Substantive Ethics: Integrating Law and Ethics in Corporate Ethics Programs Continual corporate malfeasance signals the need for obeying the law and for enhancing business ethics
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J Bus Ethics (2011) 99:39–48
DOI 10.1007/s10551-011-1165-6
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
need for obeying the law and for enhancing business ethics
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
being integrated with law may enhance understanding of an
organization’s core values. The author refers to this inte-
gration of law and ethics as ‘‘substantive ethics,’’ analo-
gous to the substantive law that evolves over time, which is
applied to ethical breaches and carries sanctions for non-
compliance. This article describes the integration of law
and ethics as a mid-point between two polar views that
define law and ethics either as having no relation or as
being one and the same. Since corporations expressly state
which laws they follow, a sample of corporate compliance
statements is used to demonstrate this integrative mid-
point. The sample also reveals that corporate ethics codes
rarely express ethics and law as being integrated per se.
Therefore, the author creates an example of a securities law
compliance statement that is introduced with an integrative
perspective of law and ethics. Perhaps such revised cor-
porate codes will encourage corporate respect for both law
and ethics and enhance ethical sustainability.
Keywords Business ethics and law � Core values � Corporate ethics codes � Ethical sustainability � Integrity-based corporate ethics programs � Substantive ethics
M. S. Blodgett (&)
Business Law & Ethics, Sawyer Business School,
Suffolk University, Boston, MA 02108-2770, USA
e-mail: [email protected]
‘‘Obeying the law, both in letter and in spirit, is the
foundation on which this Company’s ethical stan-
dards are built’’ (Avery 2009).
Introduction
Business ethics controversies continue to arise in an era of
global economic crisis, egregious corporate malfeasance,
exorbitant CEO compensation, fraudulent investment
schemes, proliferation of tort suits, and global human rights
abuses. While protection of the economy, investors, and
other stakeholders is of major concern, calls for tort caps
may reduce the parameters of responsibility. Despite the
need for greater understanding of these matters, the role of
law as it relates to these business ethics issues is not well
understood. The law is often discounted as ‘‘mere rules’’
without acknowledgment of its ethical content. Yet,
responses to crises in business ethics often include new
regulation in addition to pleas for more ethical business
behavior. The connection between law and business ethics
compels us to more fully explore its role in the current
global business environment that increasingly demands
ethical sustainability. ‘‘For globalization to succeed, it must
be ethical’’ (Hoffman and Driscoll 2000, p. 222) and
generate new business ethics perspectives.
Perhaps this role and challenge are the most prominent
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-
relationship between law and ethics; (2) proposing that a
new way of thinking about this inter-relationship is by
‘‘re-imaging’’ the ethics content of the law as ‘‘substantive
123
40 M. S. Blodgett
ethics,’’ analogous to the substantive law; and by (3) pro-
posing that corporate codes of ethics be revised to
expressly encompass this inter-relationship as consistent
with values or integrity-based corporate ethics programs.
An Applied Approach to Law and Ethics
Over the centuries, numerous philosophers and legal
scholars have debated the relationship between law and
ethics. However, it is not the intent of this author to review
either ancient philosophy or the more recent exchanges of
Hart (1958) and Fuller’s (1958) debate on their relation-
ship, or to revive the past philosophical discourse of
luminaries as enumerated without elaboration in Dunfee
and Paine’s similar approaches to this topic (1996; 1994a,
b). Each accepts such a connection and applies it to busi-
ness ethics issues. Nor does the author address unethical or
ethically neutral law. As Herrera tells us, an exhaustive
answer to the relationship between law and ethics is
complicated and leads only to further inquiry. He points
out that ‘‘entire books will continue to be written on the
philosophical linkage between law and ethics from the
utilitarian perspective, the Kantian perspective, or the
Natural-law perspective’’ (Herrera 2000, p. 2).
Rather, this article draws upon the scholarly tradition
that recognizes a connection between law and ethics, an
enduring philosophical interest (Dunfee 1996) that is
foundational to contemporary business and legal issues.
Law and ethics do not conflict, nor are they mutually
exclusive (Schwartz et al. 2005). As Rawls tells us, the law
has exerted considerable influence upon philosophical
thought through its evolution, principles, and precedent
(Dunfee 1996). Therefore, the author addresses this inte-
grated or ‘‘coinciding’’ view of law and ethics (Paine
1994a, b, p. 165) in the section below to further enhance
understanding of the role of law within the application of
business ethics today.
Coinciding View
Where there is integration of law and ethics, the ethical
purpose of the law should be evident; for example, laws
prohibiting fraud enhance the ethics of disclosure and
fairness and in this example, law and ethics can be said to
coincide. Yet, perhaps it is more helpful elaborating on this
coinciding view of law and ethics by thinking of it as a
middle ground existing between two polar extremes: (1)
where law and ethics are considered to be totally separate,
and (2) where law and ethics are considered to be identical.
Although at times law and ethics are inter-related, many
continue to differentiate sharply between law and ethics,
and statements relegating law to a threshold status are
common. This ‘‘clear-line’’ approach appears in statements
that distinguish ethics from law as not only different but
also superior, such as ‘‘ethics consists of standards 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).
While these statements contribute significantly to our
understanding of ethics and law, they may appear to
embrace the ‘‘separate realms view’’ (Paine 1994a, b,
p. 154), where law constitutes a normative minimum to
which neither ethical values attach nor from which do they
derive or evolve. Such a sharp distinction between law and
business ethics may lead to the conclusion that there is little
if any relationship between them. This supposition may
obfuscate their ‘‘coinciding’’ relationship, what Nesteruk
describes as a conduit for the law’s ‘‘morally creative role’’
that ‘‘rich interplay between law and ethics in the contem-
porary business environment’’ (Nesteruk 1999a, b, p. 604).
It is this rich inter-relationship that the American Law
Institute emphasizes as the ethical viewpoint or purpose of
the law that must be complied with rather than a narrow,
literal interpretation (Di Lorenzo 2007). As Hartman
reminds us, these rules or laws of compliance also provide
clarity to the new culture of integrity-based corporate ethics
programs (Hartman 2000). However, such lofty perceptions
do not often prevail when laws are looked upon as man-
datory compliance or as ‘‘mere rules to be followed.’’
To further enhance our perspective on this inter-rela-
tionship between law and ethics, it is necessary to identify
another viewpoint, namely, that law and ethics are in
complete harmony (the ‘‘correspondence view’’) (Paine
1994a, b, p. 156). However, this view precludes much
ethical responsibility and discretion. Each viewpoint of
separate realms and correspondence has its adherents;
however, there is a middle ground as Dunfee tells us, ‘‘the
two domains [law and ethics] are synergistically and inti-
mately related’’ and ‘‘neither can be fully meaningful or
realized without the other’’ (1996, p. 319). Hosmer and
Ehrlich deduce that, although not complete, there is con-
siderable overlap between law and ethics (2008; 2005).
This deduction leads Shaw (1996) to conclude that,
although insufficient to establish an organization’s values,
law evolves with society’s view of morals which it codifies
along with ideals. Perhaps a closer examination of these
codified morals and ideals will reveal some values suitable
for a corporation’s core values.
This considerable overlap forms an intersecting point
between the ‘‘separate realms view’’ and the ‘‘correspon-
dence view.’’ Identifying and exploring this coinciding or
integrative aspect of law and business ethics is important to
understanding a business environment that is often guided
by corporate compliance-based programs, but frequently
123
41 Substantive Ethics
engulfed in egregious breaches of both law and business
ethics. Let not the ‘‘incompleteness’’ distract us from the
mutuality of law and ethics. Separating law from business
ethics does not enhance our understanding of ethical
behavior or corporate malfeasance. Corporate compliance
statements of law carry tangible civil and/or criminal
sanctions for violations, and when sanctions are imposed,
there occurs enforcement of any coinciding business ethics
values. An emphasis on aspiration ethics may assume,
imply, and even demand another layer of responsible and
ethical business behavior, and when this occurs, it is
laudable; however, experience tells us more, and perhaps
this is the compelling reason for re-aligning and enhancing
perspectives on the coinciding view where law and ethics
are at times ‘‘synergistically and intimately related.’’
It is clear that corporations have a duty to obey the law,
yet unfortunately there are business executives who may
ignore this duty, be unaware of it, not understand it, or be
apprehensive of it. Hence, the need for compliance state-
ments, training, and broad-based communication and edu-
cation regarding the law. Ethically integrated compliance
statements imbued with express ethical perspectives may
more effectively guide behavior than narrow statements of
rules and obligations that are juxtaposed with corporate
values. For example, compliance statements prohibiting
fraud reveal the ethical perspective that intentional mis-
representation obviates good faith and honesty. This results
in a lack of trust, which should be avoided when doing
business, whether regulated or not. Integrating such ethics
values into compliance statements will unambiguously
allow the law’s ‘‘morally creative role’’ to more fully
participate in fashioning corporate ethics codes.
Corporate Ethics Codes
Analyzing corporate ethics codes is worthwhile in a global
business environment where ethical issues demand inves-
tigation (Donaldson and Werhane 1993) and where orga-
nizational culture is reflected in these formal statements
(Trevino et al. 1999). As part of corporate culture, ethics
codes contain statements of law and ethics that are self-
selected expressions or values of the corporation that are
also an identified source of business ethics (Schwartz 2005).
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
(Davies, ed. 1977) and provide guidance to managerial
decision-making by establishing ethical standards (Peppas
2002). According to Webley (Davies, ed. 1977), Cavanaugh
(1998) and Boatright (2003) they often include the business
ethics values of integrity, honesty, fairness, trust, and
responsibility. The last three of these values are also iden-
tified as among ‘‘six universal values’’ (Schwartz 2005).
One portion of today’s business ethics environment
centers upon corporate behavior and two approaches to
influencing this behavior through corporate ethics codes are
commonly identified as compliance-based and values or
integrity-based ethics programs. Compliance programs
focus on law and emphasize prevention and punishment. In
contrast, integrity-based programs acknowledge the law,
but are dominated by commitment to organizational values
(Trevino et al. 1999; Paine 1994a, b). Despite their differing
emphases, these two approaches are not mutually exclusive.
Approaches to corporate ethics programs have various
names and content (Weaver and Trevino 1999) spanning the
two poles of the ethics codes continuum from compliance to
integrity. Regardless of the corporate codes nomenclature,
‘‘an integrity-based program recognizes the complex rela-
tionship between law and ethics and is far more likely to
achieve the objective of responsible and effective organi-
zational conduct’’ (Paine 1994a, b, p. 169). Thus, the
identifiable and evolving inter-relationship of law and eth-
ics may reveal a new understanding and application of
business ethics that re-enforces the values or integrity-based
approach where the maximum emphasis is placed not upon
legal compliance but upon ethical decision-making.
In a 2005 comprehensive review, Schwartz compiled
and analyzed past studies of corporate ethics codes as part
of an extensive search for ‘‘universal values.’’ He also
included global codes and the writings of business ethicists,
all identified by him as sources of business ethics (Sch-
wartz 2005). His thorough review and analysis confirmed
the Aspen Declaration’s identification of six universal
values as follows: ‘‘(1) trustworthiness, (2) respect, (3)
responsibility, (4) fairness, (5) caring and (6) citizenship’’
(Schwartz 2005, p. 36). It is therefore reasonable to con-
clude that corporate ethics codes generally share in a rich
deposit of universal ethics values.
Just as corporate codes contain expressions of universal
values, they also contain legal compliance statements that
address many areas of current business concern. Many
codes blend law and ethics by varying degrees; they do not
merely juxtapose them. These ethics codes often include
expansive and global expressions of law. Because of this
expansive blend, the composition of corporate ethics codes
is worth investigating.
Methodology
Although the major or dominant types of legal compliance
statements are generally well known, commonly refer-
enced, (Post et al. 2002; Pagnatarro and Peirce 2007), and
static, the author studied a sample of 2008 Fortune 500
corporate ethics codes to further identify and substantiate
them and to glean additional data relevant to this study.
123
42 M. S. Blodgett
It should be, however, noted that the primary purpose of
studying this sample was not to establish the most fre-
quently occurring compliance statements per se but rather
to identify coinciding ethics values in some commonly
occurring corporate statements of legal compliance.
The sample was selected through an on-line random
number generator, and then the frequency of compliance
statements by topic was recorded, for example, ‘‘securities
laws’’ (See Exhibits 1A, 1B, 1C, 2A, and 2B). Also, state-
ments indicating the three different views—separate, cor-
responding, and coinciding, were gleaned (See Exhibit 3).
Some of the possible business ethics values coinciding with
the legal compliance areas were then identified as examples
of ‘‘substantive ethics,’’ a concept to be explained later in the
article. These examples of ‘‘substantive ethics’’ were then
corroborated with the ‘‘six universal values’’ (See Exhibit 4).
Results
The sample yielded 21 areas of corporate compliance rang-
ing in frequency from 19.35% to .81% as displayed in
Exhibit 1A 2008 Fortune 500 companies compliance data (30-
company sample)
Compliance area Term Term
frequency frequency
percentage
1 Securities 24 19.35
2 ‘‘All laws’’ 16 12.90
3 Anti-trust/competition 13 10.48
4 FCPA 9 7.26
5 Environment 9 7.26
6 Health and safety 9 7.26
7 Information/data 7 5.65
8 Anti-boycott 6 4.84
9 Corporate opportunity 5 4.03
10 Employment/EO/non- 5 4.03
discrimination
11 Fraud 4 3.23
12 Export law 4 3.23
13 Intellectual property 3 2.42
14 Money laundering 2 1.61
15 Bribes/Anti-Kickback Act of 1986 2 1.61
16 Immigration 1 0.81
17 Terrorism 1 0.81
18 Unfair dealing 1 0.81
19 Fair dealing 1 0.81
20 Child & forced labor 1 0.81
21 U.S. Embargo 1 0.81
Total compliance terms 124
Exhibits 1A, 1B 1C. Among the most prevalent areas of law
expressed in these compliance statements are as follows:
securities (30%), anti-trust (16.25%), Foreign Corrupt
Practices Act or FCPA (11.25%), environment (11.25%),
and health and safety (11.25%) (See 2A, 2B with percentages
based on a sample of 6). Four of these areas, securities
including securities fraud, FCPA, and anti-trust, track the
Federal Organizational Sentencing Guidelines for compli-
ance programs (Pagnatarro and Peirce 2007). Also prevalent
within the top 6 was ‘‘compliance with all laws’’ (20%). This
compliance statement has significance since it conceivably
includes all laws, not merely the ones specifically stated,
including U.S. law, ‘‘host countries’ laws’’ and in some
cases, ‘‘all other countries’ laws.’’ International law, a body
or system of law that exists beyond the legal system of any
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
that embodies high ideals of civilization ‘‘from which no
derogation is permitted’’ (August et al. 2009, pp. 8–9). It may
be interesting to note that no company’s ‘‘Integrity Policy’’
goes 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
1997) unless relegated to the Board of Directors or to a
specific ‘‘professional area’’ within or tangential to the code
for accountants, lawyers, or brokers, for example.
In addition, statements among the different views—
separate, corresponding, and coinciding—yielded a variety
of ethics and law expressions along this total spectrum. The
following are representative of these expressions: ‘‘3M is
recognized worldwide as an ethical and law-abiding
company’’ and Altria’s ‘‘Our Compliance and Integrity
program is focused on doing the right thing, and reflects
our family of companies’ culture and values,’’ and Pacific
Life’s ‘‘Ethics and compliance are two closely related and
intertwining concepts that work together to help us do the
right thing’’ (2009). In general, such statements reveal
aspects of the three views—separate, corresponding, and
coinciding, but may often appear mixed and possibly
ambiguous when interpreted alone or together as in the
ethics code of one company presented below.
Since law and ethics at times coincide, it is helpful
assigning ethics values to the areas of law found in the
sample. The chart given here shows common examples of
legal compliance areas and possible coinciding ethics val-
ues that are corroborated with the ‘‘six universal values.’’
While not intended as exhaustive or complete, Exhibit 4
shows examples of numerous ethical values encompassed
by legal compliance. Many of these values are often found
in the ethics sections of corporate ethics codes—a potential
reciprocity of express ethical values with compliance
statements that may lend even more meaning to the
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43
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