The Modern Environment of Business

Chapter Issues

Key functions of the Legal Systems Sources of Law Classifications of Law Ethics and Business Corporate Social Responsibility

Key functions of the Legal Systems

Enhancing social stability - limit actions that
are detrimental to the public interest and encourage beneficial actions

Conflict resolution - courts are one mechanism

for resol!ing disputes

Social maintenance - reflect the social !alues

and customs of a society

Social change - effecti!e way to change what is

acceptable beha!ior

Sources of Law
Common Law Constitutions Legislatures "dministrati!e "gencies #udiciary E$ecuti!e

COMMO L!"
Came from old English system #udge usually followed earlier decisions that resol!ed similar disputes Legal principle from these cases is called precedent %se of this precedent is Stare Decisis &ew issue'' #udge ma(es new common law Common law !aries by state )ro!ides stability but allows change

Constitutional Law
*undamental law of the land Establishes limits and power of go!ernment %S constitution+ the oldest written constitution in force in the world+ establishes legislati!e+ e$ecuti!e and ,udicial branches of go!ernment "lso ha!e state constitutions

Statutory Law
Legislatures create statutory law
- #ederal Laws - State Laws - Municipal Laws

$udges interpret Must pass Constitutional muster

!dministrative %egulations
Congress Creates Statute Statute names !dministrative !gency !gency ma&es %egulations see also chapter '

International Sources of the Law

Civil Law Countries #rance( )ermany( Italy( Spain( $apan Code Law Statutory Interpretation Common Law Countries *+S+( Britain( igeria $udge,Made Law %eligious Law Countries Middle East( India Islam( -induism( Communist Law .radition China+ Cuba )olitical "genda part of the law State ownership

Classifications of Law
)ublic and )ri!ate
- public- legal relationships between members of society and the go!ernment
influence beha!ior bring about social change

- pri!ate- legal relationships among members of society

resol!es disputes primarily common law

Classifications of Law
Civil and Criminal Criminal
- guilty can be fined+ imprisoned or both - felony or misdemeanor - beyond a reasonable doubt

Ci!il
- wrongdoer pays money+ but no ,ail time/ - preponderance of the e!idence

Su.stantive and /rocedural Substanti!e

- defines legal rights and regulates beha!ior

)rocedural
- how it is to be enforced 0the nuts and bolts 1

Ethics and Business

/u.lic perception of .usiness leaders has fallen( pro.a.ly from increased e0pectations More and more focus is on ethics ot to .e confused with rules of law see Soldano v+ O12aniels see also *nited States v+ Stanley

Soldano !2 345aniels 067891 p2:;

- <unman enters saloon - pulls gun and threatens to (ill Soldano2 - )atron runs across the street and as(s bartender - 345aniels to call police or let him call2 - 345aniels refuses and Soldano is (illed2 - Ethics or legal !iolation' - =hat duties do we ha!e to assist others'

%nited States !2 Stanley

0678>1 p2::
Stanley+ in "rmy+ !olunteers to test special clothing ?nstead+ "rmy gi!es him LS5/ @ears later+ Stanley finds out and sues "rmy under *ederal .ort Claims "ct Court says &o <o- you were in the "rmy+ so go!ernment not liable

Corporate Social Responsibility

&arrow !iew- agents-of-capital !iew
- social responsibility is to ma(e as much money as possible while conforming to the basic rules of societyA in lawAand ethical custom2 - Corporations may do things that loo( li(e altruism+ but are really self-interest

Broad !iew- social contract

- social responsibility includes more than ,ust profit+ must also consider interests of others

<rimshaw !2 *ord Botor Company 067861 p2:C

*ord ma(es a )into !ehicle which is highly susceptible to fuel tan( damage and e$plosion e!en at low le!el impacts 5espite cost of only about D6C per car to greatly impro!e these faults+ *ord proceeds to ma(e )intos without the e$tra safety features <rimshaw sues after being in,ured in a )into rear-end collision which resulted in a fire #ury awards D9 million in compensatory and D6:C million in puniti!e damages+ which were reduced to D92C by the trial ,udge *ord appealed claiming that the puniti!e damages were e$cessi!e 5amages were upheld on appeal