The Costs of Unethical Business Conduct

By contrast, the costs of unethical business behavior can be staggering. Some of the costs

include the loss of physical assets, increased security, the loss of customers, the loss of

employees, the loss of reputation, legal costs, the loss of investor confidence, regulatory

intrusion, and the costs of bankruptcy. According to a report by the Josephson

Institute, unethical business behavior has an adverse impact on sales, stock prices,

productivity, the performance of the highly skilled employees, efficiency, communication, and

employee retention and recruiting plus the risks from scandal and employee fraud.

The costs of employee theft are particularly daunting. An estimated 75 percent of employees

steal from the workplace, and most do so repeatedly. One third of all US corporate bankruptcies

are caused directly by employee theft; US companies lose nearly $400 billion per year in lost

productivity due to “time theft” or loafing; and an estimated 20 percent of every dollar earned by

a US company is lost to employee theft. Office supplies, money, and merchandise are the

most frequently stolen items. Employee theft may be even more of a concern to small

businesses because many small businesses operate so close to the margin. It has been estimated

that theft by small business employees totals nearly $40 billion each year.