Legal and Ethical Issues

in Business
Ethics verses Business

Ethics is the issue of right and wrong

Business has relation

Money, profit, benefit, advantages
 Ethics verses Law
Having define business ethics in terms of issues of right and wrong, one might
quite naturally question
whether this is in any way distinct from law?
Surely law is also about the issues of right and wrong. This is true, and there is
indeed considerable overlap between ethics and law .
In fact, law is essentially an institutionalization or codification of ethics into
specific social rules and regulations.
Nevertheless, these are not equivalent.
In many morally contested issues, may be in business or elsewhere, some
area are not explicitly covered by law ,
for example there is no law preventing one to be unfaithful to his/her
girlfriend or boyfriend (though it is unethical),
Similar there is no law in many countries selling land mines to oppressive
regime, preventing employees from joining the union.

On the other hand, many issues covered by law not by ethics.

Like drive on right and left side of the road. Although it prevents chaos on
the road is good and right for all, but it can not call ethics
Business ethics can be said to begin where the law ends.
Business ethics primarily concerned with those issues not covered by law
or where there is no definite consensus whether something is right or
wrong.
 Ethics GrayArea Law
Business ethics

Business ethics primarily concerned with those issues not covered by law or
where there is no definite consensus whether something is right or wrong
Business ethics can be said to begin where the law ends.
The problem of trying to make decisions in the gray area of business ethics,
or where values may be in conflict
and may not have definite ‘right’ answer to many business ethics
problems.
Like persuasive sale technique, child labour, and others tend to be
controversial and open to different points of view.
Thus business ethics is not like subjects such as accounting, finance,
engineering, or business law
where we are learn to specific procedure and facts to make objectively
correct decisions.
Studying business ethics should help you to make better decisions, but this
is not unequivocally right decision.

unambiguously
 Types of misconduct across
sectors
30

© 2008 Ethics Resource Center

27%
25%
24% 24%
20 22%
21% 21%
20%
19%

10
Nonprofit

Business

Government

Putting own interests Lying to Abusive behavior

employees
ahead of org

Source: Ethics Resource Center (2008)

7
 Observed ethical misconduct
across sectors
75%

© 2008 Ethics Resource Center

60% 57% 57%
52%
52% 56%
55%
50% 46%
55%
46%
49%

43%

Nonprofit

25%
Business

Government

0%

2000 2003 2005 2007

Source: Ethics Resource Center (2008)

8
 Globalization: A key context for business ethics?
In the context of business ethics, controversy over globalization plays a crucial
role.
Multinational Companies (MNC)are at the center of public criticism on
globalization.
They are accused of exploiting workers in developing countries, destroying
environment, and by abusing their economic power, engaging developing
countries in so called ‘race to the bottom’.
MNCs are allocating foreign direct investment to those countries that can
offer them most favorable condition in terms of tax rates, low level of
environmental regulation and restricted workers rights.
However, true these accusation are in practice, there is no doubt that
globalization is the most current and demanding arena in which corporations
have to define and legitimate the ‘rights and wrong’ of their behavior.
Legal Environment of Business
Definition of Law
Law is the body of principles recognized and applied by the
State in the administration of justice. -Salmond

Law is that portion of the established habit and thought of

mankind which has gained distinct and formal recognition in
the shape of uniform rules backed by the authority and
power of the government. - Woodrow Wilson

11
 Law and Social Objectives
Moral values rather than the settlement of disputes of
interests should be the objective of Law.
Observed by
Emile Durkheim
L. T. Hobhouse
Max Weber

Law must be framed and changed on the basis of social

needs. Henry Maine
 Legal Environment of Business

Rules of Law
There are three rules-
1. The rule of law states that, “No man is punishable or can be lawfully
made to suffer in body or goods except for a distinct breach of law
established in the ordinary legal manner before the ordinary courts.”
2. The rule of law mean, “No man is above law.”
3. The rule of law is “The result of statues and judicial decision
determining the rights of private persons.”
 Legal Environment of Business
Law is a body of enforceable principles applicable in adjudicating upon the
rights of parties to suit or proceedings instituted in a court of law.
When any suit arise from commercial transaction it is called commercial suit.

Commercial law mean a body of rules that civilized peoples have accepted as
applying to multifarious transactions relating to trade and commerce.

Branches of Commercial law:

• Company law • Law relation to negotiable instrument act
• Law of contract • Law of Banking
• Law of Partnership • Law related to commercial Security
• Law relation to sale of goods • Law related to Arbitration
 Sources of commercial law
When we speak of Commercial law as a general term, it means the European
Commercial law as it is developed in course of the mercantile history of
western and northern Europe.
This law has been regarded as the law of nations since the very inception of
international trade. It may be said to have been grown out of the following
sources:
a. Maritime Uses and customs: they were widely practiced and obeyed in
Europe during 14th and 15th century
b. Roman law: When customary rules failed to solve difficulties reference was
made to roman law for guidance.
c. Equity: In case neither custom nor Roman law could provide solution
English judges applied the principles of justice, equity and good conscience.
d. Fair Court decisions:
 Sources of commercial law in Bangladesh
1. Statutes: These source of commercial law is based mostly on English law.
The contract Act, The company Act, The sale of goods Act, The partnership
Act and the Negotiable Instrument act are instances
in which English law has been gradually incorporated into mercantile law of
India as adopted in Bangladesh
2. English Common Law: Where the rules of statutory law provide no
guidance or too ambiguous to justify application,
the court in Bangladesh readily take the help of English Common Law
relevant to the subject.
3. Local Customs and Usages: Where an undisputed custom of ancient origin
exists, such a custom, unless its application is excluded by any statute.
4. Equity: As in England and so in Bangladesh, equity fills up the gaps left by
the preceding three sources.
Thank you all