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Business Ethics and Law

Using the same moral guidelines you already follow yourself, knowing the difference between right and wrong, also goes for business.  It will tell you what is right or wrong in any business situation.  Sometimes, however, what might be best for the company might seem morally wrong personally.  For example, buying cheaper goods from another country will help increase the company’s profit margin, however, that country legally allows children to work for low wages.  At the end of the day, businesses should be as ethically sound as they can when determining the “greater good” for all involved.


Companies that violate the more obvious ethical practices can result in huge consequences.  Just look at what happened to Enron.  Problems usually start off small, but build into bigger ones unless standards are truly set and followed.  With the pressure to achieve the numbers, bad decisions can be made.  This can be pressure on the customer service representative to wrongly fill an order, to senior management falsifying the financial health of the company.  


Some business ethics, however, are much more easily recognizable as being obviously ethically wrong.  To name a few:


  • Money lost to Fraud
  • Money lost to Embezzlement
  • Accuracy of books, records, and expense reports
  • Proper use of organizational assets
  • Protecting proprietary information
  • Discrimination
  • Lying
  • Over charging
  • Charging for work that was not necessary
  • Withholding needed information
  • Abusive or intimidating behavior toward others
  • Misreporting actual time or hours worked
  • False insurance claims
  • Kickbacks and bribery
  • Proper exercise of authority
  • Theft of business equipment and supplies
  • Trading or accepting goods for unauthorized favors
  • Moonlighting, which causes poorer work performance
  • Knowingly ignoring the health and safety of employees
  • Sexual harassment
  • Evading someone’s privacy



Using basic common sense, if you as manager always act with integrity, you will not violate business laws or be associated with bad work ethics.  This not only prevents any problems for you personally and professionally, you will also be seen and known as a solid and trustworthy leader.  Make it known that everyone is expected to adhere to the highest standards of business ethics and must understand that anything less is totally unacceptable.


Standards regarding ethical behavior need to be developed, set, and communicated throughout the entire company.  For more information on ethical issues, go to www.ethics.org


The legal department of a company takes charge of all legal matters of the company including labor laws, contracts, and legal representation.  They are the team who will get involved with any legal troubles.  You would have to take a course in business law to understand all of the ramifications associated with the legal department, however, we will give a brief explanation of some of the most known business laws faced by the legal department.


Basically, business law governs the rules of conduct of people and organizations in business, and is meant to enforce justice and obligation.  The major areas of business law are:


Antitrust – which its laws ensure that competition remains fair by prohibiting companies from merging with one another, or acquiring one another, to form monopolies.  A monopoly exists when there is only one supplier of some product or service, and can then charge whatever price it wants due to there is no longer any competition.


Bankruptcy – which laws let a company that is having financial problems seek protection from the demands of creditors.  Chapter 11 of the bankruptcy code regulates liquidation, which means closing the company and selling its assets to creditors, and chapter 7 regulates reorganizations, which means a court supervised restructuring of a company while its creditors wait for payment.


Business organization – which are the laws that govern the formation of a business.


Consumer protection and product liability – which are regulations regarding products, services, and credit practices.  Consumers should be able to assume that products will work and food is safe to eat, which is FDA regulated.  Also a company cannot knowingly sell a product that it believes will be unsafe or harmful for its intended use.


Contracts – which are legally binding exchanges of promises or agreement between parties that the law will enforce.


Employment – which are laws that regulate the hours and conditions under which people work, such as child labor laws, sets minimum wage, and expands the rights of disabled people.  You need to take all discriminatory laws associated with employment very seriously.  The Equal Employment Opportunity Commission or the EEOC enforces these laws.  The website is www.eeoc.gov.


Intellectual property – which laws protect copyrights, trademarks, and patents.


Securities regulation – which is governed by the Securities and Exchange Commission (SEC).  It polices the financial markets regarding insider trading, stock price manipulation, improper financial reporting, and improper and illegal practices at brokerage firms.


As manager, if you encounter any type of legal issue that you are not 100% aware of, or not comfortable with, be sure to ask your boss or the legal department for help.  This includes the signing of any legal documentation.  Always be careful on what you say and how you act.  If you do get into some trouble, contact an attorney right away.  However, common sense should always prevail, and you will be all right as long as you are ethically sound whenever any possible legal issues, such as discrimination or consumer protection, occur. 

Master Certificate of Competion in Business Management
Master Certificate in Business Management - Online Management Course
Master Certificate in Business Management - Online Management CourseMaster Certificate in Business Management - Online Management CourseMaster Certificate in Business Management - Online Management Course
Master Certificate in Business Management - Online Management Course