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17

ETHICAL MANAGAMENT IS BEYOND LEGAL


COMPLIANCE

What is the Bhopal industrial accident?

Let me recall the sad story of a once mighty


company that took place in East Asia, a story
that narrates the connection of business ethics
with legal compliance.
On the night of December 2, 1984, the deadly
methyl isocyanate gas, a highly toxic chemical
(500 times more poisonous than cyanide),
stored in a tank, started boiling furiously when
some chemical elements accidentally entered
the tank.

Emergency valves on the tank exploded and


the white toxic gas began shooting out of some
big pipes. The lethal cloud settled silently over
the neighboring shantytowns of Jaipraksh and
Chola where hundreds were killed instantly in
their bed, choking helplessly in violent spasms.
Meanwhile the eyes of thousands were burned
and blinded and still many thousands more
suffered lesions in their throats, nasal and
bronchial passages.

When it was over, municipal workers gathered


at least 15,000 cold human bodies,
and 200,000 more seriously injured. The
poisonous leak of methyl isocyanate gas
happened in a Union Carbide pesticide plant
located in Bhopal, India, considered by many to
be the worst industrial accident in human
history.
For business to be ethical it is not enough to
follow the law. Why not?

The industrial accident immediately calls for


an analysis of what happened -- from the
perspective of both ethics and law. Sure
enough, the most important areas the Union
Carbide officials were forced to address were
matters concerning the ethical and the legal. It
is ethical because someone or some group of
leaders were morally responsible for what
occurred. It is legal because it has got to do
with the observance of the law.

Did the company officials adhere to the


environmental and safety laws of India? If yes,
were the same company officials aware that
these laws.were of fairly low standard in
comparison with, let say, the environmental
and safety laws of the United States or Japan?
Did the management of Union Carbide have any
responsibility to do more than the
requirements of the local laws to ensure
safety? Were there more ethical requirements
for these business officials than simply to
follow the law? Or was it adequate for them, or
for any business for that matter, simply to
follow the existing law?
The answers to these nagging questions can
supply the difference between business ethics
and legal compliance (Maximiano, 2001).

What is law?

Business Law: Legal Environment, Online


Commerce, Business Ethics, and International
Issues. Philosophers and lawyers have
traditionally defined law as the ordinance of
reason promulgated by someone in authority
for the common good (Aquinas, 1947). More
than a counsel, a recommendation or a
suggestion, a law is an ordinance, a rule, a
command. Because of these intrinsic features,
the law is obligatory.

Since it is an ordinance of reason imposed by a


competent authority, say an Executive Order of
the President of the Philippines, a court order
or a mandate of the Labor Code, it must be
both reasonable and binding.

The law by nature is both persuasive and


coercive. Because it is reasonable, it is
persuasive. Thus the ignorance of the law is
not an excuse. And because it is imposed, it is
coercive. One can get arrested, be fined or
perhaps imprisoned in violation of an
ordinance. For the law to be effective and
compelling, it has to be promulgated,
broadcasted, disseminated or published for
everyone to know.

And finally, the law is for the common good and


not for the good of any individual or of a few.
For our purpose, when I talk about the law I
mean the civil-criminal law of a particular
state and not the natural law in general or the
ecclesiastical law of any sectarian religion or
the Ten Commandments.

What are the important features of the law?

An ordinance has to have certain features or


characteristics in order to qualify as a law.

1. IT MUST BE MORALLY ACCEPTABLE. A law


cannot impose a crime or what is criminal in
nature. It cannot urge you to do anything illegal
or immoral.
Common sense says that an ordinance which
demands you to cheat on clients, evade correct
taxes, discriminate on women, practice child
labor or unfair competition are morally
unacceptable and therefore could not and
should not become a law.

What the law should impose are universal


values that are morally acceptable to all. This
is in fact another indirect argument in favor of
the universal character of human values, and
therefore of the existence of a global business
ethics.

2. IT MUST BE JUST. Unjust law does not


oblige. For this reason, one may disobey a law
that encourages apartheid, sexual or religious
discrimination, business dictatorship or
monopoly, priority of foreign investment over
human rights or any other forms of injustice.

The justified act of directly disobeying an


unjust law, according to some authors, is civil
disobedience.

Civil disobedience is a rare exception to the


rule. The rule is that we are morally obligated
to obey all laws (when these laws are just and
fair).

3. THE PRECEPTS OF A LAW MUST BE


PHYSICALLY AND MORALLY POSSIBLE.
Obviously, Congress or the city council cannot
impose something that is impossible to do or
accomplish, like the suspension of the law of
gravity or the stoppage of the economic law of
supply and demand. In the State of California,
smoking was completely banned in all
restaurants, bars and clubs effective January
1, 1998. But after a while, the lawmakers
themselves admitted that the law seemed
impossible to physically enforce.

4. IT MUST BE ORDAINED FOR THE COMMON


GOOD. Always for the sake of public order and
common interest, the state has the juridical
right to impose specific laws. But a law
cunningly crafted for the welfare of a chosen
few or the privileged one is not binding. That
kind of law loses its moral authority.

Is it correct to consider ethics and law as


identical?

In our study of different cases, it is important


to identify what are the requirements of the
law and what are those of ethics. It may
happen though that certain issues are both
legal and ethical at the same time. It means
there is a need to identify where the law ends
and where ethics begins in each specific case.
From the outset it must be said that it is not
correct to presume that ethics and law are
identical. No, they are not the same. Definitely,
there are some civil laws that demand action,
human behavior or conduct comparable to the
action, human behavior or conduct demanded
by ethics. But the law, specifically civil law,
and ethics are neither equivalent nor the same.

It is important therefore to know how to


distinguish the law from ethics, to determine
what is legal and what is ethical. Law and
ethics do not always jibe. The company's code
of ethics is not conceived and formulated by
the legal department. The code of ethics
usually springs from the company's vision and
mission of service to clients and customers,
employees, shareholders and to society as a
whole. The code of ethics is more than the
strict execution of the company policies or any
of the government regulations.

Business ethics cannot be reduced to the


simple obedience of the law. It is not adequate
for business entrepreneurs and managers
simply to obey the law, as we have learned
from the example of Union Carbide in Bhopal,
India. Whatever is legal is not necessarily
ethical and whatever is illegal is not
necessarily unethical. What is lawful is not
always moral.

In summary, it is important to know that the


ethical duties do not always coincide with
legal obligations because mainly of two
reasons: one, because not everything ethical is
covered in the civil laws since the scope of
ethics is broader than the scope of the law;
and two, because a few number of civil laws
may be unethical and unjust (Maximiano,
2001).

Should the companys code of conduct be


formulated by the legal department?

The company's code of conduct is not


conceived and formulated by the legal
department. The code of conduct usually
springs from the company's vision and mission
of service to clients and customers,
employees, shareholders, to the environment
and to society as a whole. The code of ethics is
more than the strict execution of the company
policies or any of the government regulations.
Business ethics and corporate social
responsibility cannot be reduced to the simple
obedience of the law. It is not adequate for
business simply to obey the law, as we have
learned from the example of Union Carbide in
Bhopal, India. Whatever is legal is not
necessarily socially responsible and whatever
is illegal is not necessarily unethical. Philip
Morris might have complied with all legal
requirements but it might fail in its social
responsibility when we consider the health
hazards it brings to both smokers and non-
smokers.
Posted 17th September 2010 by Jose Mario Bautista Maximiano