Term Paper on "Legal Environment of Business"

Term Paper 10 pages (2863 words) Sources: 1+

[EXCERPT] . . . .

Legal Business Environment

Legal Environment of Business

Modern businesses have to operate under a variety of laws and regulations. The business manger has to ensure that all federal and state mandate laws are followed to avoid litigation and penalties. In addition to the laws on the books the businesses also have to be sensitive to the public opinion and ethics. Some of the ethical issues are covered by law but others may be related to the public image of the company and may be of equal importance to some businesses.

TRENDS IN LEGAL DECISION-MAKING

Interaction between Ethics and Law

As ethics and law increasingly become interwoven, it is becoming more and more difficult to create distinction between the two. Both ethics and law deal with right and wrong both lay down rules for social cooperation and business conduct. Ethics practiced by the society are often incorporated into the law through legislation or court decisions and are thus followed as a part of the law [Reed et al., 2005].

Ethics are learnt from the society and are often imposed upon an individual by the norms of that society. What is permissible ethical behavior in a society is determined by the society; the family, the company or even the law which incorporates the ethics of the society into the legislation. The motivation to follows ethics, which are not a part of the law, comes from within. Even if the law contains a matter which we may also consider ethically correct, the motivation to follow the law comes from outside the individual in the shape of compliance with the state law. Most people knew that slavery was unethical but as it was not sanctioned illegal, it continued until it was declared illegal.

Our morals tell us the ethics, we know now as we knew before, that discrimination on the grounds of race, color, sex and religion in business transaction is ethically incorrect but the force of law was required to curb the selfishness that is present in all of us.

Morality and ethics do not necessarily have the force of law behind them and may not be practiced by everyone but the fear of the law makes everybody pay attention to his/her legal duty. As Justice Holmes said, "A bad man who cares nothing for an ethical rule which is believed and practiced by his neighbors is likely nevertheless to care a good deal to avoid being made to pay money, and will want to keep out of jail if he can" [Reed et al., 2005].

Legal system, however attempts to set a basic minimum, while ethics may demand us to do more. The logic behind ethical approach in business is sometime divided into two categories; formalism and consequentialism. Formalism advocates absolute morality, a particular act is wrong whatever the justification is the philosophy of formalist (deontologist) ethics. A formalist would consider lying as wrong, no matter what the circumstances. On the other hand, a consequentialist (teleologist) focuses on the consequences of actions, lying itself is not unethical; it is the loss of trust or harm done by lying that is unethical [Reed et al., 2005].

The consequentialist definition appears to be too flexible and if accepted it could justify many actions by the teleologist, would it be acceptable to pay bribes to win an international contract, if it creates American jobs, does not harm U.S. interests and so on. This kind of ethics has been practiced for a long time and businesses need to be bound by a variety of laws to enforce good business practices. [Reed et al., 2005] identify four sources that impact business ethics.

Legal regulation

Professional codes of ethics

Organizational codes of ethics

Individual values

One of the most important factors forcing the businesses to be more aware of ethical nature of business decisions is the role of media in exposing gross violation of business ethics. Businesses taking their production to sweatshops of South East Asia risk exposure and bad press in United States, for example Nike and its handling of journalists investigating foreign sweatshops and how it backfired. Companies like ENRON and WorldCom cannot hide their wrongdoings. Even undue favor to companies favored by government officials in award of contracts in distant lands is easily exposed.

Business ethics are very important in today's economy. What is more important is to have the backing of legal framework to make companies follow the norms of decent business practices.

Influence of Legal Processes and Risks on Business Decision-making

Companies involved in businesses have to follow an array of laws relating to their operations, labor laws, environmental laws, tax laws and a variety of other laws related to specific businesses. Businesses operating across national boundaries have to follow laws applicable in countries of their operations. The risk involved in operating a business not only relates to the economic climate and normal day-to-day market related factors. The businesses have to cover themselves for litigation arising from a whole spectrum of their operations. It could be a result of accident, poor product quality, labor laws, discrimination protection act, unfair dismissal, and violation of contract or any other area of business operation.

Being involved in litigation is not a good feeling for a business manager, but sometime this is the only course open to resolve a dispute by an impartial party, the courts. An understanding of litigation process is essential not only to handle the procedures through the company lawyer but also to appreciate that a lawsuit represents an immense waste of time, money and energy for everyone involved in litigation.

Litigation, or "lawsuit," is started by a plaintiff. The plaintiff files a complaint with the court. The complaint has to give the reason for the lawsuit and the damages or relief sought by the plaintiff. The party being sued (defendant) is then served the notice by the court and asked to respond to the case and submit his/her objections.

After the defendant's response, the parties enter into a discovery phase, where both parties assess each other's evidence. The discovery phase often results in a settlement as one or the other party finds its case to be weak.

The trial begins after the discovery phase before a jury or before a judge only. The plaintiff has to prove his case and has the "burden of proof." The defendant has the burden of proof for matters such as 'affirmative defenses'.

After the trial the decision may be announced in favor of plaintiff or defendant who may appeal against the decision to a higher court if the party appealing against the judgment can demonstrate that the previous decision was an improper interpretation of the facts. The parties may settle their dispute out of the court to end the lawsuit in return for promises or considerations.

In addition to a court case, other forums may also be considered. An alternate dispute system, for example may be a desirable alternative. Small claims courts can be used if the action is eligible for small claims court. A Class action may be another option. This involves one or two plaintiffs pursuing the case on behalf of a larger group, cases such as environmental impact, security fraud, and airliner crash are often conducted as class action allowing pooling resources and combining many cases into a single case. Businesses can sometime face class action as defendant from a group of people affected by their operations.

Another form of resolving legal issues is called Alternate Dispute Resolution. This method avoids going to court. Arbitration and mediation are two common forma of alternate dispute resolution methods. Arbitration uses a neutral third party who listens to arguments made by both parties to make a decision. This could be binding on both parties or not binding in which case either party can go to the court. Mediation is less formal than arbitration. Both parties make opening statements and then mediation proceeds with discussions and private communications. At the end of mediation the mediator offers his or her opinion which is not considered binding.

TORT, CRIMINAL, AND PROPERTY LAW

Comparison of Intangible, Real, and Personal property laws

The capitalist economy depends on the right of ownership. The benefit that one can gain by the right to claim ownership of something gives the owner the rights to profit from the ownership with the exclusion of all others. The profit is gained not necessarily by adding value but by the mere fact of ownership. "Property is the legal right to exclude others from resources that are originally possessed or are acquired without force, theft, or fraud. A 'resource' includes anything that someone may need or want [Reed et al., 2005]."

Land, shares of corporate stock, and the uses of these things are all resources. Once the ownership is established the owner can use that property to generate profit. Property can be subdivided into two types; Real and Personal. Real Property law applies to land and interest related to land such as leased land or mining rights. All other property… READ MORE

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