Ethical behaviour is not always best defined within the confines of the law.
Ethics and the law are not identical. Typically, the law tells us what we are prohibited from doing and what we are required to do. It is said that the law sets minimum standards of behaviour while ethics sets maximum standards.
This seems to be changing as the law tries to impose broader obligations in relation to business and corporate activity, such as with directors’ duties and best interest obligations for financial advice. Yet legal duties and ethical duties still do not always correspond.
Something may be legal but we may consider it unacceptable. And we may consider something right but it may not be legal. Many companies are facing a public backlash for not paying adequate tax in a number of jurisdictions. While this may not be an illegal activity, it is considered wrong and we are looking to the law to make sure it does not allow it.
In other instances, what has long been an acceptable thing to do may have been made illegal in an effort to change cultural practices that disadvantage or endanger certain groups. In India, seeking, giving or accepting a dowry is now illegal, and child marriage has been outlawed in many jurisdictions.
But throughout history we also have instances where laws that are considered unjust are disobeyed in an effort to change them. This occurred with civil rights activist Rosa Parks and the racial segregation laws in the US.
A key issue to consider in relation to ethics and the law is whether the law is adequate as a guide for our personal and professional lives.
"The law sets minimum standards of behaviour while ethics sets maximum standards."
Ethics provides us with guides on what is the right thing to do in all aspects of life, while the law generally provides more specific rules so that societies and their institutions can be maintained. Ethics engages our thinking and also our feelings, including those of disgust and guilt.
The law does not tell us what to do in relation to many of the dilemmas and decisions we have to make in life. While we think obeying the law is an important basis for role models in our life, we consider other traits such as benevolence and empathy as more important in characterising someone as a good person.
Professional accountants, like everyone else, have legal and ethical duties. Compliance with the law, while paramount, does not extinguish the duty to act in the public interest and in accordance with the ethical principles of the profession.
Further, businesses and other organisations, which are increasingly considered citizens of society, are required and expected to not only comply with the law, but to be ethical. We increasingly demand that they are good corporate citizens. Then we have the added complication that the law has not only a letter, it also has a spirit, which demands a commitment to ethics and, particularly, fairness.
Doing what you have the right to do – as in doing something that is not illegal – is not always identical to doing what is right. That goes for both natural and legal “persons”. We are becoming increasingly intolerant of businesses that are not doing anything against the letter of the law, but against its spirit.
Dr Eva Tsahuridu is CPA Australia’s policy adviser, professional standards and governance.
This article is from the April 2015 issue of INTHEBLACK.