McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 1

An Introduction to the Fundamentals of Dynamic

Business Law and Business Ethics

1-2

Business Law

Definition: Enforceable rules of conduct that govern commercial relationships

1-3

Functional Areas of Business Affected By Business Law

• Corporate Management

• Production and Transportation

• Marketing

• Research and Development

• Accounting and Finance

• Human Resource Management

1-4

Purposes of the Law• Providing order• Serving as an alternative to altercation• Facilitating a sense that change is possible• Encouraging social justice• Guaranteeing personal freedoms• Serving as a moral guide

1-5

Classification of Law

• Private Law: Involves disputes between private individuals or groups

• Public Law: Involves disputes between private individuals or groups and their government

1-6

Classification of Law

• Civil Law: Involves the rights and responsibilities involved in relationships between persons and between persons and their government

• Criminal Law: Involves incidents in which someone commits an act against the public as a whole

1-7

Sources of Business Law

• Constitutions

• Statutes

• Cases

• Administrative Law

• Treaties

• Executive Orders

1-8

Major Federal Administrative Agencies (Independent)

• Commodity Futures Trading Commission• Consumer Product Safety Commission• Equal Employment Opportunity Commission• Federal Trade Commission• Federal Communications Commission• Interstate Commerce Commission• National Labor Relations Board• National Transportation Safety Board• Nuclear Regulatory Commission• Securities and Exchange Commission

1-9

Major Federal Administrative Agencies (Executive)

• Federal Deposit Insurance Corporation• Occupational Safety and Health Administration• General Services Administration• National Aeronautics and Space Administration• Small Business Administration• International Development Cooperative Agency• National Science Foundation• Veterans Administration• Office of Personnel Management

1-10

Schools of Legal Interpretation

• Natural Law

• Legal Positivism

• Identification with the Vulnerable

• Historical School: Tradition

• Legal Realism

• Cost-Benefit Analysis

1-11

Business Ethics and Social Responsibility

1-12

Business Ethics and Social Responsibility

• Ethics: The study and practice of decisions about what is good or right

• Business Ethics: The application of ethics to the problems and opportunities experienced by businesspeople

• Ethical Dilemma: A problem about what a firm should do for which no clear, right decision is available

• Social Responsibility of Business: Expectations that the community imposes on firms doing business inside its borders

1-13

The “WPH” Process of Ethical Decision Making: W—WHO

(Stakeholders)• Consumers

• Owners or Investors

• Management

• Employees

• Community

• Future Generations

1-14

The “WPH” Process of Ethical Decision Making: P—PURPOSE

(Values)

• Freedom

• Security

• Justice

• Efficiency

1-15

Primary Values and Business Ethics: Freedom

• To act without restriction from rules imposed by others

• To possess the capacity or resources to act as one wishes

• To escape the cares and demands of this world entirely

1-16

Primary Values and Business Ethics: Security

• To possess a large enough supply of goods and services to meet basic needs

• To be safe from those wishing to interfere with your property rights

• To achieve the psychological condition of self-confidence such that risks are welcome

1-17

Primary Values and Business Ethics: Justice

• To receive the products of your labor• To treat all humans identically,

regardless of race, class, gender, age, and sexual preference

• To provide resources in proportion to need

• To possess anything that someone else was willing to grant you

1-18

Primary Values and Business Ethics: Efficiency

• To maximize the amount of wealth in society

• To get the most from a particular output

• To minimize costs

1-19

The “WPH” Process of Ethical Decision Making: H—HOW

(Guidelines)

• The Golden Rule

• Public Disclosure Test

• Universalization Test

1-20

Six Ways To Interpret “The Golden Rule”

• Do to others as you want them to gratify you• Be considerate of others’ feelings as you want them

to be considerate of yours• Treat others as persons of rational dignity like you• Extend brotherly or sisterly love to others, as you

would want them to do to you• Treat others according to moral insight, as you

would have others treat you• Do to others as God wants you to do to them