Law, Ethics, Business and Practice

How I see it now:

How I see it should be:

The first diagram above represents how I see the reality, and the second diagram represents my personal “ideal” framework on the interconnection of Law, Ethics, Business and the actual practice.  Ethics is defined as “the principles, norms, and standards governing the organization” while Law is defined as the “society’s minimum norms and standards of business conduct”.   

For economic dimension, solid boundaries pertain to management’s and investors’, target income or profit and return on investment.  Thicker boundaries for legal dimension represent black and white rules and regulations, laws and policies set by the government.  Dotted boundaries for ethical dimension represent flexibility, openness and uncertainty. 

Reality

     In my perspective, business environment in general are bound by economic considerations and most often, bound by their desire for profits.  Business central focus is on the profit generation and return of investment.  Legal matters are embedded, but sometimes go beyond the economic bounds.  One perfect example for this is the current yet outdated tax bracket for individual tax payers.  Businesses comply with this tax code, but it no longer makes an economic sense.  Ethical dimension is overlapped with both economic and legal, but usually given less consideration.  Some legal considerations may not necessarily be ethical, and vice versa.  Since most of the time, there are no black and white rules on ethical standards, and that some factors do not overall or align with the legal matters, confusion and conflicting decisions are being made. 

Ideal

For me, legal, economic and discretionary considerations should all be within the bounds of Ethical considerations, and the latter should be given the utmost importance.  I agree that the “law should not be the only guiding principle for deciding what’s right”, rather, “Ethics” should prevail among the other factors.  Laws and regulations should be written and implemented, on the basis of common good.  Although the current president of the country is being criticized for his undue remarks, I am grateful that certain tax laws (like rationalizing the income tax brackets and rates, as well as increasing the rate and coverage of sin taxes) will be reviewed by the current administration.  These laws, if approved, will definitely benefit a larger part of the society. 

Economic on the other hand, should also be within the ethical bounds.   One example is the law on minimum wages.  Most businesses often restrict themselves on these minimum rates on their drive to minimize costs and increase profit.  However, businesses would always have the flexibility to go above the minimum rate set by the tax code/labor law.  Wages of the ranks and file are always considered for cost minimization, but sometimes, the company would feel a greater impact if the management’s compensation or benefits, or at least their number will be reduced.  Companies should have a regular review of the management’s functions, and if their compensation really commensurate the level or criticality of their work.   In some organizations, the cost of 1 manager personnel may be equivalent to the cost of 20-50 minimum wage earners.  If on the ideal world, economic and legal dimensions are “always” within the ethical boundaries, then every action taken by the company would have a positive ripple effect to the stakeholders and to the wider range of society.