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Legal and Ethical Environment of Business (Mgmt 518). Course Introduction; Today’s Business Environment: Law and Ethics (Meiners et al., Chapter 1; Halbert & Inguilli, Chapter 1). Course Introduction. Introduce myself and course. Call roll. Review syllabus. My e-mail – chsmith@fullerton

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legal and ethical environment of business mgmt 518

Legal and Ethical Environment of Business (Mgmt 518)

Course Introduction; Today’s Business Environment: Law and Ethics (Meiners et al., Chapter 1; Halbert & Inguilli, Chapter 1)

course introduction
Course Introduction
  • Introduce myself and course.
  • Call roll.
  • Review syllabus.
  • My e-mail – chsmith@fullerton
    • Best way to contact me.
  • My website –
    • Check regularly.
    • I will use TITANium for grades only.
    • Blackboard will be defunct as of June 1, 2012.
  • Survey of law and ethics often involves some kind of wrongful conduct which is illegal, unethical or both.
  • Due to this wrongful conduct (or even just an accusation), cases and examples presented in class may deal with offensive matter.
  • All cases and examples are presented for educational value, not “shock” value.
why should mba students be required to take a law course
Why Should MBA Students Be Required to Take a Law Course?
  • Why not? 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., Internal Revenue Code, who is entitled to it when company has multiple owners.
    • Marketing; e.g., false advertising, other misconduct.
    • Worker relations; e.g., employee or independent contractor, hiring/firing decisions.
    • Contracts; e.g., buying or renting premises or equipment.
    • More examples.
bases of american law
Bases of American law
  • Constitutions.
  • Statutes.
  • Common law.
  • Administrative law.
  • “The Constitution” usually refers to United States Constitution which governs entire U.S.
  • All laws in U.S. must comply with U.S. Constitution – 2 aspects
  • Any law conflicting with U.S. Constitution will be invalidated.
  • Any state law conflicting with federal law will be invalidated (preemption).
  • Each state has own state constitution which may provide additional rights; e.g., California Supreme Court decided same-sex marriage case based on state equal protection clause in 2008.
  • Constitutions usually worded in general – even vague – terms.
  • Two purposes of any constitution
    • Create government powers/structure.
    • Guarantee individual rights.
  • Often very-detailed laws created by federal, state and local legislatures; examples include
    • Congress – Federal Arbitration Act.
    • California State Legislature – traffic regulations (California Vehicle Code).
    • Fullerton City Council – parking regulations.
  • “Statute” is generic term – also called codes, regulations and ordinances.
common law
Common Law
  • U.S. legal system is a “common law” system which we got from England; sometimes called “case law.”
  • Judge is required to interpret constitutions, statutes and/or prior cases (precedent) in order to decide current dispute before the court.
  • Virtually any dispute can be decided by referring to precedent.
  • A “case” is the opinion of a court which decides a dispute
    • Usually comprised of introduction, recitation of facts, application of law to facts, conclusion.
    • Examples – Miranda v. Arizona, Brown v. Board of Education.
administrative law
Administrative Law
  • Decisions and rules of federal, state and local administrative agencies that specialize in one area; examples include
    • Federal – EEOC (employment discrimination).
    • State – Division of Labor Standards Enforcement (wage claims).
    • Local – City Personnel Board (city employee contests adverse employment action).
  • Important since many statutes require hearing by administrative agency before being able to file lawsuit in court.
  • Also, great deference accorded to administrative decision if dispute eventually ends up in court so must take administrative proceedings seriously.
categories of law
Categories of Law
  • Substantive law vs. procedural law – see Exhibit 1.5 (Meiners, page 15).
    • Substantive law defines legal rights and obligations
      • Most people just call this “the law.”
      • Examples – contract law, what damages (if any) are appropriate.
    • Procedural law provides methods for determining legal rights and obligations
      • Sometimes a procedural law is called a “technicality.”
      • Examples – statute of limitations and other deadlines.
categories of law cont
Categories of Law cont.
  • Civil law vs. criminal law – see Exhibit 1.4 (Meiners, page 14)
    • Civil law relates to rights and obligations between individuals, businesses and/or government
      • Usually only money involved though court can issue non-monetary judgment.
      • Example – business partners sue each other for partnership money and equipment.
    • Criminal law relates to wrongs against society
      • Investigated, prosecuted and administered by government.
      • Examples – murder, identity theft.
    • One incident can give rise to civil and criminal cases; e.g., O.J.
    • About 99% of this course will deal with civil law.
categories of law cont1
Categories of Law cont.
  • Law vs. equity
    • Action at law is when plaintiff is seeking judgment of money; e.g., compensation for injuries suffered in accident.
    • Action in equity is when plaintiff is seeking non-monetary judgment; e.g., injunction.
    • Difference is important since constitutional right to jury trial in action at law but cannot have jury trial in action in equity.
parties in a civil lawsuit
Parties in a Civil Lawsuit
  • Parties in the trial court
    • Plaintiff vs. Defendant.
    • Cross-Complainant vs. 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 housing development.
parties in a civil lawsuit1
Parties in a Civil Lawsuit
  • Appellant vs. Appellee (federal) or Respondent (California).
  • Cross-Appellant vs. Cross-Appellee (federal) or Cross-Respondent (California).
  • Again, party can be more than one but this is rare since an appeal almost always involves clear winner and clear loser in the trial court.
business ethics
Business Ethics
  • Ethics is the study of what is right and wrong
    • Ethics can be standards based on religious doctrine/beliefs, cultural traditions, family upbringing, teachings of philosophers, etc.
  • Business ethics is a subset of ethics – not a separate subject – that is the study of what is right and wrong in the business world; small group discussions as to these case studies
    • “Does Regulation Improve Business Ethics?” (Meiners, page 19).
    • Lamson v. Crater Lake Motors (Meiners, page 21).
business ethics cont
Business Ethics cont.
  • Should you have different ethics in your “personal life” as opposed to your “business life”?
    • Yes – the business world is highly competitive and giving away your advantage in the name of “ethics” could be costly; e.g., executive quickly agrees to family’s requests at home but is tough negotiator in the office.
    • No – ultimately, you will be accepted and valued for taking a stand in the name of “ethics”; e.g., Jim Edson office painting.
setting the right ethical tone
Setting the Right Ethical Tone
  • Two ways to set the right ethical tone
    • Ethical leadership
      • Owners/executives must be ethical “role model” – be an example for underlings to follow; e.g., boss refuses to lie to customer.
      • Owners/executives cannot “look the other way” when wrongdoing happens – ignoring it will only encourage more of the same; e.g., sexual harassment.
    • Ethics codes and training
      • Provides clarity and ethical awareness.
      • Shows company is serious.
outcome based ethics
Outcome-Based Ethics
  • Utilitarianism
    • Greatest good for the greatest number, or choosing the alternative that should give the greatest overall good.
    • Related to stakeholder theory (see later slides).
    • Example – how to make decision to reduce payroll.
  • End-Means
    • The end [good result] justifies the means [steps taken to achieve result].
    • Often used to justify unethical or even illegal conduct.
    • Example – businessperson disregards unfavorable information when preparing report.
duty based ethics
Duty-Based Ethics
  • Religion
    • Many view religion as providing set of rules to follow though these rules also support community.
    • Example – 10 Commandments.
  • Categorical imperative
    • Person must be willing to accept consequences of having his/her action/decision becoming the universal rule.
    • Examples – cheating on exam; punch in the face.
ethics case studies
Ethics Case Studies
  • To be reviewed with small groups
    • Case Questions 2, 3, 4 and 5 (Meiners, pages 23-24).
    • Ethics Question 3 (Meiners, page 24).
    • Yania v. Bigan (Halbert, pages 3-4).
    • Chapter Problems 1 and 2 (Halbert, page 41).
corporate social responsibility
Corporate Social Responsibility
  • Also known as CSR, corporate citizenship or philanthropy, stakeholder management, and sustainability.
  • Study of CSR usually involves company’s obligation to something beyond the minimum legal requirement.
  • Of course, much debate as to what “something beyond” means or even if company should be doing “something beyond.”
  • Query – what do you do when panhandler asks you for money?
  • Examples of CSR.
csr cont
CSR cont.
  • Various CSR theories
    • Milton Friedman – profit maximization (aka free market)
      • Company has no obligations other than to follow law and maximize profits for owners’ benefit.
    • CSR as business strategy
      • Public relations.
      • Making crisis management proactive, not reactive.
stakeholder theory
Stakeholder Theory
  • Definition taken from Mgmt 440 textbook and slightly modified
    • “An entity that [or person who] is benefitted or burdened by the actions of a corporation [or person or other entity] or whose actions may benefit or burden the corporation [or person or other entity]. “
primary stakeholders
Primary Stakeholders
  • Stakeholder is “primary” is impact of relationship with entity or person is “mutually immediate, continuous, and powerful” (definition taken from Mgmt 440 textbook), including
    • Stockholders (owners).
    • Customers.
    • Employees.
    • Communities.
    • Governments.
    • More examples of all.
secondary stakeholders
Secondary Stakeholders
  • Stakeholder is “secondary” when “the relationship is one of less immediacy, benefit, burden, or power to influence” (definition taken from Mgmt 440 textbook), including
    • Media.
    • Competitors.
    • Suppliers (vendors).
    • Trade associations.
    • Political interest groups.
    • Creditors.
    • More examples of all.
secondary stakeholders cont
Secondary Stakeholders cont.
  • More secondary stakeholders – note there can be some overlap (e.g., future generations and educational institutions)
    • Unions.
    • Political parties.
    • Religious groups.
    • Earth’s biosphere.
    • Future generations.
    • The poor.
    • Educational institutions.
    • More examples of all.
who are the stakeholders
Who are the Stakeholders?
  • Start with the people/entities on the previous slides – one of the big issues with this model is identifying stakeholders which makes this truly a “volume” issue.
  • Which stakeholders on these lists are more important to you generally? To the majority generally? Why?
  • Should any stakeholders on these lists be disregarded? Why?
stakeholder case study
Stakeholder Case Study
  • To be reviewed with small groups
    • Who/what are the stakeholders as Cal State Fullerton – would the stakeholders be different for different issues such as
      • Class cutbacks.
      • Tuition increases.
      • Addition/deletion of academic programs.
      • Campus construction projects?