3. What is the difference between unethical and unlawful behavior? Please provide
examples for both behaviors in your discussion.
Unethical and unlawful behaviors share similarities in the sense that both acts are deemed
as having a negative impact on the individual or organization that is facing any allegation of bad
conduct. There are perceptions that stipulate an act being unethical is also an act that is
unlawful, and other perceptions of unlawful activities being ethical or unethical dependent upon
the individual’s viewpoint. As written by Anstead (1999), “A behavior may be perceived as
ethical to one person or group or might not be perceived as ethical by another. Further
complicating this dichotomy of behavior, laws may have been legislated, effectively stating the
government’s position, and presumably the majority opinion, on the behavior” (p. 2). Today’s
unbalanced marketplace makes it imperative for business professionals to understand the
difference between law and ethics.
Anstead (1999) defines law as a set of universal rules that are widely published, accepted,
and usually enforced. These same rules typically describe the ways in which people should act
in their relationships with others in society. Ethics is further defined by Anstead (1999) as “What
is good for the individual and for society and establishes the nature of duties that people owe
themselves and one another” (p. 3). As a matter of viewpoint, ethical behavior is learned
behavior leaving the interpretation of ethical and unethical behavior as a matter of personal
interpretation or judgment. In contrast, unlawful behavior has universal meaning. The
difference between unlawful and lawful behaviors is very well defined by governmental laws.
Society is required to act in a specific manner, not just expectations to act in that way (Anstead,
1999). Therefore, unlawful behavior has defined consequences compared to unethical behavior
which can result in different outcomes.
The current business environment mandates a strongly related set of ethical ideals and
legal principles based on several recent corporate scandals over various forms of crime and
wrongdoing equated to unethical and unlawful behaviors (Sullivan, Haunschild, & Page, 2007).
Enron, once the largest buyer and seller of natural gas and electricity in the United States, filed
bankruptcy in December 2001 resulting from uncovering unethical and unlawful behavior
proven to be many cases of fraud (Sullivan, Haunschild, & Page, 2007). Another company,
WorldCom, became the nation’s second largest long-distance phone company before publicizing
of a widespread $11 billion accounting scandal in 2002 (Sullivan, Haunschild, & Page, 2007).
Both companies once enjoyed being two of America’s “Most Admired Companies” to two of
America’s “Least Admired Companies” within a one year time span. Unethical behavior as well
as unlawful behavior of leaders resulted in the loss of consumer and investor confidence leading
to the ultimate demise of both firms. Business managers must effectively assess the legality and
morality of interorganizational activities, and recognize a basic fact that consumers will make
purchasing decisions based on how they view a company’s ethical or unethical practices.
5. According to Milton Friedman, “Business has only one social responsibility – to make
profits (as long as it stays within the legal and moral rules of the game established by
society). Few trends could so thoroughly undermine the very foundations of our society as
the acceptance by corporate officials of a social responsibility other than to make as much
money for their stockholders as possible.” Explain why you agree or disagree with such a
statement.
Milton Friedman possessed a strong opinion about a business sole, social responsibility
of making profits. My opinion aligns with his thoughts when incorporating the idea of the
purpose of the existence of businesses. Friedman (1970) argues that “businessmen believe that
they are defending free enterprise when they declaim that business is not concerned “merely”
with profit but also with promoting desirable “social” ends”, (p. 1). The social responsibility he
is referencing is what we term as corporate social responsibility (CSR) which is considered the
belief that corporations have a huge responsibility to their communities and stakeholders by
having a social conscience.
Business leaders, government officials and academics continue to focus a great deal of
attention to the concept of CSR, especially in the environmental protection arena (Reinhardt &
Stavins, 2010). My idea of people having responsibilities and not entities supports Friedman’s
argument that “only people can have responsibilities” but that “businesses as a whole” cannot, as
they are not people. The corporate executive is employed by the shareholders, and is responsible
to them as his employers. Therefore, the corporate executive has overall responsibility of
managing the business as he deems necessary, and additionally has the ethical responsibility of
generating profits while following the general laws of society.
The corporate executive is viewed as a public employee while serving shareholders, and
should receive directions from the shareholders on how to spend their money. Despite the
viewpoint of many economists and business scholars that corporations have a simple and strict
fiduciary duty to maximize profits for shareholders, the legal basis for this view is surprisingly
weak (Reinhardt & Stavins, 2010). Even though there is a duty to maximize profits for the
shareholders, there is room for the possibility that firms may sacrifice profits in the public
interest. This concept is based on the courts giving considerable deference to the judgment of
business people under the so-called “business judgment rule”.
Businesses are entities created by people with the intent of generating goods and services
with the goal of making profits. There are businesses such as hospitals that have the primary
goal of providing life-saving medical service to its patients. However, these same hospitals must
generate enough profits to maximize its capacity to treat patients, and provide them with the best
advanced technology for their care. Friedman’s argument that a business’s sole responsibility is
to generate profit cannot be denied “…as long as it stays within the legal and moral rules of the
game established by society” (Friedman, 1970, p. 2)
References
Anstead, S. (1999, July 6). Law versus ethics in management. Human Resources in Technology
Organizations. Retrieved from http://ansteadsue,tripod.com/ethics.htm
Friedman, M. (1970, September 13). The social responsibility of business is to increase its
profits. The New York Times Magazine, pp. 1-5. Retrieved from
http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html
Reinhardt, F.L., & Stavins, R.N. (2010). Corporate social responsibility, business strategy, and
the environment. Oxford Review of Economic Policy, 26(2), 164-181.
Sullivan, B., Haunschild, P., & Page, K. (2007). Organizations Non Gratae? The Impact of
Unethical Corporate Acts on Interorganizational Networks. Organization Science, 18(1), 55-
70. Retrieved from http://www.jstor.org/stable/25146083
