Ethical and Legal

Issues in Business

Teacher: Ms. Dwyer

▪Define ethics and legal issues.
▪Outline some ethical and legal
issues.
▪Explain principles that must be
adopted in the establishment
and operation of a business. Objectives
▪Factors that cause unethical
behavior.
▪Unethical behaviors and their
consequences.
 What are ethical and legal
issues?

▪Ethics refer to beliefs about what are right

and wrong behaviours or actions, (good or
bad).

▪Legal issues refer to activities that are

guided by the laws of the country.
▪Business owners are required to
obey all legislations concerning
the operations of a business.

▪These include, paying taxes,

Ethical and
business registration, obtaining
licenses when required etc. Legal Issues

▪Business owners should also

operate their business based on
integrity.
 Ethical and Legal Issues
This involves:
▪ Environmental awareness – reducing pollution and
harmful effluents in the rivers and seas.

▪ Ensuring that the business is genuinely a firm or

establishment and not using it as a front for money
laundering and other illicit activities.

▪ Ensuring that capital is legally obtained and not

tainted with illegal operations as the source of
funding.

▪ In the operations of a business, payment of national

insurance contributions and taxes.
Principles That Must Be Adopted In The Establishment
and Operation of a Business

▪The adoption of an organisation code of ethics.

▪Implement policies on environmental issues.

▪Implement policies on handling of personal

information.
 Factors that cause unethical
behaviour
▪Personal gains over and above other persons.
▪Pressure to show quarterly growth in earnings.
▪Cultural pressures to put profitability ahead of
ethical behaviour.
▪Absence of a consistent system to monitor and to
enforce ethical and legal practices rigidly.
▪Competition which may force entrepreneurs to
engage in unethical behaviour to boost
productivity.
 Examples of unethical behaviours and their
consequences
Examples of Unethical Behaviour Consequences
Misleading advertisements- It is Citizens will buy products and waste
deceptive and promises many things that their money.
may not happen.

Withholding tax- This cheats the Poor quality of service such as health and
government of revenues that it needs to education.
finance/pay for services hospitals, build
roads etc.

Unethical disposal of waste- Pollution of This can cause health threats.

air, soil and water. (lack of
environmental awareness)
Money laundering- Using money that has Distortion in the national economy or the
been illegally gained in a legally government has an inaccurate measure
registered business. of the flow of money. This will result in
their plans for the country being
ineffective.
▪Tied selling (marrying of goods).

▪Untrue sale price – For example,

writing the word ‘’sale’’ on items for
which the price remains the same.
Other
▪The use of market dominance to Unethical
squeeze firms out of the industry- Behaviours
For example large firms may drop the
price of their goods so low that small
firms are unable to compete with
them.
 Other consequences of
unethical behaviour
▪Loss of sales
▪Loss of reputation
▪Loss of important contracts
▪Inability to obtain loans
▪Negative publicity
▪Government may revoke licenses
▪Legal action

N.b. Legislations protect consumers, competitors

and society from unethical practices of a business.