Question

Business or corporate leaders charged with unethical practices may often point out that everything they did was perfectly legal; they broke no laws. Does that mean that their actions are necessarily ethical? What is the difference between what is legal and what is the right thing to do?

Answer 1

• The main difference between ethical and legal business practices is that the law doesn't fully address all ethical dilemmas that businesses face. Something might be legal, for example, but unethical. Legal practices refer to processes and policies to abide by the law, such as honesty and transparency in accounting. Ethical practices refer to efforts to meet stakeholder expectations for business activities.
• Essentially, legal business practices are enacted because of the inherent legal requirement that the company behave or act in certain ways. Companies often have staff or contracted lawyers to help ensure compliance with business and industry-related laws.
• Ethical practices offer a bit more choice, technically. A business doesn't necessarily have to recycle plastics and other materials unless local laws dictate it. However, many companies do practice environmental recycling and reuse for ethical purposes and to meet public and customer expectations.
• Breaking promises is generally legal, but is widely thought of as unethical.
• There’s a big overlap between unethical and illegal business practices. Lying to your customers is both illegal and unethical. Violating promises to customers is both illegal and unethical. Normally, the overlap between ethics & law is smaller: in everyday life, it’s unethical to lie, but it’s not illegal.
  
• Businesses are still ethically obligated to treat their customers, employees, and suppliers with respect, to clean up their own messes, and so on — even when the law doesn’t force them to.
• Although businesses operate within a wide range of regulations aimed at enforcing ethical standards, the subjective nature of ethics means that even perfectly legal business practices can come under scrutiny as unethical behavior. Businesses must take extra care to respect the ethical perspectives of all of their stakeholder groups.
• Labor practices are often a hot-button issue from an ethical perspective, and labor laws tend to lag behind popular sentiment, leaving room for companies to employ legal practices that their customers and employees may find unethical. Paying minimum wage to full-time employees is one of many examples.
• Although the minimum wage in an at-will employment agreement is legal, those working for minimum wage often cannot manage their day-to-day expenses, leaving them buried in debt and bitter toward their employers. Another common example is working legally with foreign suppliers whose labor practices do not fit the ethical expectations of local customers.
• Regulation is heavy in any industry causing direct environmental impacts, but following the law is not always enough to satisfy people in affected areas. Hydraulic fracturing in oil drilling operations is an example from the early 21st century.
• Although the process is legal, companies that engage in hydraulic fracturing are often the target of angry protests and calls for legal action by those who live in surrounding communities. If your business causes direct environmental impacts, the best ethical policy is to always go beyond the letter of the law, as much as you can, to respect the ethics of those who live in the areas in which you operate
• Marketing tactics can walk a fine line between persuasion and manipulation, and this is another area where subjective ethics come into play heavily. Some marketing tactics can take advantage of uneducated segments of the population, which can be perfectly legal while being scorned throughout the marketplace. For example, before the Credit Card Act of 2009, banks could lure teens into opening credit accounts with promises of financial freedom, regardless of the teens' ability to repay the high-interest debts.
• Other tactics can take advantage of harmful addictions by eliciting emotional responses. Casino commercials showing elated winners throwing money into the air is a prime example of this in a world where people can ruin their lives with a gambling addiction. Still other tactics can take advantage of people in need by luring them into predatory services, such as high-cost loans with daily interest compounding.
• All businesses must consider the greater impacts of their operations on society in general, which can do much to influence whether consumers view a business as an ethical and respectable organization.
• For example, a business built around products that increase national obesity or addiction statistics can be successful and well within the law, but at the cost of a tarnished reputation among all consumer groups. The public scrutiny that cigarette and fast-food companies come under proves that these lines of business can be risky, albeit highly profitable.