Closing the Gap Between Business Ethics and the Law

Business Ethics and the Law

The gap between business ethics and the law enables businesses to operate unethically without breaking the law.

Don't cross the street against the light. Ride your bicycle on the right side of the road and always use signals. These are examples of the way we are taught from a young age that laws are meant to protect us, and that following the laws will keep us safe. Businesses operating within the law, but still acting unethically, make this long-standing line of thinking untrue.

Why Is There a Gap Between the Law and Doing the Right Thing?

A business exists to make money. This statement is one of the first facts business students learn. In addition to being used as a business rule, and even more importantly, it is one of the pillars holding up capitalist economies. Does that, and should that, mean that anything goes in business as long as the result is a profitable business?

Take this thought further to look at the laws regarding ethical issues and the way those laws are enacted and promulgated. This is the black hole in the center of the gap between business ethics and the law. Laws come into existence only after enough people have been endangered and hurt to make others take notice. Some new laws end up as big news, while others slip quietly into the books, only to be rarely if ever, enforced.

The Heart of CSR

This gap is the heart of the corporate social responsibility field because it allows businesses to operate unethically without breaking the law. Plenty of both current and historical examples exist. One current example, as of June 2011, making the news on a regular basis, is the controversial practice of natural gas hydro-fracking. Most of the gas companies involved are technically operating within the law, but current laws were not drafted with the goal of protecting citizens from a proprietary, or secret, list of fracking brine chemicals. This frees up gas companies to use, transport, and dump these chemicals under lax legislative guidelines. Laws will probably eventually be enacted to close this particular gap, but only after enough people get sick and die to make the media and legislators take notice.

History of Weak Ethical Business Practices

Historical examples go back to early capitalist practices. Labor laws were enacted, for example, in the early 1900s to protect workers only after countless lives were lost. Global business practices bring us a more recent historical example via Nike's late 1990's black eye for allowing the use of child labor to make soccer balls in Pakistan. Pakistan's laws did not prohibit the use of child labor, so while widely considered unethical, Nike was not breaking the law by permitting the practice by its suppliers.

Can a Company Recover From Bad Business Ethics?

The Nike child labor example also gives us a clue as to what a company can do to close the gap between business ethics and the law. First, Nike publicly acknowledged what had happened and, albeit hesitantly, accepted responsibility. Then the company ramped up efforts in other areas of ethical business practices, becoming a leader in creating new sustainable products, and they have earned a reputation for positive business practices.

Businesses have a responsibility to act ethically, even before laws are created to enforce ethical behavior. Sadly, businesses often fail to meet that responsibility, making new laws necessary.


  • Earth Times: Dangers of Fracking Go Beyond Poisoned Water Supplies and Earthquakes
  • American: TED Case Studies: Nike and Child Labor
  • The Labor Relations Process (Seventh):2001: Holley Jr., Jennings, & Wolters: Harcourt, Inc.

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