Examples of Legal But Unethical Situations in Business
Although certain ethical beliefs are nearly universal, much of the concept of ethics is subjective. Theft has been considered unethical in virtually every society since the dawn of civilization, for example, while certain forestry practices are perpetually debated. Although businesses operate within a wide range of regulations aimed at enforcing ethical standards, the subjective nature of ethics means that even perfectly legal business practices can come under scrutiny as unethical behavior. Businesses must take extra care to respect the ethical perspectives of all of their stakeholder groups.
Labor practices are often a hot-button issue from an ethical perspective, and labor laws tend to lag behind popular sentiment, leaving room for companies to employ legal practices that their customers and employees may find unethical. Paying minimum wage to full-time employees is one of many examples. Although the minimum wage in an at-will employment agreement is legal, those working for minimum wage often cannot manage their day-to-day expenses, leaving them buried in debt and bitter toward their employers. Another common example is working legally with foreign suppliers whose labor practices do not fit the ethical expectations of local customers.
Regulation is heavy in any industry causing direct environmental impacts, but following the law is not always enough to satisfy people in affected areas. Hydraulic fracturing in oil drilling operations is an example from the early 21st century. Although the process is legal as of April 2013, companies that engage in hydraulic fracturing are often the target of angry protests and calls for legal action by those who live in surrounding communities. If your business causes direct environmental impacts, the best ethical policy is to always go beyond the letter of the law, as much as you can, to respect the ethics of those who live in the areas in which you operate.
Marketing tactics can walk a fine line between persuasion and manipulation, and this is another area where subjective ethics come into play heavily. Some marketing tactics can take advantage of uneducated segments of the population, which can be perfectly legal while being scorned throughout the marketplace. For example, before the Credit Card Act of 2009, banks could lure teens into opening credit accounts with promises of financial freedom, regardless of the teens' ability to repay the high-interest debts.
Other tactics can take advantage of harmful addictions by eliciting emotional responses. Casino commercials showing elated winners throwing money into the air is a prime example of this in a world where people can ruin their lives with a gambling addiction. Still other tactics can take advantage of people in need by luring them into predatory services, such as high-cost loans with daily interest compounding.
All businesses must consider the greater impacts of their operations on society in general, which can do much to influence whether consumers view a business as an ethical and respectable organization. For example, a business built around products that increase national obesity or addiction statistics can be successful and well within the law, but at the cost of a tarnished reputation among all consumer groups. The public scrutiny that cigarette and fast-food companies come under proves that these lines of business can be risky, albeit highly profitable.
The same applies to businesses that serve to keep poor people in poverty by marketing $200 shoes to youth in low-income market segments, for example, or by selling high-calorie, low-nutrition foods at a higher price-per-volume in smaller packages in impoverished neighborhoods.