Legal & Ethical Concerns

Working in a positive work environment can be very rewarding and beneficial for any professional. Large companies offer good compensation, generous bonus packages, and prospects for growth are numerous. Such an environment would also provide training and an individual can acquire greater experience in shorter time. In their fight for survival however, firms have to be competitive and innovative, which brings unexpected challenges. In their quest for rapid success, many companies may bring unorthodox initiatives to life that may elevate ethical concerns and raise legal issues as well. To handle situations at the work place that may escalate into potential tort claims or criminal investigations, a good professional needs impeccable integrity and high moral and ethical values.

Knowing the basics of business law should be a priority for any respectable professional, because knowledge can help prevent the escalation of white collar crime, and is good protection from various potential claims of discrimination, defamation and agency issues at work. Since knowledge can make all the difference regarding exposure to moral and professional obligation, the more skills and knowledge a professional has, the higher become the responsibilities one would face. If ethical duties are not complied with, it would not only diminish one’s integrity, but it could even lead to an unwelcome criminal investigation. If an electrical engineer with a professional license for example, does not reveal to her clients a potential danger of which she has knowledge, she is not only not abiding by her moral obligations, but could be criminally liable as well.

The cost of unethical conduct: To facilitate the assessment of customer satisfaction, some companies may go down the wrong path. Further, in their attempt to achieve maximum profit maximization, especially in times of crisis, some executives may branch out parts of the company to small firms to hide losses and evade taxes, as in the Enron example. The roots of many firms’ wrongdoings lay in the profit maximization theory, according to which if there are maximized benefits to society at large, the allocation of social welfare does not matter (Mallor et all., 2008, p. 95-99,) and it might as well be in the hands of top management.

Many corporate crimes have their grounds in other teleological ethical theories according to which decisions and actions should be judged on the results they generate. Thus, if a company’s profits are on track, any wrongdoing could be justified, and since Enron was providing benefits for society as a whole, the shareholders’ sufferings should not matter? This, aside from all criminal issues, is in grave contradiction to agency relationships since it is not in the best interest of the shareholders.

The Enron saga did not stop here, with its collapse their accounting firm Arthur Anderson went down as well. When in December of 2001 Enron filed for bankruptcy, it became apparent  that its financial statements were deliberately misleading. In an industry where reputation is 'the business itself,' firing a majority of the partners might not be enough to save the firm, and in August 2002 Arthur Anderson closed its public auditing practice.

The moral of the story is clear- the business world can, and does, severely punish unethical conduct and those that choose to silently observe questionable business conduct may have disagreeable experiences with the law. 

In a series of articles we will provide examples, and a glimpse of hazardous situations at work that need a cautious approach.