Ethics, Morals and Laws in Business

Ashok R Garde

It was a delight to see a new book on ‘ethics as the foundation of business’. As one of IIM-A Business Books, this book on “Being Ethical” covers vital aspects of running any small or large business. A chapter each is devoted to basics of ethics, ethical analysis, and ethical issues related to customers, employees, competitors, environment, and society. Guidelines are given for building an ethical organisation and for becoming an ethical manager. The last chapter is on ethics in management education. Neat organisation of the contents as well as easy readability make this book attractive.

However, discerning readers who expect definitive guidelines on ethical issues will be disappointed. The book keeps conveying that ethical issues are complex, do not permit unambiguous logical decisions, and what is ethical depends on context and on own value system .

The reasons for dissatisfaction are four:

  • Lack of clarity on what is ethical, or moral, or even legal
  • Incorrect identification of ethical ‘dilemmas’
  • Confusion about standards and norms
  • Omission of two vital ethical issues

Ethics, Morals and Laws

The author has rightly conveyed that ethics may demand more than law, and that a law may be unethical . A similar juxtaposition of ethics and morals has not been done. In fact, the term ethics is sometimes used in the sense of morals,  and some immoral actions are shown to be punishable without mentioning that such actions have also to be illegal to permit punishing. These ambiguities have occurred because the three terms are not clearly defined.

When an action X taken by a person A for his/her happiness affects another person B, and when the same action is taken by B, person A continues to be happy, then the action X is ethical. Morals are the Dos and Don’ts inculcated into a person right from the childhood by parents, schools, religion and society. Laws are moral and/or ethical and/or other tenets made enforceable (mostly) by the state–i.e. punishable when caught flouting. Thus, ethical tenets are universally applicable; morals are culture specific; and laws are state (government at all levels) specific.

Their interrelationship is a Venn diagram of three intersecting circles. They form seven classes: M, E, L, EM, EL and EML.


Any action of any individual falls in one of these seven classes and is either acceptable, not acceptable – deserves rejection – or is neutral. An action can be ethically right, morally wrong and legally neutral: example -‘A Jain eats onions ’. A moral tenet of Jainism forbids such eating, but since this behaviour of an individual does not affect any other person, it is ethically neutral. Fortunately, no law exists (in India) making eating onions a punishable moral tenet. Consider ‘stealing’: this action is morally, ethically and legally wrong.

Using this method of classification, every single ethical question can be resolved unambiguously. The commonly cited 5 ‘doctrines’ or theories’ on ethics) or  the ‘dharma’ concepts do not resolve issues categorically; and hence all these need to be set aside. Managers need to test every moral tenet  using the ethics test, know the relevant law, and classify the needed action in one of the seven classes. Then decide whether it is ethically/morally/legally acceptable, not acceptable or neutral. Ethically unacceptable decisions are often considered permissible owing to lack of clarity on WHAT is ethical by definition: all cases (about 15) presented in the boxes in this book as dilemmas: they are Right versus Wrong situations, where the wrong should not be done. A fertiliser unit polluting the sea water   is undoubtedly an unethical action: it is Right versus Wrong. No cost computations or benefits assessment can make ‘polluting’ acceptable ethically. Ethics does not permit ‘tradeoffs’. The plant management needs to admit, “We happen to be unethical because adhering to ethics is too costly” Classification does not change because of the context.

All examples from Mahabharata are about the morals at that time. Bhishma hitting on the thigh of Duhshasana   was morally wrong (then): the de-robing of Draupadi in a gathering of people was ethically and morally wrong, but was legally correct (then, there). Bheema did nothing unethical in hitting Duhshasana below the belt!   Ethical issues in wars  are essentially questions of ‘Wrong versus Wrong’. When terrorists strike, does one think of responding ethically? Such situations occur rarely, if at all, in business transactions and are best avoided in books on business ethics.


Ethical dilemmas are only those where each available alternative action is ethical. This becomes a question of ‘Right versus Right’.  

The definition of ethical acts given above shows that all cases (about 15) presented in the boxes are not dilemmas at all! They are Right versus Wrong situations, where the wrong should not be done. Only when the case is of Right versus Right, like downsizing a business to make it survive, it can be considered as a dilemma. Some ‘constructed cases’ used to bring out dilemmas – persons traveling on railway tracks and in an overcrowded ship  start from an unethical and/or illegal premise. Having been wrong to be begin with, every solution naturally looks wrong and one needs to minimize the wrong!  .

Ethics, morals and laws refer to the Dos and Don’ts that human beings should follow to live happily with each other in human society. The moment the field is widened to include the life of animals (other living beings),  we face an impossible situation. No human can then survive since killing (eating) living things, animals (and plants), would then be unethical! Even global warming needs to be controlled and biodiversity needs to be preserved for the long term survival of human species, not for the sake of ethical considerations to animal and plant kingdoms.

Standards and Norms

Norms refer to what a large number from a ‘population’ are or do, while standards are values established through scientific experimentation or through rigorous logic. Neither are enforceable unless made into a law. Consider the case of air pollution from exhausts of cars. The standard value for permissible level of carbon monoxide is determined scientifically as that which does no harm to humans. The norm –what most cars exhaust –is very much higher. The laws like Euro I and Euro II bring the enforceable level to the standard level in convenient steps.

Some moral tenets can be ‘norms’ of a specific culture. But no ethical or moral or legal tenet needs to be a norm to be considered as a rule to be followed. Therefore, to use expressions like “ethical judgments are normative  “moral standards –all ethical standards are relative — enforceable morals  is not meaningful.

Vital Omissions: Tax Evasion and Corruption

Tax evasion and corresponding black money creation is not even mentioned. Should the traders, professionals, business owners and managers not be told to behave ethically (and morally and legally) and pay all due taxes? This is a Right versus Wrong situation: absolutely no dilemma here. Corruption is stated to be difficult to define (p.88), but it has been defined precisely by Transparency International as ‘using entrusted responsibility for undue personal gain’. Only ‘gifts’ are discussed. Neither the employee nor the employer is told not to be corrupt. Every book on ‘Being Ethical’ needs to show ‘why/how not to succumb to corrupt practices’ and “how/why not to indulge in corrupt practices” To desist temptations requires integrity and character; the vital requirement of excellent self-control is not mentioned explicitly. The two unethical practices that damage India most –tax evasion and corruption – are conspicuous by their absence: why?

 ‘Takeaways’ like — managers have to choose between different actions, each of which has right and wrong aspects.”  “–there are no absolutely ethical or unethical decisions –“these are dependent on personal values —cannot be uniform all over the organisation.” dilute the very message of the book.

‘What is ethical’ can be answered unequivocally. Creative solutions are needed in all cases: in Right versus Wrong to get the desired results without doing the wrong; in Right versus Right, for maximizing the benefit in a humane manner.

If the revised edition of the book adopts the system of defining ethics as universal and morals as culture specific, this excellent book can give unambiguous guidelines on ‘Being Ethical’ to managers the world over.


BE ETHICAL: Ethics as the foundation of business

S. Manikutty

Random House India, 2011