The relationship between ethics and the law

What is the relationship between ethics and the law?  Are they complementary or do they conflict with one another?

Fundamentally, the law and ethics serve a similar purpose and share many important characteristics in establishing boundaries and in guiding human behavior.  However, important differences exist.  

On the one hand, the law consists of a set of institutionalized rules and regulations that govern society and are designed to maintain order.  In civilized societies, laws are externally developed, imposed and enforced by the government through social institutions designed to protect its citizens and enforce punishment for individuals who break the law.

Ethics, on the other hand, is subjective and consists of internal principles that guide individual action.  Ethical behavior is dictated by an individual’s internal moral compass, value system and personal integrity.  These characteristics define a person’s understanding of what is fundamentally good and right, and guide how that person will make decisions and behave in challenging situations.  Ethical behavior both defines, and is measured by, culture and different societies and cultures have different ideas of ethical behavior.

Fundamentally, both the law and ethics are designed to regulate human behavior.  The relationship between these two principles, therefore, is complex with many competing priorities.  Consider, for example, situations where an action is illegal, but arguably ethical - e.g., robbing a bank to feed a family in need.  Yet other situations exist that are not per se illegal, but arguably unethical - e.g., lying, breaking a promise or betraying a confidence.   

So, the question remains - what is the relationship between ethics and the law?  And what role does ethics play in guiding human behavior over and above minimum legal standards?  

Let’s examine how these principles operate in the business world.  To manage compliance, responsible organizations must implement a variety of programs and internal controls to identify and minimize risk.  These include developing policies, procedures, communications, training, risk assessments, and monitoring programs to track compliance, identify gaps and implement corrective action.  

The overall success of these formal compliance programs, however, is highly dependent upon the company’s culture which, in turn, is driven by subjective individual action.  For example, is it in the best interest of the company to forge a signature on a contract to push a deal through by the deadline, or to recognize revenue on a transaction by year-end before the transaction has closed?   

Ultimately, employees need the right tools to effectively navigate these ethical dilemmas when faced with competing priorities, internal demands and stringent business goals often perceived as emphasizing profit over responsible action.  Employees thrive in a transparent culture where they feel empowered to speak up, raise issues for further dialogue, and report noncompliance in good faith without the fear of retaliation.  

Similarly, in companies with a strong ethical culture, managers are properly trained and armed with the tools necessary to engage in dialogue with their teams on ethical issues and responsible decision-making, encouraging employees to raise issues of concern.  Fundamentally, culture flows from the top down, where the message from the CEO and senior leadership is that business integrity and compliance go hand-in-hand in creating an ethical culture and a strong reputation for always doing the right thing. 

As the business, social and political landscape evolves, ethical decision-making principles must be integrated into the internal controls and formal governance structures that regulate society, particularly considering the fast pace of change. Our system of laws and regulations, although comprehensive, is not exhaustive and cannot address every possible scenario that may arise within the scope of human interaction.  It is in these grey areas where the law and ethics intersect and must coexist to effectively govern and ensure a sustainable culture of ethics and integrity in our society.

Lauren A. Ferrari, Esq.
Legal Counsel, Ethics and Compliance Executive 
Senior Advisor, Ethics & Compliance Initiative 
LinkedIn:  www.linkedin.com/in/laurenferrari02