2. The Modern Environment of Business Chapter 1

3. The Modern Environment of Business Key Functions of the Legal Systems Sources of Law Classifications of Law Ethics and Business Chapter Issues

4. The Effects of Terrorism in the Modern Business World September 11, 2001 The Effects of Terrorism in the Modern Business World Loss of thousands of lives and billions of dollars in assetsLoss of thousands of lives and billions of dollars in assets Increase in military and domestic securityIncrease in military and domestic security Ripple effect to businesses and legal relationshipsRipple effect to businesses and legal relationships Airlines cut about 100,000 employees, nearly go bankrupt and are bailed out by the federal governmentAirlines cut about 100,000 employees, nearly go bankrupt and are bailed out by the federal government Companies lose employees through death and economic losses and decide whether or not to invoke force majeure and “acts of war” clauses in contractsCompanies lose employees through death and economic losses and decide whether or not to invoke force majeure and “acts of war” clauses in contracts Some companies pushed over the brink to bankruptcySome companies pushed over the brink to bankruptcy Others are able to reorganize, working creatively and ethically in a significantly changed worldOthers are able to reorganize, working creatively and ethically in a significantly changed world

5. 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 resolving disputes Social maintenance - reflect the social values and customs of a society Social change - effective way to change what is “acceptable” behavior See “Chad: A Third-World Country Looks to Create a Legal System”

6. Classification of Laws Common Law vs. Statutory Law

7. Statutory Law Legislatures create statutory law –Federal Laws –State Laws –Municipal Laws Judges interpret Must pass Constitutional muster

8. COMMON LAW Came from old English systemCame from old English system Judge usually followed earlier decisions that resolved similar disputesJudge usually followed earlier decisions that resolved similar disputes Legal principle from cases is called precedentLegal principle from cases is called precedent Use of this precedent is Stare DecisisUse of this precedent is Stare Decisis Novel issue? Judge makes new common lawNovel issue? Judge makes new common law Common law varies by stateCommon law varies by state Provides stability but allows changeProvides stability but allows change

9. Classifications of Law Public and Private –Public- legal relationships between members of society and the government influence behavior; bring about social change.influence behavior; bring about social change. Criminal, constitutional, social security.Criminal, constitutional, social security. –Private- legal relationships among members of society resolves disputes; primarily common law.resolves disputes; primarily common law. Contracts, torts, agency, property.Contracts, torts, agency, property.

10. Classifications of Law Civil and Criminal Criminal –The guilty can be fined, imprisoned or both –Either a felony or a misdemeanor –Requirement: “beyond a reasonable doubt” Civil –Wrongdoer pays money, but no jail time! –Requirement: “preponderance of the evidence” Substantive and Procedural Substantive – Defines legal rights and regulates behavior Procedural –How it is to be enforced (the “nuts and bolts”)

11. United States v. Stanley (1987) Stanley, in Army, volunteers to test special clothingStanley, in Army, volunteers to test special clothing Instead, Army gives him LSDInstead, Army gives him LSD Years later, Stanley, suffering mental problems, finds out and sues Army under Federal Tort Claims ActYears later, Stanley, suffering mental problems, finds out and sues Army under Federal Tort Claims Act Court says “No Go” - you were in the Army, so government not liableCourt says “No Go” - you were in the Army, so government not liable Held: Art. I, Sec. 8 of Constitution gives total control over rights of military personnelHeld: Art. I, Sec. 8 of Constitution gives total control over rights of military personnel Dissenting Opinion: Re: Medical trials at Nuremberg--Sue the officers, not the gov’t.Dissenting Opinion: Re: Medical trials at Nuremberg--Sue the officers, not the gov’t.

12. Sources of Law Common Law Constitutions Legislatures Administrative Agencies Judiciary Executive

13. Constitutional Law Fundamental law of the landFundamental law of the land Establishes limits and power of governmentEstablishes limits and power of government U.S. Constitution, the oldest written constitution in force in the worldU.S. Constitution, the oldest written constitution in force in the world Establishes legislative, executive and judicial branches of governmentEstablishes legislative, executive and judicial branches of government Each state also has its own constitutionEach state also has its own constitution

14. Statutory Law Legislatures create statutory law –Federal Laws –State Laws –Municipal Laws Judges interpret Must pass Constitutional muster

15. Administrative Regulations Congress creates statute Statute names administrative agency Agency makes regulations Chapter 6 will study in depth

16. International Sources of the Law Civil Law Countries France, Germany, Italy, Spain, Japan Code Law Statutory Interpretation Common Law Countries U.S., Britain, Nigeria Judge-Made Law See “Sources of Law in Japan” Religious Law Countries Middle East, India Islam, Hinduism, Communist Law Tradition China, Cuba Political Agenda part of the law State ownership

17. Ethics and Business Public perception of business leaders has fallen, probably from increased expectations & big horror storiesPublic perception of business leaders has fallen, probably from increased expectations & big horror stories More and more focus is on ethicsMore and more focus is on ethics Not to be confused with rules of lawNot to be confused with rules of law See Soldano v. O’Daniels See also United States v. Stanley

18. Soldano v. O’Daniels Gunman enters saloon - pulls gun and threatens - Gunman enters saloon - pulls gun and threatens to kill Soldano. to kill Soldano. - Patron runs across the street and asks bartender to call police or let him call. to call police or let him call. - O’Daniels refuses and Soldano is killed. - Ethics or legal violation? - What duties do we have to assist others? Held: There are enough legal issues to permit the case to go forward for trial.

19. Cyberlaw: Online Ethics and Legal Compliance The evolution of computer and the Internet in relation to the law have created ethical challenges for businessesThe evolution of computer and the Internet in relation to the law have created ethical challenges for businesses Invasion of privacy is an issue in ethical discussions by employers and employeesInvasion of privacy is an issue in ethical discussions by employers and employees Sexual harassment and obscene e-mails are problems in companiesSexual harassment and obscene e-mails are problems in companies How do businesses choose to monitor the company computers?How do businesses choose to monitor the company computers? Does legal and ethics on-line training for employees have benefits?Does legal and ethics on-line training for employees have benefits?

20. International Perspective: “What Does Business Do When A Government Is Immoral? International Perspective: “What Does Business Do When A Government Is Immoral? ” Prison labor is used in China to make export productsPrison labor is used in China to make export products There are international concerns about US companies who have joint ventures using prisonersThere are international concerns about US companies who have joint ventures using prisoners Levi Strauss and Timberland have stopped their productions out of ethical considerationsLevi Strauss and Timberland have stopped their productions out of ethical considerations One Theory: “Only the rules of law keep state enterprises from riding roughshod over people....”One Theory: “Only the rules of law keep state enterprises from riding roughshod over people....” See article: “China Fights Corruption With Slogans, Not Rule of Law”See article: “China Fights Corruption With Slogans, Not Rule of Law”