Business and Its Legal Environment (Management 246)Professor Charles H. SmithCourse Introduction/Business and Its Legal Environment (Chapter 1)/Ethics and Business Decision Making (Chapter 4)Fall 2010
Course introduction• Introduce myself/course.• Distribute sign-in sheet.• Review syllabus.• My e-mail –
[email protected] (best way to contact me).
• Website – http://faculty.fullerton.edu/chsmith (check it regularly).
A disclaimer and an opportunity• Disclaimer – survey of law often
involves some kind of wrongful conduct (illegal, unethical or both); due to this wrongful conduct, cases and examples presented in class may deal with offensive matter; presented for educational value, not “shock” value.
• Opportunity – does anyone have a question for me before we proceed? Your question can be academic, legal, personal, etc.
Why should a business major be required to take a law course?• “Why not?” After all, legal issues
come up on a weekly, daily and even hourly basis in any business.
• Legal issues which can arise in any business can involve– Money; e.g., taxes, how money
must be recorded and reported.
– Marketing; e.g., false advertising, other misconduct.
– Worker relations; e.g., employee or independent contractor, discrimination.
– Contracts; e.g., buying or renting premises or equipment.
– Student examples.
Basis of American law - Constitutions• “The Constitution” usually refers to
the United States Constitution, which governs the entire U.S.; all laws in the U.S. must comply with requirements stated in the U.S. Constitution since it is “the supreme law of the land.”
• However, each state has its own state constitution which often provides additional rights or an alternative way to have rights; e.g., same-sex marriage cases.
• Any constitution creates government powers/structure and also guarantees individual rights, though constitutions are usually general and even vague.
• Student examples.
Basis of American law - Statutes
• Laws created by federal, state and local legislatures.
• Also called ordinances, regulations and codes.
• Often very detailed.• Many areas of law
governed by statutes.• Student examples.
Basis of American law – Common or case law• U.S. legal system is a “common
law” system.• Judge is required to interpret
constitutions, statutes and/or prior cases (“precedent”) in order to make decision of current dispute.
• Stare decisis ordinarily requires judges to follow past decisions, which facilitates predictability and stability in legal and business matters.
• Virtually any legal dispute/issue can be decided by precedent.
• Student examples.
Basis of American law – Administrative law• Decisions and rules of federal,
state and local administrative agencies.
• Important since many laws require a hearing by an administrative agency before being able to file a case in court.
• Courts often give great deference to administrative agency’s decision so take administrative proceedings seriously.
• Student examples.
Categories of law• Substantive law vs. procedural law
– Substantive law defines legal rights/limitations; most would just call this “the law.”
– Procedural law provides the methods for seeking or defending legal rights/limitations.
– Student examples.• Public law vs. private law
– Public law involves matters of public interest.
– Private law pertains to the parties to a dispute only.
– Student examples.
Categories of law cont.• Civil law vs. criminal law
– Civil law relates to duties between individuals, businesses and/or government; usually only money involved.
– Criminal law relates to wrongs against society and is investigated, prosecuted and administered by government.
– Student examples.• Law vs. equity
– Action at law is when plaintiff is seeking money; right to jury trial.
– Action in equity involves non-monetary relief; cannot have jury trial.
– Student examples.
Parties in a civil lawsuit• Parties in the trial court
– Plaintiff– Defendant– Cross-complainant– Cross-defendant– Party can be more than one;
examples include• Business dispute – partners
suing each other.• Construction defect case –
HOA, general contractor and sub-contractors suing each other based on problems at a housing development.
Parties in a civil lawsuit cont.
• Parties on appeal– Appellant– Appellee or respondent– Cross-appellant– Cross-appellee or cross-
respondent– Party can be more than one
though this is rare since an appeal almost always involves clear winner and loser in the trial court.
Law vs. ethics• Law
– Rules which must be followed by everyone in society – like it or not.
• Ethics– Your own rules, such as
personal beliefs, religious doctrine, moral code, cultural traditions, etc.
– May involve giving up a legal right or violating the law.
Law vs. ethics cont.• Examples of following law but
ethical issues raised– Meg Whitman has
reportedly spent about $100M of her own money running for governor.
– County clerk denies same-sex couple’s request for a marriage license in California.
– Student examples.
Law vs. ethics cont.
• Examples of being ethical but– Giving up legal right
• 21 years old or older – refuses to drink alcohol due to religion.
• Student examples.– Violating the law
• Property stolen – forcible retrieval instead of calling police.
• Student examples.
Business ethics• Focus is what is right and
wrong in context of the business world – the specific application of ethics in the workplace.
• Should you have different ethics at work and at home?
• Ethics are important to a company’s long-term viability; reputation lasts longer than this quarter’s profits.
Setting the right ethical tone• Ethical leadership
– Top management must be committed to ethics or underlings will not be – manager must be a “role model.”
– “Looking the other way” – manager’s ignoring worker’s bad conduct will encourage future bad conduct by other workers.
• Ethics codes and training – provides clarity and shows company is serious– Written codes – but see Enron’s
code of ethics; must be more than words on a page.
– Ethics training for employees.
Stakeholders• Conflicts and trade-offs – if decision
needs to be made, which group of “stakeholders” (people with an interest in a business and its decisions) should take priority? Which stakeholders are more important?
• Stakeholders in a business or its decisions can include– Owners/investors.– Employees.– Supply chain (customers and
suppliers).– Government.– Community.– Others – student examples.
Stakeholders cont.
• Who are the stakeholders regarding the following situations/entities?– Cutbacks in classes
offered at CSUF.– Same-sex marriage.– Death penalty.– Your favorite band.
Laws regulating business• Extensive federal, state
and local regulation, with frequent changes/additions to governing law.
• “Ignorance of the law is no excuse.”
• Therefore, important to stay current with governing law.
Legal “gray areas”
• Definitions of terms in statutes and cases, such as– “Reasonable person”– “Good faith”– “Abuse of discretion”
• Exceptions to general rules; often called “loopholes.”
• Contract interpretation, especially if contract comprised of multiple documents/communications and/or has ambiguous wording.
Duty-based ethics• Religious beliefs – every religion
has set of rules that are both absolute and based on compassion; e.g., 10 Commandments.
• Kant – central theme is individual should evaluate his actions in light of consequences that would follow if everyone acted the same way (“categorical imperative”); e.g., theft from employer; punch in face.
• Principle of rights – humans have basic rights, such as life, freedom and pursuit of happiness.
Outcome-based ethics
• Focus on consequences, not the nature of an action itself or any moral/ethical rules; some examples– End/means doctrine – good
result justifies using bad methods to achieve it.
– Utilitarianism – wants the greatest good for the greatest number of people.
Business ethics on a global level
• Different ethics in different countries/cultures– Example – U.S. laws barring
discrimination against women and other “protected classes” of people, such as people of color or non-U.S. origin; other countries permit such discrimination.
– Example – while alcohol consumption is legal in U.S., it is up to each individual whether to imbibe; in some countries, alcohol consumption is illegal, so no individual choice.