My Five-Step Analysis: JPMorgan. A business ethics case? A business law case? Both?

Last night, as my business ethics class (the class I teach at UNH; it is Economics 629, Business and Society) was about to begin, I saw on the New York Times website an article, “JPMorgan in Talks to Settle Energy Manipulation Case for $500 Million.” According to the article, the Federal Energy Regulatory Commission is accusing JPMorgan of devising “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” accusing a JPMorgan executive of making false and misleading statements under oath, and accusing some JPMorgan traders in Houston of offering energy at prices “calculated to falsely appear attractive” to state energy authorities.

To some business ethics professors, the JP Morgan case would be worthy of spending a few hours, or more, in class discussing it. Many business ethics professors use cases like the JP Morgan case to teach business ethics, that is, teach what to do and not to do if you are an executive.

That is fine, but I think it is also fine to spend only about 10 minutes in class discussing the JPMorgan case. Why? Because in my opinion, the JPMorgan case is more of a business law case than a business “ethics” case. If someone broke the law, there is no need to discuss the “ethics” of the situation. If something is illegal, it is unethical! Period. In that sense, all business law cases are also business ethics cases. I teach a lot about business law in my business ethics course, but the name of my course isn’t simply “business law.” It is “business ethics” (actually, the name of the course is Business and Society; it is primarily a course in business ethics). There is much more to the study of business ethics than just business law. Business law is, to be sure, the most important component of business ethics. That is why the first question in my five-step analysis (my five-step method for making ethical, profitable business decisions) is, “Is it illegal?” If something is illegal, don’t do it. Whether anyone at JPMorgan did anything illegal, I do not know. I’ll wait and see what happens in the case. But if anyone at JPMorgan did anything illegal, they shouldn’t have. If they did anything illegal, they did something unethical.

Beyond that, I don’t have much to say about the JPMorgan case. To me, it is a simple case from a business ethics standpoint: Did they do something illegal? If they did, they shouldn’t have. In my opinion, anything that is illegal is also, ipso facto, unethical. If something is illegal, it means that society has reached a consensus, expressed in a law passed by a majority of people in society (or a majority of their elected representatives), that such conduct is wrong and will not be allowed. My five-step analysis saves you (executives and managers) a lot of time. Is it (the action you are contemplating) illegal? If your answer is yes, don’t do it. If your answer is no, or you’re not sure whether the answer is yes or no, go to Question 2 (Is it a tort, breach of contract, or other activity that might cause someone to sue you in court and win?).

Some business ethics professors might spend a few hours in class talking about why some executives engage in illegal conduct. I see no reason to talk about it. I don’t care why an executive engaged in illegal conduct. He or she should not have engaged in illegal conduct. Period. Nothing justifies illegal conduct. No amount of pressure from bosses, peers, stockholders, or anyone else justifies illegal conduct. Just say no if someone asks you, or wants you, to do something illegal. Don’t do it. Plain and simple.

I devoted most of last night’s class, as I do most of my Business and Society classes, to talking about cases in which it is not clear whether a course of action is illegal; and cases in which a course of action is legal but perhaps not ethical. In other words, I talk about cases in which it is not entirely clear what the right thing to do is. I try to help students develop a good thought process for making business decisions when the “right” course of action is not entirely clear. One thing is always clear: If something is illegal, don’t do it.

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