Big Problems with Laws Regulating Business

The problem with implementing laws in order to enforce business ethics is that, unfortunately, laws are retrospective. No law will ever combat a crime that isn't somehow provided for within that law, and similarly, most crimes are not crimes until they have been identified and a law has been implemented against them.

This is the nature of our common law system, in which a great deal of the law that might matter in business ethics cases actually comes from other such cases and establishes important precedent beforehand. A full overview of the common law that affects cases of ethical behavior in business, then, is very difficult, not the least which because it is quite variable and ill-defined beyond that specific case.

Yet another problem standing in the way of laws that would regulate business ethics cases is that such laws actually lead to a negative depiction of the relationship between law and ethics. Common law might dictate certain key precedents when dealing with business ethics cases, but if business ethics relies only upon compliance with common law combined with actual legal statutes, then the ethics are diminished in force.

In other words, if, in business ethics cases, a given business can be shown to have acted in accordance with the law, then under the comprehension of business ethics that defines it as simply following the laws, that business would have acted ethically regardless of what it actually did.

Because common law is based on precedent, it is entirely possible that a given company could determine a way to perform an otherwise entirely unethical action that is perfectly legal within the scope of the law up to that point. After all, if there is no law prohibiting the act, then the act is not illegal, and if business ethics cases focus on ethics as synonymous with obeying the law, then businesses will not be restrained from performing any given act until such a time as that act is prohibited under either common law or official statute.

As a prime example of this problem regarding the relationship between laws and business ethics, take the famed Ford Pinto cases, which involved the Ford Pinto model of car. Ford, in designing the car, came up with a different model design that would likely result in 180 fewer deaths per year according to Ford's statistics. This alternate design would also have cost an additional $11 per car. Ford, following the law as set up in common law and prior business ethics cases, used a cost benefit analysis in order to determine whether or not they should implement the different design.

This cost benefit analysis was originally designed to be used with regard to a single accident, whereas in this case Ford was using it to cover the entire line of a given product. But it was legal for Ford to do so, as established in precedent. Ford decided not to implement the safer design because it determined that the costs would be greater to implement the other design than it would be to simply allow 180 customers to die per year.

Inarguably, Ford's decision was unethical, but it did conform with the common law of the time. As a result, if business ethics cases focus primarily on obeisance to the law, then Ford could not be held accountable for its actions. The law could then be changed, but Ford's own particular instance of unethical behavior would still stand unpunished.

In order for business ethics cases to be effective at moving towards stronger ethical practices, ethics need to be detached from mere obeisance to the law. No amount of business law will ever be enough to ensure ethical practice in business.

NEXT: Business Ethics and Common Law