Question

Which of the following is the best approach that should be used by the board of a firm if it is aware of a practice that it deems unethical but not illegal?

- It should allow the practice as long as it is not strictly illegal.
- It should prohibit the practice to protect the long-term sustainability of the firm.
- It should allow the practice as long as it is financially profitable.
- It should advise the firm to be discreet while undertaking the practice.

Answer 1

The board should prohibit an unethical yet legal practice to protect the firm's long-term sustainability and ethical standing. This aligns with the intent behind antitrust laws and ensures the company maintains a reputation for fairness and integrity. Option B is correct.

Step-by-step explanation:

The board of a firm that is aware of a practice that it deems unethical but not illegal should take immediate action to address the situation. While the law may not prohibit such actions, ethical standards and the long-term sustainability of the firm are also crucial considerations.

In the context of antitrust laws and restrictive practices, it's important to recognize that legal allowances, such as granting monopolies for innovation, do not necessarily condone all practices that might harm competition or have unethical overtones.

Therefore, the best approach for the board would be to prohibit the practice to ensure the company's reputation remains intact and to encourage ethical business practices that support fair competition and the interests of consumers and other stakeholders.

Ignoring unethical practices in favor of short-term financial gain or because they are not strictly illegal undermines the moral integrity of the firm and can lead to long-term detrimental effects on the company's standing and success.