Substantive Ethics: Integrating Law and Ethics in Corporate Ethics Programs

Author(s): Mark S. Blodgett

Source: Journal of Business Ethics, Vol. 99, Supplement 1: The 16h Annual International
Conference Promoting Business Ethics (2011), pp. 39-48
Published by: Springer
Stable URL: http://www.jstor.org/stable/41476167
Accessed: 08-05-2018 10:24 UTC

REFERENCES
Linked references are available on JSTOR for this article:
http://www.jstor.org/stable/41476167?seq=1&cid=pdf-reference#references_tab_contents
You may need to log in to JSTOR to access the linked references.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide
range of content in a trusted digital archive. We use information technology and tools to increase productivity and
facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at
http://about.jstor.org/terms

Springer is collaborating with JSTOR to digitize, preserve and extend access to Journal of
Business Ethics

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
J Bus Ethics (2011) 99:39-48
DOI 10.1007/S10551-01 1-1 165-6

Substantive Ethics: Integrating Law and Ethics in Corporate

Ethics Programs

Mark S. Blodgett

Published online: 24 January 2012

© Springer Science+Business Media B.V. 2012

Abstract Continual corporate malfeasance signals the

"Obeying the law, both in letter and in spirit, is the
foundation on which this Company's ethical stan-
need for obeying the law and for enhancing business ethics
dards are built" (Avery 2009).
perspectives. Yet, the relationship between law and ethics
and its integrative role in defining values are often unclear.
While integrity-based ethics programs emphasize ethics
values more than law or compliance, viewing ethics as
Introduction
being integrated with law may enhance understanding of an
organization's core values. The author refers to this inte-
Business ethics controversies continue to arise in an era of
gration of law and ethics as "substantive ethics," analo-
global
gous to the substantive law that evolves over time, which is economic crisis, egregious corporate malfeasance,
exorbitant CEO compensation, fraudulent investment
applied to ethical breaches and carries sanctions for non-
compliance. This article describes the integration of law
schemes, proliferation of tort suits, and global human rights
and ethics as a mid-point between two polar views that abuses. While protection of the economy, investors, and
define law and ethics either as having no relation or as stakeholders is of major concern, calls for tort caps
other
may reduce the parameters of responsibility. Despite the
being one and the same. Since corporations expressly state
which laws they follow, a sample of corporate compliance
need for greater understanding of these matters, the role of
law as it relates to these business ethics issues is not well
statements is used to demonstrate this integrative mid-
understood. The law is often discounted as "mere rules"
point. The sample also reveals that corporate ethics codes
without acknowledgment of its ethical content. Yet,
rarely express ethics and law as being integrated per se.
Therefore, the author creates an example of a securities responses
law to crises in business ethics often include new
regulation in addition to pleas for more ethical business
compliance statement that is introduced with an integrative
behavior.
perspective of law and ethics. Perhaps such revised cor- The connection between law and business ethics
porate codes will encourage corporate respect for bothcompels
law us to more fully explore its role in the current
and ethics and enhance ethical sustainability. global business environment that increasingly demands
ethical sustainability. "For globalization to succeed, it must
Keywords Business ethics and law • Core values • be ethical" (Hoffman and Driscoll 2000, p. 222) and
Corporate ethics codes • Ethical sustainability • generate new business ethics perspectives.
Integrity-based corporate ethics programs • Perhaps this role and challenge are the most prominent
Substantive ethics within the context of corporate behavior. Thus, this article
explores the inter-relationship of law and ethics as applied
to managerial decision-making and corporate governance
by (1) explaining a current, applied approach to the inter-
M. S. Blodgett (El)
relationship between law and ethics; (2) proposing that a
Business Law & Ethics, Sawyer Business School,
Suffolk University, Boston, MA 02108-2770, USA new way of thinking about this inter-relationship is by
e-mail: mblodget@suffolk.edu "re-imaging" the ethics content of the law as "substantive

â Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
 40 M. S. Blodgett

ethics," and statements relegating law to a threshold status are

analogous to
posing that corpo
common. This "clear-line" approach appears in statements
that distinguish
expressly ethics from law as not only different but
encompass
with also superior, such as "ethics
values or consists of standards
integr and
norms for behavior that are beyond laws and legal rights"
and "ethical standards are not the standards of the law. In
fact, they are a higher standard" (Jennings 2006, p. 3).
An Applied Approa
While these statements contribute significantly to our
understanding of ethics and law, they may appear to
Over the centuries
embrace the "separate realms view" (Paine 1994a, b,
scholars have debat
p. 154), where law constitutes a normative minimum to
ethics. However, it is
which neither ethical values attach nor from which do they
either ancient philos
derive or evolve. Such a sharp distinction between law and
Hart (1958) and Ful
business ethics may lead to the conclusion that there is little
ship, or to revive
if any relationship between them. This supposition may
luminaries as enumerated without elaboration in Dunfee
obfuscate their "coinciding" relationship, what Nesteruk
and Paine's similar approaches to this topic (1996; 1994a,
describes as a conduit for the law's "morally creative role"
b). Each accepts such a connection and applies it to busi-
that "rich interplay between law and ethics in the contem-
ness ethics issues. Nor does the author address unethical or
porary business environment" (Nesteruk 1999a, b, p. 604).
ethically neutral law. As Herrera tells us, an exhaustive
It is this rich inter-relationship that the American Law
answer to the relationship between law and ethics is
Institute emphasizes as the ethical viewpoint or purpose of
complicated and leads only to further inquiry. He points
the law that must be complied with rather than a narrow,
out that "entire books will continue to be written on the
literal interpretation (Di Lorenzo 2007). As Hartman
philosophical linkage between law and ethics from the
reminds us, these rules or laws of compliance also provide
utilitarian perspective, the Kantian perspective, or the
clarity to the new culture of integrity-based corporate ethics
Natural-law perspective" (Herrera 2000, p. 2).
programs (Hartman 2000). However, such lofty perceptions
Rather, this article draws upon the scholarly tradition
do not often prevail when laws are looked upon as man-
that recognizes a connection between law and ethics, an
datory compliance or as "mere rules to be followed."
enduring philosophical interest (Dunfee 1996) that is
To further enhance our perspective on this inter-rela-
foundational to contemporary business and legal issues.
tionship between law and ethics, it is necessary to identify
Law and ethics do not conflict, nor are they mutually
another viewpoint, namely, that law and ethics are in
exclusive (Schwartz et al. 2005). As Rawls tells us, the law
complete harmony (the "correspondence view") (Paine
has exerted considerable influence upon philosophical
1994a, b, p. 156). However, this view precludes much
thought through its evolution, principles, and precedent
ethical responsibility and discretion. Each viewpoint of
(Dunfee 1996). Therefore, the author addresses this inte-
separate realms and correspondence has its adherents;
grated or "coinciding" view of law and ethics (Paine
however, there is a middle ground as Dunfee tells us, "the
1994a, b, p. 165) in the section below to further enhance
two domains [law and ethics] are synergistically and inti-
understanding of the role of law within the application of
mately related" and "neither can be fully meaningful or
business ethics today.
realized without the other" (1996, p. 319). Hosmer and
Ehrlich deduce that, although not complete, there is con-
Coinciding View siderable overlap between law and ethics (2008; 2005).
This deduction leads Shaw (1996) to conclude that,
Where there is integration of law and ethics, the ethical
although insufficient to establish an organization's values,
purpose of the law should be evident; for example, laws law evolves with society's view of morals which it codifies
prohibiting fraud enhance the ethics of disclosure and along with ideals. Perhaps a closer examination of these
fairness and in this example, law and ethics can be saidcodified
to morals and ideals will reveal some values suitable

for a corporation's core values.

coincide. Yet, perhaps it is more helpful elaborating on this
coinciding view of law and ethics by thinking of it as This a considerable overlap forms an intersecting point
middle ground existing between two polar extremes:between (1) the "separate realms view" and the "correspon-
dence view." Identifying and exploring this coinciding or
where law and ethics are considered to be totally separate,
and (2) where law and ethics are considered to be identical.
integrative aspect of law and business ethics is important to
understanding a business environment that is often guided
Although at times law and ethics are inter-related, many
continue to differentiate sharply between law and ethics,
by corporate compliance-based programs, but frequently

Ö Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
 Substantive Ethics 41

engulfed One
in portion of today's business ethics environment
egregiou
ethics. centers upon not
Let corporate behavior and the
two approaches to "i
influencing of
mutuality this behavior through
law corporate ethics codesand
are
ethicsdoes
commonly identified asnot enh
compliance-based and values or
behaviorintegrity-based
or ethics programs. Compliance programs
corporat
statements of
focus on law and emphasize prevention andlaw
punishment. In c
sanctionscontrast,
for integrity-based programs
violatio
acknowledge the law,
there but are dominated by commitment
occurs enforcem to organizational values
values. An
(Trevino et al. 1999; emphasi
Paine 1994a, b). Despite their differing
imply, and emphases, these two approaches are not mutually exclusive.
even dem
ethical business behavior, and when this occurs, it is Approaches to corporate ethics programs have various
laudable; however, experience tells us more, and perhaps names and content (Weaver and Trevino 1999) spanning the
this is the compelling reason for re-aligning and enhancingtwo poles of the ethics codes continuum from compliance to
perspectives on the coinciding view where law and ethics integrity. Regardless of the corporate codes nomenclature,
are at times "synergistically and intimately related." "an integrity-based program recognizes the complex rela-
It is clear that corporations have a duty to obey the law,tionship between law and ethics and is far more likely to
yet unfortunately there are business executives who mayachieve the objective of responsible and effective organi-
ignore this duty, be unaware of it, not understand it, or bezational conduct" (Paine 1994a, b, p. 169). Thus, the
apprehensive of it. Hence, the need for compliance state- identifiable and evolving inter-relationship of law and eth-
ments, training, and broad-based communication and edu-ics may reveal a new understanding and application of
cation regarding the law. Ethically integrated compliance business ethics that re-enforces the values or integrity-based
statements imbued with express ethical perspectives may approach where the maximum emphasis is placed not upon
legal compliance but upon ethical decision-making.
more effectively guide behavior than narrow statements of
rules and obligations that are juxtaposed with corporate In a 2005 comprehensive review, Schwartz compiled
values. For example, compliance statements prohibitingand analyzed past studies of corporate ethics codes as part
fraud reveal the ethical perspective that intentional mis- of an extensive search for "universal values." He also
representation obviates good faith and honesty. This resultsincluded global codes and the writings of business ethicists,
all identified by him as sources of business ethics (Sch-
in a lack of trust, which should be avoided when doing
business, whether regulated or not. Integrating such ethicswartz 2005). His thorough review and analysis confirmed
values into compliance statements will unambiguouslythe Aspen Declaration's identification of six universal
allow the law's "morally creative role" to more fully values as follows: "(1) trustworthiness, (2) respect, (3)
participate in fashioning corporate ethics codes. responsibility, (4) fairness, (5) caring and (6) citizenship"
(Schwartz 2005, p. 36). It is therefore reasonable to con-
Corporate Ethics Codes clude that corporate ethics codes generally share in a rich
deposit of universal ethics values.
Analyzing corporate ethics codes is worthwhile in a global Just as corporate codes contain expressions of universal
business environment where ethical issues demand inves- values, they also contain legal compliance statements that
tigation (Donaldson and Werhane 1993) and where orga-address many areas of current business concern. Many
nizational culture is reflected in these formal statements codes blend law and ethics by varying degrees; they do not
(Trevino et al. 1999). As part of corporate culture, ethics merely juxtapose them. These ethics codes often include
codes contain statements of law and ethics that are self- expansive and global expressions of law. Because of this
selected expressions or values of the corporation that are expansive blend, the composition of corporate ethics codes
also an identified source of business ethics (Schwartz 2005). is worth investigating.
Ethics codes are common among large firms (Donaldson
and Werhane 1993), and more than 90% currently use them
(Murphy 2005). They aid in identifying expectations Methodology
(Davies, ed. 1977) and provide guidance to managerial
decision-making by establishing ethical standards (Peppas Although the major or dominant types of legal compliance
2002). According to Webley (Davies, ed. 1977), Cavanaugh statements are generally well known, commonly refer-
(1998) and Boatright (2003) they often include the business enced, (Post et al. 2002; Pagnatarro and Peirce 2007), and
ethics values of integrity, honesty, fairness, trust, andstatic, the author studied a sample of 2008 Fortune 500
responsibility. The last three of these values are also iden-corporate ethics codes to further identify and substantiate
tified as among "six universal values" (Schwartz 2005). them and to glean additional data relevant to this study.

Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
 42 M. S. Blodgett

It Exhibits 1A, IB
should 1С. Among the most prevalent
be, areas of law
howev
studyingexpressed in thesethis
compliance statements are as follows: sam
quently securities
occurring(30%), anti-trust (16.25%), Foreign Corrupt c
to Practices Act or FCPA (11.25%), environment
identify coinci (11.25%),
occurring
and health and safetycorporat
(11 .25%) (See 2A, 2B with percentages
The based on a sample of 6). Four of these was
sample areas, securities s
number including securities fraud, FCPA, and anti-trust, track the
generator,
Federal Organizational Sentencing
statements by Guidelines for compli-
topi
laws" (See
ance programs (PagnatarroExhibit
and Peirce 2007). Also prevalent
ments indicating
within the top 6 was "compliance with all laws" (20%). This th
responding, and
compliance statement has significance since it conceivably co
Some of includes
theall laws, not merely the onespossibl
specifically stated,
the includingcomplianc
legal U.S. law, "host countries' laws" and in some
of cases, "all other countries' laws." International law, a bodyethi
"substantive
article. These exam
or system of law that exists beyond the legal system of any
corroborated with
particular country (Schaffer et al. 2009) may reasonably be
included in this expansive language. International law is rich
in ethics content such as the peremptory norm of jus cogens
Results that embodies high ideals of civilization "from which no
derogation is permitted" (August et al. 2009, pp. 8-9). It may
The sample yielded 21 areas of corporate compliance rang-
be interesting to note that no company's "Integrity Policy"
ing in frequency from 19.35% to .81% as displayed goes
in so far as to generally embrace "due care" (duty of care),
a legal element, and ethical value. This is consistent with past
studies of corporate ethics codes (Blodgett and Carlson
Exhibit 1A 2008 Fortune 500 companies compliance data (30-
1997) unless relegated to the Board of Directors or to a
company sample)
specific "professional area" within or tangential to the code
Compliance area Term Term for accountants, lawyers, or brokers, for example.
frequency frequency
In addition, statements among the different views -
percentage
separate, corresponding, and coinciding - yielded a variety
1 Securities 24 19.35 of ethics and law expressions along this total spectrum. The
2 "All laws" 16 12.90 following are representative of these expressions: "3M is
3 Anti-trust/competition 13 10.48 recognized worldwide as an ethical and law-abiding
4 FCPA 9 7.26 company " and Altria's "Owr Compliance and Integrity
5 Environment 9 7.26 program is focused on doing the right thing , and reflects
6 Health and safety 9 7.26 our family of companies' culture and values and Pacific
7 Information/data 7 5.65 Life's " Ethics and compliance are two closely related and
8 Anti-boycott 6 4.84 intertwining concepts that work together to help us do the

9 Corporate opportunity 5 4.03 right thing " (2009). In general, such statements reveal
10 Employment/EO/non- 5 4.03 aspects of the three views- separate, corresponding, and
discrimination coinciding, but may often appear mixed and possibly
11 Fraud 4 3.23 ambiguous when interpreted alone or together as in the
12 Export law 4 3.23 ethics code of one company presented below.
13 Intellectual property 3 2.42 Since law and ethics at times coincide, it is helpful
14 Money laundering 2 1.61 assigning ethics values to the areas of law found in the
15 Bribes/ Anti-Kickback Act of 1986 2 1.61 sample. The chart given here shows common examples of
16 Immigration 1 0.81 legal compliance areas and possible coinciding ethics val-
ues that are corroborated with the "six universal values."
17 Terrorism 1 0.81

18 Unfair dealing 1 0.81 While not intended as exhaustive or complete, Exhibit 4

19 Fair dealing 1 0.81 shows examples of numerous ethical values encompassed

20 Child & forced labor 1 0.81 by legal compliance. Many of these values are often found
in the ethics sections of corporate ethics codes - a potential
21 U.S. Embargo 1 0.81
reciprocity of express ethical values with compliance
Total compliance terms 124
statements that may lend even more meaning to the

â Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
Substantive Ethics 43

£ 13

t ьЩЩШШШЯШЯШШЯШШ
š/Wýf
/ / Compliance Term

Exhibit IB 2008 Fortune 500

^ ■
Û. 5.00%

'rw/wsws
# * ¿fi* ^ # * ¿fi* ^ V сГ
V сГ
/ ^^ у
</ у
Compliance Term

Exhibit 1С 2008 Fortune 500

ď J> ^ /Р ^ ^
J? <? Jř <р <^ <£
* * <? / <р </ <^ /
/ <*
Compliance Term

Exhibit 2A 2008 Fortune 500 c

statement representative
that "obeying the
is the foundation on which
identification o
dards are built"
part (Avery
of the "p2

Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
 44 M. S. Blodgett

that define
tell much a
concerns of
selected; al
Federal Or
ironically,
are also ide
within firm
ethics valu
Exhibit 2B federal
2008 gui
Fortun
areas percentages
is bad busin
perspectiv
adding global
even more con
im
and ethicsconceivabl
as an eme
making purpose,
and corporatan
tion" exist
universal p
Analysis: Emerging
humanity
Clearly, bu
Many compliance
and ar
ethics.
commonly it identifi
is eviden
component
Pagnatarro and Peirc

Exhibit 3 Excerpts from

Separate Coinciding Corresponding

"While [ethics and compliance] serve similar "Ethics

functions, they are distinct enough to justify related
separate principles in our Code of Business work tog
Conduct" thing"
"Just as there are many laws and regulations that
guide us in our compliance efforts, there are
many ethical standards that guide us in doing the
right thing"

Exhibit 4 Compliance areas

Compliance area Law governing Substantive ethics values Universal values
and coinciding ethics values
Securities Fraud Fairness Fairness

Disclosure Responsibility Responsibility

Insider trading Trustworthiness Trustworthiness
Fiduciary duty
FCPA Bribes Fairness Fairness

Accounting
Anti-trust Competition Fairness Fairness
Employment Equal opportunity Caring Caring
Discrimination Fairness Fairness

Responsibility Responsibility
Trustworthiness Trustworthiness

Environment Environmental protection Caring Caring

Responsibility Responsibility
Trustworthiness Trustworthiness

^ Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
 Substantive Ethics 45

upon one us, may

even many routine questionsdetract
posed to corporate ethics
common officers deal with conflicts of interest that encompass both
juxtapositio
best interests
the legal and ethical concept of "dutyof eth
of loyalty" (2005,
necessaryp. 4). Thus,
is values are
a less ambiguous
more when perceived as u
ethics. part of the rules themselves (Hartman 2000) that also reveal
currently perceived ethical demands in today's business and
Substantive Ethics regulatory environment (Nesteruk 1999a, b).
Codes that take a coinciding view of legal compliance
The argument for ethics without regard for law to guideand ethics have much more to offer our understanding of
the role of law than those taking a separated view. The
business behavior may be analogous to arguing for the
abolition of law and for religious teachings, philosophy, ethical content of law is of such great magnitude that
etiquette and civility to guide our citizenry in correctNesteruk calls for a new way to view the images of law
societal behavior. While this non-legal background is(1999a, b). It is so inter-twined with ethics that Salbu
concludes that ethics permeates the law through its
necessary, highly desirable, and profound, it is also of great
importance to have laws that prohibit deceit, fraud, theft,emphasis on equity or fairness, constitutional concepts
murder, and discrimination and that dole out substantial such as "due process" and modern statutory law (2001).
penalties for violations. It is also important that society andHis specific examples include the Civil Rights Act of 1964,
business respect these laws, recognizing that they embrace cyber law and environmental law (Salbu 2001), each
fundamental ethics values. exemplifying an "applied ethics" (Dunfee 1996, p. 318)
After all, if one were to decide between laws that within the substantive law or perhaps a "substantive eth-
"coincide" or aspiration ethics, which would be then the ics." This author therefore suggests that the concept of
better choice: laws that embrace business ethics that are "substantive ethics" aptly and accurately conveys the
enforced with tangible penalties, or discretionary ethicalcoinciding view of law and business ethics as (1) ethics that
is part of the rights and duties of the substantive law, and
practice that may not be intrinsically valued or acted upon
(2) ethics that therefore evolves as the substantive law
and that carries no formal incentive for doing so? If laws
evolves.
carrying sanctions did not exist, how much influence would The following employment law example, one area
their coinciding ethics values have in guiding managerialof "ethics-permeated" laws shown above in Exhibit 4,
decision-making? illustrates these two aspects of "substantive ethics."
Fortunately, there is no need to decide between law and It has been said that education is the answer to guar-
ethics. But this duality has been the challenge at hand
anteeing equal opportunity to all and that the Civil Rights
because law and ethics are more appropriately viewed Acts,
as and other similar laws are unnecessary. In such a
society, equal employment opportunity would be bestowed
integrative, and if not so viewed contributes to dysfunction
in corporate governance. By the late nineteenth century, upon the deserving by noble minded, ethical, and moral
our nation's history showed us that "[i]n a lawless world,people. Unfortunately, much of this "equal opportunity"
the exigencies of competition tended to drive commercial would be dependent upon the ethical and moral largesse of
many who are the least likely to possess it. Here, as in other
practices toward the level of the most unscrupulous" (Hilts
business ethics challenges, substantive law imbued with
2003, pp. 45^6). Hence, followed the decades of evolving
regulatory response amidst concerns for the fundamental ethics values has been the necessary response. It also
reveals the concurrent unfolding of coinciding ethics val-
undermining of "faith in commercial integrity and the very
foundation of trade" (Hilts 2003, pp. 45-46). Conse-
ues that is analogous to the evolution of the substantive
law. Following is an example as seen in the history of the
quently, in our current era, substantive law makes a major
impact on ethical behavior. For example, the design, common law doctrine of "employ ment-at- will."
manufacture, and distribution of products and services is a Common law doctrines trace their origin to medieval
function of the law's standards of "duty of care." England, the source of our legal system that is based upon
Not to recognize ethics in the substantive law is to missstari
a decisis or the reliance upon case precedent as a guide
significant coinciding perspective, for our products and to deciding current controversies. The common law system
services are governed as much by the ethics and law spansof the globe and many of its doctrines are imbued with
the "duty of care" as are decisions of corporate boards. ethics, in particular, the ethic of "individual responsibil-
Hoffman and Driscoll (2000) and Schwartz et al. (2005) ity;" however, our society has gradually eroded this stark
aspect of the common law by favoring a more societal
recognize that corporate board decision-making is central to
ethics integration within corporations and decisions of viewpoint or sharing of responsibility. According to the
corporate boards carry expectations of trust, a reciprocalcommon law doctrine of "employment at will," either
party can terminate employment at whim without liability
value to responsibility (Fritzsche 1997). As Ehrlich reminds

â Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
 46 M. S. Blodgett

(Bailam 2000).
always This
a threshold. It is at times an evolving and vast array
alteredof business ethics.
over time to
employmentHence, we arrive at an emerging perspective
envir of law and
evolved with the industrial revolution and our nation's business ethics as part of values- or integrity-based ethics
programs - a "substantive ethics" that more descriptively
commitment to equal opportunity. Among the current
reflects the evolving and coinciding, inter-relationship of
restrictions on this doctrine are "wrongful discharge" and
the protections against some forms of discrimination
law and ethics. But how can the image of law be transformed
from the often pervasively narrow view of "rules to be fol-
offered by the Civil Rights Acts. Evolving societal ethics
have thus transformed this common law doctrine and oth- lowed" to an image that encourages the best applications in
ers such as caveat emptor or "buyer beware." ethical decision-making and corporate governance?
As ethics evolves, so does the legislative response or what
some have called "legislating ethics" (Jennings 2006). This Re-Imaged Corporate Compliance
dynamic of regulatory response to ethical breach is highly
predictable as the demand for business ethics increases. Emerging perspectives on the relationship between law and
Hosmer also recognizes this "complex response" where ethics are prompted by Nesteruk's call for "re-imagining"
changing moral standards become institutionalized by social law (1999a, b) and Paine's and Trevino's passionate views
and political processes (2008, p. 71). Thus, law and ethics on integrity-based ethics programs where both legal com-
evolve over time as legislation responds to ethical demands. pliance and ethics are recognized as vital, integrative parts
Perhaps another way of expressing the complexities of of the whole (1994a, b; Trevino et al. 1999). The inter-
"legislating ethics" is through the role of social responsi- relationship of law and ethics also conforms to Hartman' s
bility, or duty. Just as Ostas recognizes that legal duty is "process of ethics integration" (2000, p. 157) where law
encompassed by a more expansive social duty, one that and ethics coincide in corporate codes beyond narrow
"could be entrusted to the goodwill and ethics of the notions of "rules to be obeyed" and where ethical values
business community" (2004, p. 563), as a Kantian "self- are clarified by law (Hartman 2000). This clarity of values
regulator" (Herrera 2000, p. 2), he also concludes that if is consistent with an expanded view of "shared values,"
this duty were not met then regulation would follow. The the norms that create organizational expectations (Weaver
Sarbannes-Oxley Act is one of our most recent and dra- and Trevino 1999), as they imbue legal compliance and the
matic examples of this inter-relation of law and ethics - a corporation's total ethical culture. As the values or integ-
breach of business ethics and a legislative response that rity approach advances, corporate ethics programs may
demands more ethical behavior. more distinctively transform beyond a juxtaposition of the
Other business ethics issues continue to arise, and in polar realms of compliance and ethical values.
reciprocal fashion, regulations and corporate ethics codes There is now an opportunity for re-imaging the law by
respond. This should not be surprising because the under-
enhancing the compliance parts of corporate codes with
pinnings of many legal compliance statements such as anti-
ethics. By re-writing codes to explain and elaborate on the
business ethics context of the law, business can demon-
trust, securities, employment and intellectual property are
based upon tort law. The business ethics of tort law strate
is the reasons why laws should be followed and clarify
that although law is not an ethical totality - neither is it
profound. It defines the contours of responsibility, or duty,
and greatly impacts our society's essential value system
devoid of ethics. Such revised expressions should explain
and culture (France 2005). Unfortunately, the ethical and
unambiguously that ethics and law at times coincide, and
legal underpinnings and relationships of these compliance
they should also make use of identified global values.
areas are generally not well communicated nor well For example, the legal compliance statement "we abide
understood although "exemplary conduct usually reflects
by securities regulation" can be prefaced with the historical
an organizational culture and philosophy that is infused objective of the Securities Acts which is to protect inves-
with a sense of responsibility" (Paine 1994a, b, p. 109). tors by upholding business ethics through fair dealing (Cox
Ethical and legal inter-relationships are pervasive, pre-
et al. 2004) or as our courts have stated, by substituting "a
dictable and continuously evolving. They have an ethicalphilosophy of full disclosure for the philosophy of caveat
impact on business and society as people learn about theemptor and thus to achieve a high standard of business
law, apply it, and eventually embrace it. Our jurispruden- ethics in the securities industry" (Di Lorenzo 2007, p. 280).
The author developed an example of such a values or
tial and legislative processes institutionalize this evolving
ethical impact. As coinciding business ethics evolves,integrity-based
so statement set forth in Exhibit 5.
does substantive, coinciding law to such an extent that Enhancing compliance statements with their ethical
Hoffman recommends that ethics codes stay abreast of the
dimensions will not only communicate that there is ethics
latest legal developments (Boatright 2003). The law is not
in compliance but enhance the ethical context of business

Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
 Substantive Ethics 47

Exhibit 5 makes recommendations to revise statements of corporate

"Securities
Introduction
Our company's commitment to comply with the securities laws is
consistent with the business ethics objectives of the Securities
Acts. Much of securities law today is concerned with ensuring
"fairness" for both consumers and business by balancing the
interests of these two parties. Among the ways it is achieved is
through appropriate transparency and disclosure of material
information. Investors must be adequately informed before they
purchase equities and we must ensure that employees are not
trading on inside-information nor engaging in fraudulent
activities
We believe in treating all of our stakeholders, both internal and
external, in a fair manner. Fairness is highly valued by our
company in any context across all of our business practices,
relationships and commitments
As such, fairness is one of our core and inter-related ethics and
legal compliance values that we use to guide our decision-
making on a daily basis. This integration of ethics and law is part
of our company's commitment to our shared core values - a
vibrant part of our organizational culture and strength
Integrity-base
compliance to more fully express their ethical content. This
regulation"
enhanced process of ethics integration is consistent with
the call to transition from legal-compliance-based ethics
programs to values or integrity-based programs rooted in
the idea that the individual internalizes the shared core
values of the firm as a personal commitment to self-gov-
ernance (Tre vino et al. 1999; Paine 1994a, b) where law is
well acknowledged and ethics is emphasized.
This recommended approach will help business not only
to reach beyond the legal compliance-based notion that
whatever is legal is the ethical extent of corporate respon-
sibility, yet also help business to see the ethical value in
obeying laws. With this knowledge, business is better able to
apply ethical reasoning to even non-regulated areas as part of
its ethical identity of shared core values and its commitment
to ethical sustainability. Greater compliance as a function of
ethics is an appropriate approach and goal for corporate
governance today where the substantive law is re-imaged as
a vital part of business ethics, a "substantive ethics."

generally - a perceived "coming together" of ethics and

law that confronts current and anticipated business issues.
References
The extended context of the value of fairness as indicated
above, is an example of this ethical enhancement and a way
3M Compliance Policy. Retrieved January 1 , 2009, from http://solutions.3m.
to deepen ethical culture, (Trevino et al. 1998; Paine
com/wps/portal/3M/en_US/businessconduct/bcmain/policy/policies/
1994a, b) invigorate managerial decision-making and cor- legalethic/compliance/.
porate governance, and reach for the "goal to achievingAltria, Responsibility - Compliance & Integrity at Altria Group.
global and universal standards of fundamental ethical val- Retrieved December 5, 2009, from http://altria.com/responsibility/
ues" (Hoffman and Driscoll 2000, p. 230). Presently, what 4_//_3_re spci .asp.
August, R., Mayer, D., & Bixby, M. (2009). International business
may appear as a faint glimmer in corporate ethics codes
law (pp. 8-9). Upper Saddle River, NJ: Prentice Hall.
that may mention "integrity" and refer to the law Avery
and Dennison, Code of Ethics and Business Conduct. Retrieved
ethics as "intertwining concepts," may in reality be a December 5, 2009, from http://www.averydennison.com/corporate.
nsf/lebb2cd9540ffe2a882569de00829ce0/67b66.
beacon of change. This enhanced ethics content is consis-
Bailam, D. (2000). Employment-at-will: The impending death of a
tent with the preferred values or integrity-based ethics doctrine. American Business Law Journal , 37(4), 653-687.
program and as this article asserts, an emerging perspective
Blodgett, M., & Carlson, P. (1997). Corporate ethics codes: A
on the substantive law and ethics, a "substantive ethics." practical application of liability prevention. Journal of Business
Ethics , 76(12/13), 1363-1369.
Boatright, J. (2003). Ethics and the conduct of business (4th ed.).
Upper Saddle River, NJ: Prentice Hall.
Conclusion Cavanaugh, G. F. (1998). American business values (4th ed.). Upper
Saddle River, NJ: Prentice Hall.
Cohen, D. (1993). Creating and maintaining ethical work climates:
This article analyzes coinciding aspects of law and busi-
Anomie in the workplace and implications for managing change.
ness ethics as an emerging perspective in managerial Business Ethics Quarterly, 3(4), 343-358.
decision-making and corporate governance. It does so with
Cox, J., Hillman, R., & Langevoort, D. (2004). Securities regulation
the hope of enhancing understanding of the significance of (4th ed.). New York, NY: Aspen Publishers.
Di Lorenzo, V. (2007). Business ethics: Law as a determinant of
the law so that it is perceived not as mere rules to be
business conduct. Journal of Business Ethics , 7(3), 275-299.
obeyed, but rather as integral to ethical decision-making.
Donaldson, T., & Dunfee, T. (1999). Ties that bind : A social contracts
After all, corporate ethics codes that contain statements of approach to business ethics. Boston, MA: Harvard Business
legal compliance have been identified as a source of School Press.
Donaldson, T., & Werhane, P. (1993). Ethical issues in business.
business ethics (Schwartz 2005).
Englewood Cliffs, NJ: Prentice Hall.
The author reviewed legal compliance statements in
Dunfee, T. (1996). On the synergistic, interdependent relationship of
corporate codes of ethics, measured their frequency of business ethics and law. American Business Law Journal , 34(2),
occurrence and explored their ethical content. This article 316-319.

Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms
 48 M. S. Blodgett

Ehrlich, С. Pagnatarro,
(2005). Is
M. A., & Peirce, E. (2007). Between busin
a rock and a hard
Commercialplace; Law
the conflict between U.S.Journal
corporate codes of conduct and ,
France, M. (2005).
European privacy and work laws. BerkleyHow Journal of Employ- to
70-78. ment and Labor Law, 28 , 375-428.
Fritzsche, D. (1997). Business ethics: A global and managerial
Paine, L. S. (1994a). Law, ethics, & managerial judgment. Journal of
perspective. New York, NY: McGraw-Hill. Legal Studies Education, /2(2), 153-169.
Fuller, L. (1958). Positivism and fidelity to law - a reply to professor
Paine, L. S. (1994b). Managing for organizational integrity. Harvard
Hart. Harvard Law Review , 7/(4), 630-672. Business Review, 72(2), 106-117.
Hart, H. L. A. (1958). Positivism and the separation of law and
Peppas, S. (2002). Attitudes toward business ethics: Where east
morals. Harvard Law Review , 7/(4), 593-629. doesn't meet west. Cross Cultural Management, 9, 42-59.
Hartman, L. (2000). Compliance versus integrity: The processPost,
of J., Lawrence, A., & Weber, J. (2002). ' Ethical dilemmas in
ethics integration. Journal of Employment Discrimination Law, business ' business and society (10th ed.). New York, NY:
2(2), 157-159. McGraw-Hill.
Herrera, С. D. (2000). How are Law and Ethics Related? Retrieved
Reed, O. L., Shedd, P., Morehead, J., & Pagnattaro, M. (2009). The
April 30, 2009, from http://www-hsc.usc.edu/~mbernste/tae.ethics legal and regulatory environment of business (14th ed.).
&law.herrera.html . New York, NY: Irwin/McGrawHill.
Hilts, P. (2003). Protecting America's health (pp. 45-46). Chapel
Salbu, S. (2001). Law and ethics. American Business Law Journal,
Hill, NC: The University of North Carolina Press. 38( 2), 209-214.
Hoffman, W. M., & Driscoll, D. M. (2000). Business ethics in the new
Schaffer, R., Agusti, F., & Earle, В. (2009). International business
millennium: Will the patient survive? Business Ethics Quarterly , law and its environment (7th ed.). Mason, OH: South-Western
70(1), 221-231. Cengage Learning.
Hosmer, L. (2008). The ethics of management (6th ed., p. 71). NewSchwartz, M. (2005). Universal moral values for corporate codes of
York, NY: McGraw Hill Irwin. ethics. Journal of Business Ethics, 59(1/2), 27-44.
Jennings, M. (2006). Business ethics (p. 3). Mason, OH: Thomson-
Schwartz, M., Dunfee, T., & Kline, M. (2005). Tone at the top: An
West.
ethics code for directors? Journal of Business Ethics, 55(1-3),
Murphy, P. (2005). Developing, communicating and promoting 79-100.
corporate ethics statements: A longitudinal analysis. JournalShaw,
of W. H. (1996). Business ethics (2nd ed.). Belmont, CA:
Business Ethics, 62(2), 183-189. Wadsworth Publishing Co.
Trevino,
Nesteruk, J. (1999a). Reimagining the law. Business Ethics Quarterly , L., Butterfield, K., & McCabe, D. (1998). The ethical
9(4), 603-617. context in organizations: Influences on employee attitudes and
Nesteruk, J. (1999b). Evaluating the moral creativity of the law. behaviors. Business Ethics Quarterly, 8(3), 447-476.
Business Ethics Quarterly, 9(4), 689-692. Trevino, L., Weaver, G., Gibson, D., & Toffler, B. (1999). Managing
Ostas, D. (2004). Cooperate, comply or evade? A corporate execu- ethics and legal compliance: What works and what hurts.
tive's social responsibilities with regard to law. American California Management Review, 41(2), 131-151.
Business Law Journal, 41 {A), 559-594. Weaver, G., & Trevino, L. (1999). Compliance and values oriented
Pacific life, our principals, our values: A guide to the code of business
ethics programs: Influences on employee's attitudes and behav-
conduct. Retrieved December 5, 2009, from http://www.pacific ior. Business Ethics Quarterly , 9(2), 315-335.
life.com/About+Pacific+Life/Corporate+Governance/Corporate+ Webley, S. (1997). The business organisation. In P. W. F. Davies
Governance2.htm.
(Ed.), Current issues in business ethics. London: Routledge.

Ö Springer

This content downloaded from 202.43.93.14 on Tue, 08 May 2018 10:24:28 UTC
All use subject to http://about.jstor.org/terms