Today’s Business Environment: Law and Ethics. Chapter 1 Meiners, Ringleb & Edwards The Legal Environment of Business, 12 th Edition. The Modern Environment of Business. Chapter Issues. Law & the Key Functions of the Legal Systems Sources of Law in the U.S. Classifications of Law - PowerPoint PPT Presentation
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No Generally Accepted Definition of Law Law: May be viewed as a collection of rules or principles
that limit and direct human behavior
Improving Social Stability by Influencing Behavior – The legal system defines social behavior; limits actions detrimental to the “public interest”; restricts business practices that are outside of the ethical norms; and encourages furtherance of social and political goals Laws in different jurisdictions may reflect social norms
Conflict Resolution – Courts are one mechanism for resolving disputes Businesses turning to formal private settlement techniques
– alternative dispute resolution systems outside the court
Social Stability and Change – Reflect the social values and customs of a society, which over time may change Ex: the changing status of same-sex marriages &
controversies involved Effective way to change what is “acceptable” behavior Ex: Laws reflect social changes about discrimination in the
INTERNATIONAL PERSPECTIVE“EMERGING NATIONS AND THE LAW”
• After the tragedy of the 2010 earthquake in Haiti, the world was shocked by of the poverty and notorious corruption of Haiti’s government and legal system.
• Businessmen interviewed after the earthquake said that doing business in Haiti was nearly impossible.
• The demands for bribes are endless.
• Transparency International ranks Haiti 168 most corrupt in the world
Constitutions U.S. Constitution & State Constitutions
Federal & State Legislatures and Statutes Administrative Agencies and Regulations The Judiciary and Common Law The Executive International Sources of Law
• Glacier Northwest hired Baugh Industrial Contractors to build a processing facility, including underground pipe system.
• 3 years later, Glacier suspected a pipe leak. Assigned an employee, Davis, to uncover the leak. While Davis was in the hole to get to the pipes, a concrete wall collapsed, killing him.
• Pipes should last 100 yrs. These were likely damaged in the installation, which caused the leak. Davis’ daughter sued Baugh & others for negligence in father’s death.
• The trial court used the precedent that when a contractor finishes work & owner accepts it, the contractor (Baugh) is no longer liable; only the property owner has liability. Suit dismissed at trial court.
CONTRACTORS, INC.• Appealed to Supreme Court of Washington
• HELD: Reversed and remanded.
• HELD: Court rejected previous common law rule and accepted a more modern approach:o The contractor is liable for injury to 3rd parties as a result of
negligent work, EVEN IF the work was accepted by the property owner.
o Construction has become highly scientific and complex. Landowners rely on a contractor’s expertise and non-expert landowners often don’t recognize poor performance by the contractor.
o Liability occurs when it is reasonably foreseeable that a 3rd party could be injured due to the contractor’s negligence.
Public perception of business leaders has fallen (i.e. big banks and Wall Street)
Ethics: Rules or standards governing conduct of members of a profession
Integrity: Living by a moral code & standards of ethics International business and corruption – duping investors and
bribing government officials
Morality: Conformity to rules of correct conduct within the context of a society, religion or other institutional belief Campaign contributions to influence public officials
Practical consequence are high jury awards against large corporations who cross ethical lines into illegality
INTERNATIONAL PERSPECTIVE “DOES REGULATION IMPROVE
BUSINESS ETHICS?”• World Bank Report
o The more regulation a country has:
1. the more corruption is likely and
2. the lower is the standard of living
o In United Arab Emirates: To enforce a contract requires 49 procedures—takes 1 ½ years & 20% of value of the claim
o In India, documents to export goods requires 9 steps – takes 2x as long as in developed countries
o Countries that regulate the most include: Bolivia, Chad, Costa Rica, Guatemala, Mali, Mozambique, Paraguay, the Philippines and Venezuela
o Countries that regulate the least: Australia, Canada, Denmark, Hong Kong, Jamaica, the Netherlands, New Zealand, Singapore, Sweden and the United Kingdom
Corporate leader is to ensure corporate mission is fulfilled
Commitment to a code of ethics goes beyond legal obligations
Google’s Rule in its Code of Conduct: “Don’t Be Evil” Spells out application in operations, serving customers,
personnel policy & privacy issues
China stated Google was breaking Chinese law by refusing to follow the country’s censorship rules Google agreed to follow China’s rules – has been criticized Says it is working to reduce censorship
CASELAMSON V. CRATER LAKE MOTORS• For 15 years, Kevin Lamson was sales manager for car dealership.• Good employee – valued his job – liked the company’s motto
“customers come first”. Good reputation for high standard of ethics and integrity.
• Sales were lagging. Company hired outside sales firm, Real Performance Marketing (RPM), to run a company 5-day sales promotion.
• Lamson observed a number of “unethical or unlawful” activities.• RPM video said “all vehicles “ cut in price – only video vehicles were
on sale.• RPM tried to “pack the payments” – providing life ins., service
contracts in purchase agreements WITHOUT customers’ knowledge.• Lamson complained to general Manager (GM) was told “go home”.• After the sale, relations worsened between Lamson & GM.• GM told Lamson that another sales manager was making $600 profit
per sales. (Lied: Lamson found out it was only $100.)