2. 1 - 1Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04MGT102 Legal Environment of Business University of Management and Technology 1901 North Fort Myer Drive Arlington, VA 22209 Voice: (703) 516-0035 Fax: (703) 516-0985 Website: www.umtweb.edu

3. 1 - 2Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04MGT102 Chapter 1: The Modern Environment of Business Meiners, R. E., Ringleb, A. H. & Edwards, F. L. Legal Environment of Business (8th ed.) © 2003 South-Western. ISBN 0324121512

4. 1 - 3Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04MGT102 Chapter 1 The Modern Environment of Business

5. 1 - 4Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 The Modern Environment of Business Key Functions of the Legal Systems Sources of Law Classifications of Law Ethics and Business Chapter Issues

6. 1 - 5Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 September 11, 2001 The Effects of Terrorism in the Modern Business World Loss of thousands of lives and billions of dollars in assets Increase in military and domestic security Ripple effect to businesses and legal relationships Airlines 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 contracts Some companies pushed over the brink to bankruptcy Others are able to reorganize, working creatively and ethically in a significantly changed world

7. 1 - 6Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 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”

8. 1 - 7Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 Sources of Law Common Law Constitutions Legislatures Administrative Agencies Judiciary Executive

9. 1 - 8Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 COMMON LAW COMMON LAW Came from old English system Judge usually followed earlier decisions that resolved similar disputes Legal principle from cases is called precedent Use of this precedent is Stare Decisis Novel issue? Judge makes new common law Common law varies by state Provides stability but allows change

10. 1 - 9Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 Constitutional Law Fundamental law of the land Establishes limits and power of government U.S. Constitution, the oldest written constitution in force in the world Establishes legislative, executive and judicial branches of government Each state also has its own constitution

11. 1 - 10Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 Statutory Law Legislatures create statutory law Federal Laws State Laws Municipal Laws Judges interpret Must pass Constitutional muster

12. 1 - 11Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 Administrative Regulations Congress creates statute Statute names administrative agency Agency makes regulations Chapter 6 will study in depth

13. 1 - 12Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 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

14. 1 - 13Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 Classifications of Law Public and Private Public- legal relationships between members of society and the government influence behavior bring about social change Private- legal relationships among members of society resolves disputes primarily common law

15. 1 - 14Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 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”)

16. 1 - 15Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 Ethics and Business Public perception of business leaders has fallen, probably from increased expectations & big horror stories More and more focus is on ethics Not to be confused with rules of law See Soldano v. O’Daniels See also United States v. Stanley

17. 1 - 16Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 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.

18. 1 - 17Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 Cyberlaw: Online Ethics and Legal Compliance The 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 employees Sexual harassment and obscene e-mails are problems in companies How do businesses choose to monitor the company computers? Does legal and ethics on-line training for employees have benefits?

19. 1 - 18Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 United States v. Stanley (1987) Stanley, in Army, volunteers to test special clothing Instead, Army gives him LSD Years 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 liable Held: Art. I, Sec. 8 of Constitution gives plenary control over rights of military personnel Dissenting Opinion: Re: Medical trials at Nuremberg--Sue the officers, not the gov’t.

20. 1 - 19Visit UMT online at www.umtweb.edu© 2004 UMT Version 07-22-04 MGT102 International Perspective: “What Does Business Do When A Government Is Immoral?” Prison labor is used in China to make export products There are international concerns about US companies who have joint ventures using prisoners Levi 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....” See article: “China Fights Corruption With Slogans, Not Rule of Law”