M1: Law & Ethics as a Foundation for Business

What is law?

Rules that:

• govern relationship between and among entities and their society

• established by the state and backed up by enforcement

Internationally, what is law?

Law governs rights and disputes between countries, including amongst and between entities of those countries

Importance of Law

• Most significant social force; holds together diverse people of different backgrounds

• Adequate enforcement institutions are necessary to maintain order

• All countries strong, diverse economies of rule of law

• Business relies on rule of law

What are the origins of the concept of “law”?

• Religious principles — “Thou shall not kill”

• Customs

• History — Prior laws and decisions

• Logic — Ask “what is everyone did that?” to judge

What is morality?

One’s values that guides human behavior — shared values promote social cooperation and control

What is ethics?

Formal system for deciding what is right and wrong, it involves:

• recognizing what is right and wrong

• understanding why someone thinks something is right or wrong

What is “The Good”?

The moral objectives and goals one chooses to pursue

Ethical Systems: Formalism

Affirms an absolute morality - a particular act is right or wrong, always and in every situation (lying is always wrong)

Ethical Systems: Consequentialism

Considers the consequences of actions (lying’s not wrong in this situation)

• Utilitarianism: the dominant form of consequentialism - the right action maximizes overall happiness or utility

“Schools” of Jurisprudence

Jurisprudence is the philosophy of law

• "Natural Law”

• “Positive Law”

• “Sociological”

• “Historical”

• “Legal Realism”

Natural Law

Reflects universal moral principles

Positive Law

Simply the commands of the state backed up by enforcement - it is contrary to the philosophy of natural law

Sociological

Law can and should evolve to meet new developments in society

Historical

Contemporary law should focus on legal principles that have withstood the test of time; different nations have different laws and traditions

Legal Realism

Go beyond just the words of law to examine what police, administrators, prosecutors, and judges are actually doing as they enforce, interpret, and apply laws

Consequentialist Ethics: Corporate Governance & Stakeholder Theory

• Corporate governance is about how a company is controlled. Ethical corporate behavior depends on officers/managers who consider all stakeholders

• Risk of harm to all stakeholders should be actively reduced

• Stakeholders should be able to communicate with decision makers

• Lack of transparency hinders ethical decision making

Professional Rules of Conduct

Certain professions have long traditions of codes of ethical conduct:

• Bar rules for attorneys; Hippocratic oath for doctors

Corporate Policy

Ethical codes for everyone who works for the business

• Corporate policy is a form of self regulation

• Corporate policy that promotes integrity can help limit governmental regulation

Corporate Policy and Philosophy: Above and Beyond?

Following the law should be a minimum - corporate policy should strive for more because:

• law isn’t always adequately informed

• sometimes moves too slowly to adapt

Common Law

• Often called “judge-made law” — common to courts across England — judges determined the meaning of laws

• Many former British colonies, have legal systems rooted in English common law

Civil Law

• Civil law systems relied more on legislation (codes and statutes) than judge-made law

• Countries not colonized by England typically have civil law legal system origins (France and Germany)

Advantages of Common Law

• Precedent: prior case with similar legal principles exist

• Stare Decisis: courts decide new cases based on rules announced or handed down in former cases

Disadvantages of Common Law

• Multitude of cases

• Conflicting precedents

• Rejection of precedent

• Conflict of laws

Civil Law Advantages

• Predictability and Uniformity

• Faster, Lower-Cost Proceedings

• Judicial Role is Limited

• Greater Accessibility

Civil Law Disadvantages

• Less Flexibility

• Slow to Evolve

• Limited Role of Judges

• Potential for overly Broad Codes

Substantive Law

• Defines the legal relationship of people with other people, or with the state

Procedural Law

Focuses the method and means by which substantive law is made and administered

Public Law

Addresses the relationship between persons and their government

• Constitutional Law

• Administrative Law

• Criminal Law

Private Law

Addresses interactions between persons

• Property Law

• Contract Law

• Tort Law

Criminal Law

Crimes against the public; specified various offenses against the proper order of the state

Civil Law (not to be confused with civil law system)

Addresses certain rights between private persons against each other, sometimes against the government