Legal and ethical examples in business

Ethical obligations are a set of “ought to” standards that define a moral course of action and draw a line between right and wrong. Although ethical obligations in business share similarities with legal rules and regulations in determining how a business conducts itself while striving to make a profit and achieve strategic company goals, ethical obligations are really more about discretionary decisions and value-guided behavior.

Identification

1. Ethical obligations exist in almost every facet of a business environment. Policy and decision-making in areas such as sales, pricing and advertising all involve ethical obligations, as do dealings with staff members, contractors and suppliers. Each has benefits for carrying out an ethical obligation as well as consequences that can cause ethical dilemmas. For example, a business may realize they have an ethical obligation to instruct the sales stall to conduct needs-based selling and not to “oversell.” During a month when sales are slow, however, living up to that obligation by not pressuring the staff to “sell” can mean the difference between turning a profit or not.

Ethical Obligations

1. Some of the most common internal ethical obligations in business relate to recruiting and hiring staff, maintaining a safe and healthy work environment, using business resources wisely and avoiding situations that have the potential to create a conflict of interest, such as accepting gifts from suppliers or making a hiring decision not because the applicant has the best qualifications, but because the applicant is a relative of the business owner. Common supplier-side ethical obligations include considering how and where suppliers get their products and whether to sell products that are detrimental to the health of customers, such as cigarettes and fatty foods.

Responsibilities

1. Business owners are ultimately responsible for whether a business fulfills its ethical obligations. Accomplish ethical obligation objectives by leading by example. Work with staff members to create ethics standards and a code of ethical conduct. Not only do these actions set clear expectations but may also encourage open communication and discussion regarding ethical dilemmas – and how to solve them – among the ethics team. Conduct ethics training that sets clear expectations and shows staff members how their decisions and attitude towards ethical behavior impacts long-term business.

Decision-Making Framework

1. Developing an ethical decision-making framework can reduce the chance for ethical dilemmas that result in ignoring ethical obligations. The Institute of Business Ethics suggests using a seven step decision-making framework originally developed by Linda K. Trevino and Katherine A. Nelson in 2007. These steps start with gathering the facts, defining the ethical issue or issues and by identifying the parties involved, the consequences and ethical obligations. From there, fully consider your personal character and integrity, get creative with possible actions and always “check your gut.”

By Barbara Bean-Mellinger Updated December 04, 2018

You've heard it many times in the news. "I didn't break any laws," a business owner is reported to have said when asked about a dubious action he took. That's good to know, but sometimes that isn't the point. Listening to the interview, you can't help but think the action, while it met the legal standards, just wasn't the right thing to do. Sometimes more is expected of people, especially business leaders. That's where business ethics, or moral principles, come in. Unlike laws, business ethics require business people to stop and ask, "But is it ethical?" Often, when it comes down to ethical versus legal issues, you must be the judge.

There's no doubt that business owners want and need to make a profit. Without profits, a business can't grow, invest in research and development, or pay shareholders - if the company is a public company. But how much profit is reasonable? When does the amount of profit become unethical?

Businesses can face the issue of ethical vs legal when they charge high prices for their products, especially when the products are designed to help people and are badly needed. A recent example is when Martin Shkreli, CEO of Turing Pharmaceuticals, raised the price of their drug Daraprim from $13.50 per pill to $750 per pill. While it wasn't illegal for the company to raise the drug's price, many people saw it as a drug company taking unfair advantage, compounded by the fact that the drug had been in use for many years, so Turing had most likely earned back what it spent on developing Daraprim to begin with. This argument is an example of a difference between law and ethics in business. Just because an action is legal doesn't mean it's necessarily ethical.

What is and isn't ethical, however, can be interpreted differently by different people. All states have some type of Landlord Tenant Law that protects both the landlord and the tenant. The laws differ somewhat between states, however, so landlords and tenants need to know their rights according to their state's laws, and to also check for local laws as well.

For example, the state of New York's Landlord Tenant Laws don't place a maximum on the amount of security deposit a landlord can request. In Kansas and West Virginia, the security deposit can't exceed one month's rent. In Maryland and Iowa, the security deposit cannot be more than two months' rent. California allows a deposit worth two months' rent for unfurnished units, and three months' rent for furnished units. With the average apartment rent in San Francisco up to $3,027 in 2017, and no local law governing the amount of security deposit, it would be legal for a landlord to charge a security deposit of over $6,000 for an unfurnished apartment and over $9,000 for a furnished apartment. Unethical? Renters who think so will have to look for a different apartment.

Sometimes, people become so outraged over what they perceive to be unethical practices that they urge the creation of laws preventing such actions. For example, it used to be common for banks to allow ATM and debit transactions even when the account didn't have enough funds. They would then charge what many consider to be an unethically large fee for the overdraft service, averaging $35 per transaction as of 2018. The Overdraft Protection Law was enacted to stop banks from doing this without first asking their account holders if they wish to "opt in" to this service. Opting in means understanding that the account holder will be charged a fee when the bank pays a transaction that overdrafts an account. If a customer chooses not to opt in to overdraft protection services, ATM and debit transactions will be declined and the bank will not charge an overdraft fee.

Making unethical business decisions can backfire. Not only can your customers decide to go elsewhere, but unethical actions can make the kind of news you don't want for your business. Setting a high ethics bar for your employees to follow is a good start. Keeping realistic goals is another. When normally ethical people feel pressured to perform, they may make poor decisions to get ahead. If they know what the company will and won't allow, they are less likely to take unethical risks.

Legal but not Ethical Conducts and Ethical but not Legal.

Legal but not Ethical Conducts

Not ethical but Legal definition is a major difference. 

Laws are written and stated and expected to be followed for legal purposes. A code of ethics is unwritten moral rules that differ from person to person and between cultures. 

Not Ethical but Legal

Five controversial examples are legal but not ethical

01.    I give a person a certain amount of money that is definitely legal. Later I ask him for a favor of some kind, I’m one step from being a slug. This is totally legal but when a person betrays me this unethical.

02.    Keeping money that someone dropped is legal, but again, many would find it unethical.

03.    The death penalty is also legal in many states, but a multitude of individuals consider it unethical.

04.     Smoking cigarettes in public is legal in some places, but some may find it disrespectful and unethical.

05.    Abortion is legal in some places, but many consider it unethical.

01. When a child is hungry and he stole a loaf of bread from a shop to feed.

This action is ethical because a child is hungry and he wants something to eat but this is illegal because stealing is illegalized throughout the world.

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02. The transformer gives us electricity.

But the transformer emits a lot of heat that is why it may sometime burn out causing real damage some times to the people. Therefore if someone removes the fuse of the transformer while there is a chance that the transformer may burn out it is illegal but it is perfectly ethical because the person who removes the fuses would want to avoid damage.

03. It is illegal to run a traffic light or speed even though it is ethical & also legal if someone’s life depended on it… Like if we had to rush them to the hospital.

04. It can be illegal not to fulfill a contract, but it might be ethical for any number of logical reasons.

05.  It is illegal to lease a car or an apartment in your name for someone else who otherwise would not qualify but it is an ethical thing to do if it is going to help them succeed in life.

In a nutshell session, Ethics and laws can be a murky subject because laws are always changing, and ethics are infinitely varied.  Ethics depend, in part, on the level of social and cultural integration between people within a society.

For example, a tribal system and a state-level society usually have differing opinions on what is ethical. However, the differences between people mean there will always be a gap between what is legal and what is ethical. Ethical but not Legal and Legal but not Ethical Conducts.

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