Lesson 1 The Business and Ethics Environment and Dispute Resolution
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This Lesson begins with an exploration of the background of the legal environment of business, how law and ethics relate to each other, and how the legal environment is impacted by existing in a diverse American society. We introduce the concept of law in American society as a structure within which people and businesses operate, the different types of law our system recognizes and how law relates to business, all in our rapidly changing diverse American society. We provide a background and context for the rights and responsibilities that will be discussed throughout the rest of the course.
Let’s begin with an examination of something simple like downloading music for our iPodsÒ, something millions of us do every day in a matter of seconds. Law governs everything from the contractual agreements which allowed the music to be there for us to purchase, to what recourse is available if your downloaded music does not function correctly and many other matters. There is no such thing as a simple business transaction. Even the simplest business transaction takes place in a complex setting of laws and regulations of which a prudent businessperson must be aware. There are also the ethical and diversity implications.
For purposes of the course when we speak of diversity we are speaking of business operating in a society that is not homogeneous, but rather has multiple races, ethnicities, national origins, genders and gender identities.
As we get farther away from the time when legal segregation, called Jim Crow, was the law and openly treating others differently based on race or gender seems ancient history, we are now less likely to believe discrimination occurs and more likely to believe it is only in the claimant’s imagination (“playing the race card”). This failure to understand that it is still happening is known as the “new racism” and failure to recognize that discrimination exists means that it cannot be remedied.
In order to be fully prepared for today’s world, it is important to understand all aspects of business and its context rather than just the simple matter of, for instance, whether a contract made with a client will stand up in court if challenged. We want to provide you with tools to fully analyze business decisions before they turn into unnecessary legal and/or public relations disasters.
We must first establish a framework within which to operate. Before we begin to discuss different types of specific laws, what they require and how they work, we will first discuss the law in general. That is, what law is, what law is designed to do, how it evolved and how it operates as a system within which all other things we discuss must operate.
DEFINITION OF LAW
Law is a concept all of us have dealt with all of our lives, yet if asked to define it, most of us would probably hesitate and find it difficult to do. However, law is the foundation of all of our business relationships and many of our personal ones. In fact, once we realize its impact, it can be difficult to think of anything in our lives that is not affected by law.
Law has been defined in many different ways. For our purposes, law is a system of limitations upon our actions imposed by the government to ensure order, safety, predictability and control. While law is our government’s determination as to our limitations and rights, morality is our own personal view of what we believe is proper and how we should conduct ourselves. Law can have many different underlying bases for its existence. How law is created and exists is the study of jurisprudence.
Jurisprudence is the study of law, legal systems and legal philosophy.
Natural Law – The theory underlying natural law is that there is a discoverable set of absolute right and wrong principles upon which our laws should be based. To the extent the laws reflect the natural law, that is, the laws of nature, or God, the laws are considered “good” ones. To the extent they do not, they are “bad.”
Legal Positivism – This theory of jurisprudence is based on law as issued by a governing figure or sovereign. In legal positivism, the law derives its status as law not from some natural order of things that dictates that things should be right and just and fair, because it comes from the Creator, but rather from the fact that it has been enacted by the sovereign with power to make and enforce his or her wishes. This law may or may not be just or fair.
Legal Realism – For legal realists, actual experience is the key to determining what law should be. What is actually done is important for them, rather than what the law says should be done. Some view the drawback to this theory is that it follows rather than leads as it should. Legal realism does not establish law as a guideline to be followed, but rather, has law follow what people actually do. For legal realist, if the reality is that most people smoke marijuana, then they would deem that it should be legalized, rather than deeming it illegal because it is viewed as immoral.
Sociological Theory – This theory of jurisprudence is based on the premise that society’s ideas change over time and law should reflect a compromise between the changing, often conflicting, interests of society.
Whether we determine our country’s primary legal theory fits neatly into one category or another is not nearly as important as the fact that we have a framework for our laws that we respect and are able to live with as a society. Our laws are actually a mix of many different jurisprudential theories, depending on the times, the subject matter and the interpretation, yet we still manage to have a fairly consistent and coherent approach to law.
Ethics and Ethical Decision-making
Ethics are rules that exceed the law and guide how a business conducts itself with its employees, customers, suppliers and others with which it does business. Studying business teaches you the information needed to carry on commerce and be successful using tried and true business concepts that have worked well over time. However, this is not all you need to know in order to make good business decisions.
We cannot simply teach you the rules about business without giving you tools to develop your ethical decision-making so that your business decisions are ultimately better ones. If you doubt this, just ask the employees at Enron who lost their retirement funds when the company made what they thought were good business decisions (which were still questionable), but apparently gave little thought to the ethical implications of those decisions.
There are many different underlying theories for ethics and most businesses that have adopted formal ethical standards have used them in some way or another. Except in limited circumstances to be discussed later, companies are free to develop and impose their formal ethical guidelines however they wish. A business need not have only one theory that underlies its ethical decision-making, it can choose whichever theory seems best under the circumstances.
Every single decision a business makes can have ethical dimensions. How and what ethical standards a business implements and adheres to is up to the business, but the important thing is to be aware of is that all business decisions have ethical implications and to take those implications into consideration when making the decision so that there are as few unnecessary negative repercussions from failing to do so as possible. Having a corporate culture that encourages ethical decision-making from the top down and creating a climate in which employees accept this and govern themselves accordingly when conducting business for the organization goes a long way toward accomplishing this goal.
As we go through our subject matter, we will call upon you to think about not only the legal implications of what you read, but also the ethical implications. Our goal is not to choose your ethics for you, for, like morals, that is up to each individual or business. Rather, it is to make you aware of the ethical dimension of business decisions and give you tools to make the right ethical choices.
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Diversity as a Business Imperative
While America has always been a nation of immigrants, its relationship to them, as well as who those immigrants are and what their expectations are when they arrive in the U.S. has changed over time. At this point in time, U.S. business is taking place in an increasingly diverse society quite different than the one in which previous generations have operated. While the previous wave of immigration had been ninety percent European, with immigrants coming to America to seek a better life and wanting to assimilate, this wave of immigrants would be ninety percent Asian and Latin. While it may have been easier for Europeans, who looked like the predominantly white Americans, to fit in here, and because their reasons for coming to the U.S. included more of a wish to conform and assimilate, they were fairly quickly absorbed into their new culture. However, the new wave of immigrants do not look like the mass of white Americans, do not blend in as easily, and because they often left their countries for different reasons than the earlier immigrants, they often came with a strong wish to maintain their ethnic identity, which, for the most part, differed radically from that of the majority of white Americans whose roots were European.
In a fairly short period of time, the American landscape began to change in fairly drastic ways. Enforcement of anti-discrimination laws guaranteeing equal opportunities in employment, housing, education, public accommodations and receipt of federal funds, particularly on the basis of national origin or religion are well known to the immigrants. In addition to new immigrants coming into the U.S. and changing the business landscape, there is also the existing populations of African Americans, Hispanics, Asians, Native Americans and others who have struggled to be treated equally in this country since its inception. Since the integration of these new and vastly differing peoples and cultures into American life means interfacing with the law and the subject matter of much of the coverage of the legal environment of business, it is imperative to address this new and interesting phenomenon in the legal and business landscape.
None of us make decisions, even legal ones, in a vacuum. Not even the highest court in the land is not without its decisions reflecting its own experience, values and beliefs. To some extent, everyone is shaped by their lives ad experiences. What this course strives to do is to open your eyes to these issues and where applicable, have such issues become a relevant part of your business decision-making process, just as legal and ethical considerations are. Our increasing diversity and inclusion of all in the fabric of America is an important reality that must be addressed in constructive, productive ways if we are to remain at the forefront of the business world.
Diversity considerations are included in the text only as they arise. Not every legal issue will have diversity considerations and some may be present, but more obvious than others.
Next, this lesson examines dispute resolution. When you think of legal disputes, you probably think of them being settled by a court. For those conflicts which do not need litigation, there are several alternatives. Together, these mechanisms have come to be known as alternative dispute resolution or ADR. The immediate issue was that the startling increase in lawsuits greatly clogged the court system. Litigation was virtually the only recourse for those with disputes, and that route was time-consuming and expensive. The more litigious our society became and the more cases there were the more frustration there was at legitimate litigation being held up because of a court system congested with less compelling disputes. The growing concern over overcrowded court systems finally overcame judges and lawyers’ objections to alternatives to litigation.
In the past twenty years or so, ADR has experienced an explosive popularity. The old standbys of conciliation, mediation, and arbitration have been joined by a spate of new and innovative approaches to resolving disputes in far shorter time for far less money. Despite its advantages, ADR has not always been favored. In fact, at one time courts were downright hostile to the idea.
Unless the state or local law in a given jurisdiction has a prescribed means by which ADR must be pursued, it is very flexible and the mechanisms need not be used in any particular order, though they tend to lend themselves to a natural logic. Because they offer considerable cost-saving to the court and parties, time saving and privacy, they should be pursued before litigation.
What is Conciliation and how is it done?
It may seem too simple to even discuss, but the very first thing a party with a conflict should do when involved in a conflict is to attempt conciliation, also called negotiation, with the other party to the dispute. Conciliation is important enough that it has been written into some statutes. As simplistic as it may sound, conciliation simply involves the parties talking to each other either about their dispute, orally or in writing, in an effort to reach a resolution of the conflict. Conciliation costs nothing and nothing is lost if the parties do not reach a satisfactory resolution.
Must I mediate and how is it done?
Like conciliation or negotiation, mediation of a conflict is not required, but can be quite advantageous. Mediation brings into the conflict for the first time an outsider. The purpose is for the third party to try to facilitate the parties reaching a resolution on their own. Mediation is most useful when the parties wish to maintain an on-going relationship but simply need help resolving the present conflict. A third party outsider may well be able to make headway where the parties themselves were not able to. In mediation, a third party is brought into the conflict to try to assist the parties themselves in resolving it.
Federal Mediation and Conciliation Service – FMCS is a government agency that can be used by parties to conduct mediation of a dispute. There are also now many private mediation organizations also, as well as attorneys offering mediation ADR as part of their services. Most often the mediator engages in a type of “shuttle diplomacy” wherein the mediator goes back and forth between the two parties and listens to their concerns and tries to find a way for each to get what he or she wants from the situation.
Agency and court Annexed ADR – Some courts have instituted some form of an ADR program attached to the court itself. State and federal agencies have also increased their support for mediation, up to, and including, mandating it for claims filed. The Equal Opportunity Employment Commission (EEOC) has instituted innovative programs such as its Universal Agreements to Mediate (UAMs) and Referral Back program for mediation. UAMs are agreements the EEOC makes with employers locally, regionally or nationally, under which the employer has an identified contact point with EEOC for scheduling the mediation of claims filed by employees with EEOC. Referral Back programs allow EEOC, with the permission of the employee filing the claim with EEOC, to hold off on proceeding with the claim filed by the employee with EEOC and instead refer it back to the employer for handling by the employer’s own internal EEOC-approved mediation program.
The EEOC has fully embraced ADR for resolving its claim and continues to explore new innovations like the UAMs and Referral Back programs begun in 2002 and 2003. There are definite advantages to the use of mediation which any astute businessperson should explore and utilize when disputes arise.
Lesson Learning Objectives
By the conclusion of this Lesson you should be able:
- Explain what law is and what it is designed to do.
- Analyze the interplay between law, equity, morals, and justice.
- Explain what common law is and where it originated.
- Compare the different classifications and various areas of law.
- Explain the role and importance of ethics in business.
- Discern how diversity may come into play in business and legal issues.
- Explain what Alternative Dispute resolution (ADR) is, and how and why it is used in business.
- Determine the appropriateness of different types of ADR for various disputes.
- Set forth newly-emerging ADR alternatives specifically for business.
- Study Chapters 1 and 2 of the text.
The following Assignments should be completed and submitted to the course faculty via the learning platform for evaluation and grading. Submit your responses to these questions in one WORD document. List the question first, and then your response.
Be sure to properly site your sources, both in-text and with a reference list at the conclusion. If you use an online source to support your answers, you must provide a properly formatted link to the source. You should use APA citation format and make sure your sources are credible. In Most cases, your responses should be no more than 100 words.
Short Answer Questions
- Define law. What is the difference between law and morality?
- Discuss with an example legal positivism.
- Explain the legal realism theory of jurisprudence.
- What is the sociological theory of jurisprudence?
- Explain briefly the three branches of the federal government.
- Distinguish between public law and private law.
- Compare civil and criminal law.
- Compare substantive and procedural law.
- What is equity? Distinguish between law and equity.
- Define tort. Discuss briefly common law torts.
- What are the various advantages of alternative dispute resolution (ADR)?
- What is the major difference between arbitration and mediation?
Professional Development Questions
- Zircon, Inc., a mouthwash and toothpaste manufacturer in the U.S., discovers during a routine shipment laboratory spot check that a shipment of its mouthwash manufactured in a country outside the U.S. contains a chemical that is not a part of its normal formula. The international manufacturer says that the compound is not harmful and it made the substitution in order to meet the contract deadline when it became clear that the agreed upon ingredient would not be available in time. The compound is only present in microscopic amounts and is not harmful to users. However, the ingredients listed on the mouthwash bottle and packaging still has the original ingredient listed and does not include the substitution. Zircon understands that it has a cause of action for breach of contract against the company it contracted to manufacture the product, but it is in a quandary as to what to do about the substitution. It would be extremely costly and time-consuming to order that the labels on the bottles and boxes to be changed, or for the formula to be changed back to the original in the mouthwash. Consumers will not be harmed by the substitution and no one will likely know except appropriate company personnel.
What are the relevant issues Zircon must consider in determining the ethics of what it should do about this situation in which it finds itself?
- Antwon, who owns a large investment firm, is having a dispute with Tyrell, the owner of the company that makes the computer software Antwon’s employees use to make their market predictions. The dispute has gone on for several weeks but the parties have been unable to come to a satisfactory solution. Antwon and Tyrell wish to maintain their working relationship with each other, as it is mutually beneficial, but they would like to resolve this conflict and move on with their other business concerns. On these facts, what is most likely the best way of resolving the dispute and why?
Lesson 1 Quiz
Use the quiz to test your knowledge of the concepts covered in this lesson. You may take the quiz as many times as you wish. The results are not calculated into your grade.