and training them on what unethical behaviour can look like and what it means for the business and them
• Provide employees with a confidential reporting line and take every complaint that comes through seriously
• Always strive to create a positive culture built on trust and focus on creating a friendly workplace where employees feel valued
• Lead by example and develop strong company values
• Check-in on employees to see how they are doing and if they are struggling with something

How to deal with unethical practices?

In an ideal world, unethical practices could be easily prevented but unfortunately, that’s not the case. Individuals may still find ways to slip through the cracks and cause issues for your company. 

This is usually the situation where our clients choose to conduct an investigation. They trust us to help their investigators automate their daily tasks and achieve faster turnaround times. Our system is used to keep all information confidential and securely store any evidence that the investigators may find during the investigation. If you are looking for a reliable system that you can access from anywhere, anytime, automatic progress updates and a system that only allows those with permission to access case files, reach out! We will be happy to give you a demo!