Business Ethics Laws and Regulations: Everything You Need to Know
Business ethics laws and regulations dictate a standard of conduct that represents going beyond doing the legally right thing to acting morally right. 4 min read
Business Ethics Laws And Regulations
Business ethics laws and regulations dictate a standard of conduct that represents going beyond doing the legally right thing to acting morally right. The word itself, “ethics,” is derived from the Latin word “ethos,” which defines the moral values and characteristics of a society.
It means more than merely following the letter of the law, because laws can always be changed, but instead following the codes of conduct developed through a culture’s religious beliefs, philosophies, and even the special requirements of specific professions. Ethics are a reflection of the principle held by most individuals that regardless of whether an act or thought is either always good or always bad, or if they are relative, depending upon a situation, as human beings we have the ability to perform in a way that is right.
Ethics in a Business Setting
Applying ethical standards to business practices means applying a culture’s moral standards, which rise above legal statutes, to ascertain whether decisions or conduct are appropriate and just, good or bad, not only for the business, but also for society as a whole. It’s a matter of having a moral compass to guide practices that may increase the bottom line of a company’s ledger, but have implications that create unjust or dangerous ramifications. For instance:
- An oil company that purchases single-hull freighters for transporting oil across the ocean knowing that the ships present a higher likelihood of being ruptured and creating ecological disasters.
- A manufacturer that chooses to have its products produced in countries that have lax or non-existent labor laws that protect workers from harmful chemicals, dangerous workplaces or unhealthy work hours.
- Companies that buy materials from countries that use the income from the sales to promote terrorist activities, wage wars or engender religious or cultural intolerance.
While it is true that board of directors and officers of companies in a capitalistic society have an obligation, a fiduciary duty, to take actions that benefit shareholders, but ethical practices dictate that those actions also take into consideration “the greater good” for society.
This is not to imply that every business decision is a matter of good versus evil. Sometimes, unethical behavior can be minor, such as when a customer service representative misrepresents sales figures in order to meet pressures imposed by monthly quotas in order to keep a job, or a corporate officer falsifies records in order to keep a business operating and save hundreds of jobs.
However, the most egregious unethical acts are easy to distinguish and companies have established rules of ethical behavior to address them. Among these are:
- Fraudulent acts such as theft or embezzlement of corporate funds.
- Purposely mismanaging corporate records and expense reports.
- Misappropriation of corporate assets.
- Theft of intellectual property or misappropriation of trade secrets.
- Taking kickbacks or committing bribery.
- Theft of business equipment or supplies.
- Willingly ignoring safety health code violations.
Business Ethics and Common Sense
As you can see from the list, most unethical behavior is easy to recognize and knowing that it’s wrong, let alone illegal, is really just a matter of common sense. It really should not be necessary for managers and decision makers to have rules in writing. It should be enough that every business leader always act with a high degree of integrity in business dealings. It’s more than a matter that being trustworthy or honest is a “good business,” it’s a matter of it being a “right business.”
That being said, it’s an unfortunate fact of life that people will sometimes try to cut corners or act dishonestly. Therefore, it’s the responsibility of those at the top of a corporate’s hierarchy to establish rules of conduct that can be shared with employees and customers to enforce high standards of conduct and let everyone know that anything less will not be tolerated.
One important reason to establish business ethics laws and regulations is because many companies are multinational corporations and have employees or deal with manufacturers or suppliers in countries that may not share the same cultural, religious, or philosophical ethics. In addition, even within one society, public opinion can be fickle and exemptions can be justified based on economic, political, or environmental factors.
Without established institutional regulations to act as standards of ethical practice, it can be a difficult chore for business leaders to develop rules that protect society while not falling afoul of the traditional concept of the “hidden hand,” found in long-standing business philosophy. What it may essentially come down to is whether acting for the common good can also produce a positive return on investment.
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