Law, in its simplest form, is used to protect one party from another. For instance, laws protect customers from being exploited by companies. Laws protect companies from other companies. Laws even protect citizens and corporations from the government. However, law is neither perfect nor all encompassing. Sometimes, societal ethics fill the voids that laws leave behind; other times, usually when societal ethics have been systematically violated by a group of the population, we write laws that are designed to require individuals to live up to certain ethical standards. In the backlash of the Enron scandal (where Enron executives used accounting tricks to hide losses) for example, new accounting laws were passed. Similarly, as a result of the financial crisis of 2008, legislators proposed new regulations designed to enforce a certain standard of ethical behavior within the financial services industry.
This course will introduce you to the laws and ethical standards that managers must abide by in the course of conducting business. Laws and ethics almost always shape a company's decision-making process: a bank cannot charge any interest rate it wants to charge - that rate must be appropriate. Car manufacturers must install hardware and develop new technologies to keep up with regulations designed to reduce pollution. By the end of this course, you will have a clear understanding of the legal and ethical environment in which businesses operate.
This unit will ask a series of broad questions about the law. How does a law come into being? (Legislators pass them, of course, but how do regulating bodies and judicial precedent contribute to the process as well?) In a broader sense, why do we have laws at all? Is it possible for us to govern ourselves?
In this introductory unit, we will explore the historical events that have shaped business law in the United States. We will also review U.S. court systems, discussing the roles they play in shaping the business law of the country and learning how they enforce those laws.
In general, legal problems between private parties can be addressed in two basic ways - through the courts or through less formal alternatives. In this unit, we will look at both the court process of litigation and alternative methods of handling conflicts, known as Alternative Dispute Resolution, or ADR. Going to court is usually an expensive and time-consuming prospect. Businesses, which are always looking for ways to more effectively manage costs and other resources, can conserve both by first considering other ways to resolve disputes. For example, before going to court over the failure of a business to properly install equipment, a business might first consider entering into informal negotiations with the installer to reach a conclusion that is satisfactory to both sides. If this fails, the business might propose the use of a mediator to reach a mutually beneficial result. Often, contracts contain a provision requiring issues be submitted to arbitration with a non-governmental official or organization that acts, in essence, as judge and jury in the matter. If these efforts fail or it is apparent that ADR would be unworkable from the beginning, then businesses need to consider whether a dispute is best resolved in court, with all of its formal requirements and protections. This unit will begin by looking at the process by which businesses litigate disputes and ask who is involved in litigation and what procedural requirements must be met in order to successfully litigate a dispute. You will then study the various methods of ADR available to businesses and consider how these can be effectively used to deal with disputes.
Tort is a branch of law that involves the enforcement of civil wrongs in the absence of contracts. For example, if you are hit by another vehicle and want to sue for medical costs, there is no contract between you and the driver. This lawsuit it carried out within the tort system. (When the terms of an existing contract are violated, enforcement must be carried out outside the tort system.) Tort law allows individuals and businesses that have been wronged to receive compensation for that wrongdoing. Tort law is frequently used in situations involving medical negligence. If your doctor accidentally removed the wrong arm and you wish to sue, you would sue based on tort law. There are a number of different types of torts, but the most common is negligence, which involves a breach of the "duty of care.” In other words, in order to sue on negligence, you must be able to prove that somebody that was responsible for something violated that responsibility.
Contracts come in all shapes and sizes. You enter into a contract with a broker and seller when you purchase a house. Businesses enter into contracts with other businesses to set prices and solidify relationships. And if you want reliable work done on your house, you will have a contract with your contractor (hence the name).
Contracts are legally-binding relationships. In most circumstances, a contract involves an agreement to deliver a product or service at a specified time on a specified date. Violating a contract can result in a lawsuit or some kind of settlement. While courts can be involved in this process, these situations can also be settled outside of the judicial system. Laws regarding contracts vary from state to state, so it is always important to know the contract law in your area. This unit will discuss contracts in great detail, but it will not cover everything. By the end of this unit, you should have a general familiarity with how most contracts are written and enforced.
The idea of property usually strikes people as a fairly simple concept. However, the law recognizes that the interests in various types of property are often anything but simple and can sometimes result in highly complex problems. For example, if you sell your house to someone, what stays as part of the house and what can you take with you when you leave? Certainly you would have an automatic right to take your clothes, your furniture, and hanging photographs and artwork. But what about a favorite chandelier? How about a built-in island in the kitchen? Can you take the windows? The law recognizes two categories of property. There is real property, which is land and anything attached to it, such as a house and items attached to it. Alternatively, there is personal property, which is everything else. As you work through this unit, ask yourself when is it one item can be personal property in one situation and real property in another.
How many people have the recipe for Coca-Cola? Probably only a few high-level executives within the company. The recipe gives Coca-Cola a distinctive taste that is known the world over. If the recipe became public knowledge, Coca-Cola might lose its advantage; therefore, this recipe is one of the most closely guarded trade secrets in the US.
Trade secrets are one type of intellectual property (property that is not tangible, but has an owner). Most forms of intellectual property are protected by the government. When a famous author publishes a book, you can't go and copy the text and publish it under your name. The author and publisher have a copyright on the text of the book. If you did try to copy the book, you would be sued quickly. In this unit, we will look at the ways in which intellectual property is leveraged in business and study firms that rely solely on licensing their intellectual property for income.
This unit will introduce you to employment law, also known as labor law, regulations that are typically designed to protect the employee from the employer. For example, though a number of Constitutional amendments give equal rights to all races, religions, and genders, issues pertaining to diversity still plague the workforce. Employment law looks at these issues.
Like torts, criminal law deals with what happens when an individual or group of individuals commits a wrong against another individual or group of individuals. However, criminal laws are enforceable through prosecution by the state. Criminal law pertains to the direct violation of an existing law. In criminal law cases, there is a prosecution, a defense, and, in many cases, a jury of peers. This unit will focus on criminal law in the business community.
Corporations are legal entities that protect shareholders from certain legal liabilities. For example, if you start a sole proprietorship and take out a small business loan to get started, you are personally liable for that loan. If you do not repay the loan, the bank can pursue your personal assets. If you are a shareholder in a corporation that fails to pay its loans, however, the bank cannot pursue your personal assets.
Being a corporation has its own caveats. For example, corporations are subject to more regulations and fees. This unit will look into the various types of business entities in the United States and weigh the pros and cons of each. We will emphasize corporations because most of us will end up working for them.
Regulation is always a source of debate within the business community. In the wake of Enron's massive fraud, for example, legislators passed the Sarbanes-Oxley Act (SOX) in an attempt to force corporations to be more diligent in their reporting and auditing. As a result, many corporations have gone private to avoid SOX regulations. Other corporations must devote so much of their resources to SOX, they can barely maintain profitability. Regulations are passed all the time; it is important that managers are aware of all regulations in development and all regulations proposed for removal that could affect their business.
Running a successful business is not simply a matter of obeying the law. There are areas, some addressed by the law and others not, where we have to ask ourselves whether it would be right or wrong to do a particular thing. A life in business often presents us with different ethical challenges. For example, while it may be legal for executives at companies laying off employees to award themselves, at the same time, substantially higher salaries and bonuses, is it right? In this unit, we will present an overview of the many ethical challenges businesses and business-people face. We will look at how ethics applies to various areas within the modern business. This unit will also take a look at Corporate Social Responsibility (CSR), which works from the premise that just because it is legal to do something, doesn't mean it should be done. It may be legal for a corporation to dump a certain amount of waste, but if that impacts the community in a negative way, it could damage the reputation of the business. Corporate Social Responsibility and established business ethics seek to identify a balance between doing what's right for the community and doing what's best for a company's shareholders.
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