Business Law and Ethics

A day in the life of a business manager with legal training

As a manager, you have both legal and ethical responsibilities. Your conduct is expected to meet both the letter and the spirit of the law.

Managers who bypass their ethical responsibilities risk getting themselves and their companies into deep legal trouble. Corporate scandals have ruined both careers and companies.

Effective Learning

FAQs

After completing this topic, you should be able to:

• describe the convergence and divergence of law and ethics

• recognize how laws and ethics function in a business environment

In business, people are subject to a range of business laws, which are published and consistently enforced within a given jurisdiction. Laws frame and define rules regarding proper and improper behavior, and are developed by societies to limit people's tendency to act based on self-interest. Third parties enforce these laws using specified punishments.

Although laws and ethical principles differ, they do overlap. In many cases, what's perceived as unethical is also illegal. This is because law is typically designed to uphold standards of ethical behavior and to embody a society's expectations of its members in this regard.

The Science of Better Learning

Although the law and ethics overlap, they're not the same. For example, an action such as breaking a promise to a friend is unethical – but it's legal.

In a business environment, laws help simplify rules of conduct and decisions. In addition, the law in some jurisdictions requires that each organization have a written code of ethics to guide its conduct and decisions.

After completing this topic, you should be able to perform key steps in the process for making a decision that complies with the spirit of the law

Following the letter of the law means complying with the minimum legal requirements but not attempting to do any more than is strictly required.

Following the spirit of the law involves moving deeper into the territory of ethical behavior than simply following the letter of the law. Although difficult to define exactly, the spirit of the law refers to the underlying ethics, purpose, and intentions that the law is designed to uphold.

People are often far more aware of what a law requires than of the rationale behind the law – or the principle that law makers intended to further by developing the law. This is particularly true in organizational cultures that focus on adhering to rules, or on not getting caught violating the rules. Such a focus can cloud the ethical principles that are the foundation of the law.

Use this follow-on activity to guide you in making ethical decisions.

After completing this topic, you should be able to recognize how managers can encourage fulfillment of the spirit of the law through a culture of ethics

Most people are familiar with cases of corporate scandals that brought down powerful companies. But have you considered how common it is that behaving ethically saves companies and even boosts their profits?

Statistics show an increasing number of businesses establishing ethics programs, but no clear reduction in observed misconduct. So what's preventing businesses from behaving more ethically?

Use this job aid to review the common obstacles to ethical behavior in business.

To overcome the obstacles to legal and ethical behavior, an organization needs to develop a culture of ethics. In this type of culture, there's a shared understanding of what constitutes ethical behavior and how decisions about ethical issues and dilemmas should be handled.

Just having a written code of ethics isn't enough to create a culture of ethics. Employees should also receive training, support, and guidance on ethical behavior.

Ethics training should include instruction on ethical decision making, and on the challenges and obstacles to ethical behavior.

You can build ethics into an organization's structure by ensuring checks and balances, reinforcing ethical behavior, allowing dissent, and encouraging employee input.

If all other measures are in place, but you as a manager are not sincere about following them, the initiative to encourage ethical behavior is likely to fail.

Research over the years confirms that managers' own attitudes and behavior have a significant impact on employee conduct.

Use this job aid to review the recommendations for creating a culture of ethical behavior in an organization.

Congratulations! You just finished the Business Law and Ethics course. This was the second course of the three that together form the Business Law series.

You think knowing stuff changes the game? You think sitting in a library, stacking up facts like you’re building a Jenga tower, is gonna make you a winner? Man, that’s cute. But life ain't a trivia night. Information alone? It’s worthless. It’s like having a Lamborghini in your garage but you never learned how to drive. You just sit in it, making engine noises. Vroom vroom. People walk by, they see the car, but they also see you ain't going nowhere. You got all this knowledge, all these textbooks, but when life throws a punch, you’re still looking up the definition of "duck." It’s what you *do* with that information that actually matters. Don't be the person with the shiny car and no keys.