Ethics: Saints, Sinners and Lawyers

Ethics:  For Saints, Sinners and Lawyers

                                                                                                 

All lawyers have ethics. They know the difference between right and wrong. Maybe you can say all people have ethics, but they may not always agree with your version. So what is ethics?

Peak & Valley tax lawyers provide other firms and clients with legal tax advice about dealing with the IRS. Questions of what is ethical involve the extent to which Peak & Valley has

            a.         a legal duty beyond those duties mandated by ethics.

            b.         an ethical duty beyond those duties mandated by law.

            c.         any duty beyond those mandated by both ethics and the law.

            d.         any duty when it is uncertain whether a legal duty exists.

Ethics is the study of what constitutes right or wrong behavior. It is a branch of philosophy, focusing on morality and the way moral principles are derived. Ethics has to do with the fairness, justness, rightness or wrongness of an action.

Business ethics focuses on what is right and wrong behavior in the business world. Business decision-makers often address more complex ethical issues than they face in their personal lives. Business ethics therefore may be much more complicated than personal ethics. For example, Bernie Madoff was convicted of bilking investors out of more than $50 billion through a Ponzi scheme that he had perpetuated for decades. Bernie probably stopped at every red light he came to while driving and played poker with his friends with no ace up his sleeve.

Ethical problems in the US financial institutions contributed to the onset of the deepest recession since the Great Depression of the 1930s. More than $9 trillion in investment capital evaporated. Millions of people have lost their jobs and the American economy has been in near free-fall.

The minimum acceptable standards for ethical business behavior are known as the moral minimum. It is usually considered to be that which is in compliance with the law. However, in making business decisions, business persons must remember that just because an action is legal does not necessarily make it ethical.

The law obviously has made no attempt to codify all ethical requirements. Though professionals of all types are subject to ethical codes of conduct,  individuals are still to be guided by their own personal set of ethics about rightness and wrongness.

This personal guidance stems from exposure to parents, family, religious beliefs, as well as employment and professional responsibilities.

Ethical reasoning requires an individual to examine the situation at hand in light he is or her moral convictions or all ethical standards. Traditionally ethical reasoning, relating to business, has been characterized by two approaches. One such approach is duty-based ethics. This second approach is outcome based aspects.

DUTY BASED ETHICS

Duty-based ethics are derived from religious precepts and other revealed truths. They are also derived from philosophical reasoning.

In the Judeo Christian tradition the Ten Commandments of the Old Testament create fundamental rules for moral action. For believers, the truths are absolute with respect to their behavior. Madoff could have solved his personal and business decisions early by adhering to the “Thou shalt not steal” mandate.

Derived from philosophy, sometimes ask the individual to evaluate their actions in light of the consequences that would follow if everyone in society acted in the same way. This is called the categorical imperative, which can be applied to any action. If your decisions are based on this imperative cheating in business would not be done. As such, cheating by everyone would guarantee no gain to anyone.

Another philosophical view is that of the principle of rights. In this ethical theory, a major factor in determining whether a business decision is ethical is how that decision affects the rights of others. This would include a law firm’s partners its employees as well as its clients and the community and society as a whole. And I plying this theory, a problem exists in determining which rights are most important. What relative weight should be given to each element in the decision process? One way of resolving the problem is to determine which right is the stronger in a particular circumstance. If a decision affects 10 people verses 1000 people, an ethical decision may be resolved. But when all the rights are considered all seen equally weighted the decision becomes much more difficult.

OUTCOME BASED ETHICS

Outcome based ethics is based on the utilitarian approach. This means the greatest good for the greatest number. Unlike duty-based ethics utilitarianism is outcome oriented. This focuses on the consequence of an action, not on the nature of the action itself or on any set of preestablished moral values or religious beliefs.

A decision is ethical under this theory and an action is morally correct. When among the people it affects it produces the greatest amount of good for the greatest number. When this action adversely affects the majority of people it is morally wrong.

In order to make ethical decisions under this theory, a person must determine which individuals will be affected by the action in question; a cost-benefit analysis which involves an assessment of the negative and positive effects of alternative actions on these individuals; and a choice among alternative actions that will produce the maximum societal utility. That is the greatest positive net benefits for the greatest number of individuals.

Some companies use published guidelines to assist their employees in making ethical decisions. They may be useful to lawyers as well:

1. Is the action being considered legal.

2. Are the rules and procedures which are required by either law or internal manual being followed?

3. Are the values of the company being maintained by the decision? That is, is the spirit of the law followed?

4. Does this decision comport with your conscience. If you feel guilty, it does not.

5. Does your decision match up to the promises and commitments you have made to others both inside the business and outside.

A practical decision guide for resolving ethical questions:

Inquiry: the process begins with an understanding of the facts. That is, the parties involved. The ethical problems are then identified and a list of relevant ethic principles is created.

Discussion: a list of action options is developed each option carries with it certain ethical principles.

Decision: those participating in the decision process attempt to create a consensus for  a plan of action.

Justification: will the decision would stand moral scrutiny? Reasons should be determined for each proposed action or series of actions.

Evaluation: does the solution to the ethical issue satisfy professional values, community values and individual values? Can the decision as well as the process which was used to reach those decisions withstand moral scrutiny,.

In law firms, like any other business, one of the most effective ways of setting a tone of ethical behavior is to create an ethical code of conduct. A well-written code of ethics will state the firm's ethical priorities and demonstrate the firm's commitment to ethical behavior. It may also be necessary to create effective training for employees as to the application of the ethical standards involved. This training may include ethical seminars during which employees can openly discuss ethical problems that they may be experiencing. If an employee of the firm is accused of an ethics violation, a court may consider the presence or absence of such training in evaluating the firm's conduct.

By the way the answer to the above Peak and Valley problem is (b). How did you do?

Excerpted and complied from: Ethics and Business Decision Making. Chapter 5; Clarkson, Miller, Cross, 2012.