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Effects of Ethics, Laws, and Regulations on Organizations

Effects of Ethics, Laws, and Regulations on Organizations

Write a paper evaluating how a company system of ethics, case law and statue, as well as government
regulations affects business organizations. Further, discuss how such should help protect the general
public from harm or unfair business practices.

The achievement of an organization’s vision is dependent on its adherence to the code of
ethics, government regulations and laws. The code of ethics stipulates the relationship between
an organization with employees, suppliers, the society, and the global market. When an
organization places emphasis on protecting the rights of individuals, its reputation is enhanced
leading to its profitability and sustainable growth (Chevron, 2016). The government sets out

policies that regulate the operations of an organization in the form of taxes, global trade,
bureaucracies, and employee relations. Laws control the activities and decisions of a firm and
make them take responsibility for their actions (Gia, 2012).
If there are no laws or ethical systems, the market would be corrupted with illegal
business activities and monopoly powers that would deprive employees and consumers their
rights. For instance, The US Department of Labor was set up to act as the intermediary between
employer and employees to deal with their grievances and advocate for their rights, the Federal
Trade Commission protects consumers from dishonest companies, and Environmental Protection
Agency ensures that both consumers and organizations are protective of the environment. A
sound ethical system is essential in ensuring that a firm follows the laid down regulations and is
protective of the general public.
The effect of ethics in business organizations
A system of ethics consists of values that a firm uses in its activities. The principles that
an organization applies affects its public image, profitability, and survival. According to Luanne
(2013), the code of ethics comprises of leadership ethics, employee ethics, supplier ethics, and it
shapes the culture and values of a firm. Apple’s supplier code of ethics governs the operations
and decisions of its suppliers and sets up measures and standards that are to be followed failure
to which disciplinary action, including contract termination, are enacted. For Example, the
company’s suppliers are supposed to give employees leave and off-days, institute proper waste
management procedures, carry out communal activities and uphold integrity in all their

Through the ethical system, all employers and employees are aware of their
responsibilities and rights in an organization. Consumers and the general public can as well use
the code to sue an organization if they’re wrongfully attended to, or demand a firm to perform
activities in a certain way. Through the code, activists can activate for the rights of children by
demanding firms to refrain from employing underage children. Thus, a firm is supposed to
prioritize the ethical system but not just a moral or legal obligation since it is the foundation
through which its activities should be based on (Stephen, 2015).
i. Managerial code of ethics: Managerial ethics affect the productivity of employees and their
perception towards the organization. Employees follow the steps of their leaders thus when
managers have high ethical standards, they pass the same to the workers leading to a shared
vision. Moreover, leaders are supposed to enact ethics that stipulate the expected behavior of the
employees and disciplinary actions liable if they are not followed. Since leaders mirror an
organization to the internal and external stakeholders, exercise of high ethical standards,
including loyalty, honesty, and integrity goes a long way in ensuring that a firm gets a reputation
that translates to profits.
ii. The employee code of ethics: In every firm, there are set standards that govern the activities
of employees. For instance, customer care clerks are supposed to be friendly and listen to the
needs of clients in a warm way and accountants should follow International Accounting
Standards while preparing financial statements. All employees should prioritize the goals of the
firm and perform their duties honestly. Otherwise, the organization has the right of punishing the
employees through suspension, retrenchment or filing for a case. Ethical standards ensure that
employees produce quality goods and services and are productive leading to the growth of a

iii. The supplier system of ethics: To ensure consistency in production and quality, a firm
designs a code of ethics that suppliers follow while carrying out their operations. The suppliers
must align their activities to the expectations of the firm if they seek a long-term and beneficial
relationship with the firm. The ethical system ensures that suppliers provide quality materials,
are on time, and represent the company in a reputable manner leading.
Effects of government regulations on businesses
Regulations are enacted to control the activities of businesses and protect consumers from
exploitation, control profits, and protect the environment (Mitchelle, 2012). Taxes and tariffs are
the most common types of policies that affect every organization. After an accounting period,
firms publicize their profits and the government through the established bodies takes percentage
of their profits. Thus, taxes affect a number of profits that a business earns at the end of a
financial period. The high the gross profits, the more the tax. Trade regulators enact policies that
affect the interest rates charged by financial institutions and also the globalization procedures.
For instance, some governments regulate the type and number of imports into a country which
affects the activities of business. To protect domestic industries, international firms gave strict
policies in the form of taxes or type of operation that they can carry out or the production
capacity. All these policies affect the productivity and profitability of a firm negatively or
positively. Other common regulations are in advertising, health and safety, labor and
employment, and environmental.
i. Policies on product promotion: The Federal Trade Commission was put in place to control
the affairs of businesses with regards to advertisements. Through the commission, consumers are
protected from sub-standard products and services. The commission examines products before

businesses launch them in the market and they also have to pass through Standard Bureaus to
ensure that they conform to the expected quality standards. Advertisements must be honest and
non-exploitive, firms should be in a position to back-up the adverts, and they must not be unfair
to competitors. Moreover, each product must have information relating to its size, expiry date,
and content. Failure to adhere to the set standards can lead to disciplinary actions taken against a
ii. Labor relations and recruitment: Regulators set laws that affect benefits, minimum salaries,
working conditions, health and safety, confidentiality, and recruitment opportunities. Through
the Fair Labor Standards Act, organizations are mandated on how they are to treat and
compensate workers while the Department of Labor mediates between employers and employees
to ensure that the demands of both parties are considered. Other policies are on insurance,
employee compensation in case of damages, and Social Security.
iii. Health and safety policies: Health Act provides for the safety standards that firms must
follow. Inspection for compliance is usually done by regulators who insist that products must be
processed in a clean environment and the employees must be protected from injuries. Moreover,
the Act stipulates that employers should take insurance cover that compensates employees in
case of injuries while in the line of duty.
iv. Confidentiality: During recruitment exercises, companies collect private information such
as personal numbers, address, and health situation. Employers are thus supposed to keep such
information confidential unless a required during a court proceeding. If the information is used
against an employee or used without the consent of an individual, the injured has a right to sue a

v. Corporate social responsibility and environment: Environmental agencies exist to train and
educate firms on correct disposal and environment management techniques. With the continued
increase in population, much of the land is taken up by industries and humans thus leading to
environmental pollution. To ensure that the environment is safe from air, water, and land
pollution, the agencies set up by the government provide firms with resources that can be used to
dispose of waste. Firms are supposed to be socially responsible such that they establish
infrastructures in accordance to set environmental laws and also get involved in community
activities such clearing and planting trees to protect the environment.

How regulations and ethical systems protect the public from unfair business practices
Constitutional, case and statutory laws are enacted to provide guidelines through which
people and businesses are to conduct themselves. Since there are different industries with diverse
product portfolios, the government comes in to ensure that order is maintained and that
consumers are not exploited. According to Berger (2013), the constitution acts as the system
through which other laws are established and provide for the way cases are solved through the
different jurisdiction bodies. If any member of the public or an organization is wronged, they
have a constitutional right to sue the perpetrator.
An ethical system protects the public by making firms liable for damages that they
experience as a result of their malpractices. Since businesses are mandated to consider the rights
of workers and the community while conducting their operations, the code of ethics establishes
that it’s their responsibility to correct any problem that arises as a result of their actions
(Chevron, 2016). For instance, if a manufacturing firm disposes of waste that leads to land

infertility or diseases, the responsible firm should take measures to eliminate pollution and
ensure that the affected get medical treatment. Moreover, agencies responsible for environmental
conservation can sue the firm on behalf of the public and advocate disciplinary actions against
the firm. With such agencies and measures in place, firms usually take caution while carrying out
their operations to avoid damaging their reputation.
Policies on advertising and product promotions protect the public from toxic and unfair
prices. Before products are advertised, firms must pass them through the agencies as well as
quality regulators to ensure that they are of correct standards and quantity. By having correct
labels, descriptions of content and quantity, consumers can make unbiased judgments and buy
products that fit their specific needs. Prices set are also fair and in accordance with the current
market conditions such that unfair competition is avoided giving the public the power to choose
from different substitutes. If such policy did not exist, monopoly would lead to the provision of
over-priced products that are of poor quantity. By enacting rules that preserve the privacy of
employees and other people that send their details seeking for employment, regulators protect the
public from the wrongful handling of their personal information. Hence, people give out personal
information without the fear of defamation or being exploited, and if it happens, there are
instituted channels through which they can air their grievances and compensated as required.
Through case and statutory laws, consumers are able to file for damages and get a
compensated if the firms are found culpable. For instance, if a firm sells products that do not
conform to set standards or an employee is injured in the course of duty and firms do not
compensate, they have a right to take the matter to a court of law. Thus, the government through
statutory bodies acts as an intermediary between aggrieved parties and the firms. For instance,
employees can sue a firm if they are mistreated or unfairly compensated for work done. In

addition to the statutory bodies, labor agencies also mediate by setting minimum wage rates thus
protecting the employees from exploitation by firms.
Moreover, trade regulations assist in protecting less privileged nations from exploitation
by foreign firms through the heavy tax, entry barriers, and heavy fines in case of wrongful
practices. Otherwise, developing nations would be run by monopolies which would misuse their
resources and charge high prices for their products with no or little return to the citizens of the
country. Also, ethical systems ensure that foreign firms consider the residents of the regions in
employment opportunities as some tend to only employ workers from their respective countries.
Hence, the members of the community get employment opportunities and a chance to grow by
being part of the industries.
Through the constitution, the government sets out laws and regulations that govern the
way firms carry out their operations, treat their employees and other stakeholders, and the society
at large. If there were no laws and regulations, the public would be exploited by firms through
wrongful product descriptions and pricing, confidential information would be wrongfully
handled, and employees unfairly compensated. Thus, businesses are supposed to familiarize with
the established local and international regulations so that they carry out their activities in an
ethical way. Failure to follow the set out standards can lead the regulatory bodies to an
organization which is damaging to its reputations.
All firms have their set of ethical principles that are specific to leaders, employees,
suppliers, and the overall firm (Chevron, 2016). Leaders are supposed to be of integrity and carry
out their activities honestly since they represent the organization, and they are the role models for
employees. If the leaders are ethical, employees become motivated to work for the firm leading

to high productivity and profits. On the other hand, employees should also be ethical in how they
carry out their duties and how they treat customers to ensure the reputation of the firm is upheld.
Supplier code of ethics also stipulates the ethical concerns with respect to how they treat their
workers and the neighboring community, taking care of the environment, and safety conditions.
Since firms are made responsible for their actions through the established ethical systems and
statutory laws and regulations, the public and other regulatory agencies have the right to file
complaints and sue firms if they are unfairly treated. Thus, following set rules and ethical
systems should be prioritized by all firms to ensure that they survive in the market.


Janie, B. (2013). Ethics in organizations and leadership, 3 (34), Jones and Barlett.
Stephen, B. (2015). The role of ethics in 21st-century organizations, 11.

Luanne, K. (2013). The importance of ethics in organizations.
Berger, H. (2013). Sources of law.
Chevron (2016). Business conduct and ethics code, 3(30).

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