The law is the set of rules that guide our conduct in society and enforceable through public agencies. For business environment, the law provides an important guide to ethical decision making. But legal norms and ethical norms are not identical, nor do they always agree. Some ethical requirements are not legally required, though they may be ethically warranted. Conversely, some actions that may be legally permitted would fail many ethical standards. Ethical values and legal principles are usually closely related, but ethical obligations typically exceed legal duties, though law often embodies ethical principles.
For a long time, business executives and managers worked under the assumption that their conduct was morally acceptable as long as they stayed within the law. The problem with that assumption is that the law often lags behind community standards, especially when the ethical questions involved aren’t necessarily universal. So you can stay within the law and still fail to do the right thing.
In business, the law doesn’t always address issues of ethical concern, so a company that merely complies with the law can end up with gaping holes in its obligations to its stockholders, employees, suppliers, and community. Besides, companies often have ethics-sensitive knowledge that people outside the company aren’t privy to, and lawmakers and regulators can’t address problems they aren’t aware of. For example, regulators didn’t know about cancer-causing properties of asbestos for years; only the people inside the companies that worked with asbestos knew about its dangers. Just because the government hasn’t set up regulations that required those companies to make safer products (because they didn’t know the products were unsafe to begin with) didn’t mean the companies could ethically continue making cancer-causing asbestos.