Todays Business Environment: Law and Ethics

Chapter 1 (Today’s Business Environment: Law and Ethics)

The modern environment of business beans that managers in all firms face a variety of ethical, legal, social, political, and international issues that make business increasingly complex.

Law is a collection of principals and rules that establish, guide, and alter the behavior of members of society. Rules include both the formal rules (law) of society and the informal rules as dictated by customs, traditions, and social ethics.

Law and the legal system serve important functions in an orderly society. Law helps to define acceptable behavior. To ensure order, the legal systems provide a formal means through which disputes can be resolved. The law maintains the important values of society. Finally, the legal systems provide a way to encourage changes in social consciences.

Sources of law include the U.S. and state constitutions, Congress and the state legislatures, the judiciary branch, the executive branch (the president at the federal level and the governors at the state level), state and federal administrative agencies, and multiple sources that form the international legal environment of business.

Judge made or common law is the original source of law in this country. This system encourages judges to use prior decisions, or precedents, for guidance in deciding new disputes. The doctrine of state decisis, standing on precedent, helps give consistency to case law.

Law can be classified on the basis of whether it is public or private, civil or criminal, or substantive or procedural.

The public image of big business and of other major institutions is low. Dishonesty is believed to be common. To overcome problems, many companies use codes of ethics, and firms are enforcing compliance programs to help reduce severity of punishment by regulators in case of law violations.

Business ethics involve standards and obligations that persons and firms may uphold in business that go...