FBE 458 Law, Finance and EthicsSpring 2012

Instructor

Instructor: C. Kerry FieldsOffice: ACC 232BOffice Phone: 213-740-9307E-mail: fields@usc.edu

Lecture Class

Section: 15367RTime: Mon. & Wed. 2:00 – 3:50 p.m.Location: MHPB7BUnits: 4

Office Hours

Mon. & Wed.: 8:30-9:30 a.m., 12:00-1:30 p.m.and by appointment

Course Description

This course covers the practical aspects and strategies of financing and managing businesses from incubation to going public. Blending both legal and ethical approaches to problem solving, the course material includes agency law, legal aspects of starting businesses, sole proprietorships, general and limited partnership law, limited liability companies, franchising and special forms of business, administrative law, credit, secured transactions, bankruptcy, liability of accountants, corporate law, corporate governance, mergers and acquisitions, securities and finance law, and antitrust law.

Course Objective

The purpose of this course is to provide students with practical legal knowledge of specific substantive business law topics and current legal trends and issues. This course is structured on the premise that legal knowledge is a personal and strategic asset. The course coverage includes many of the topics on the C.P.A. examination. The student will secure the knowledge necessary to effectively work in private and public business entities by acquiring a sound grasp of the relevant concepts, legal vocabulary, and rules of law that apply. Students will contribute to their own learning by presenting both legal and business ethics case studies to the class. Actual cases involving substantive legal and ethical issues relating to those cases will be analyzed and FBE 458 Sp. 2012.rev 01.06.12 1

presented. The course provides the long-term benefit of spotting potential legal and ethical problems and issues.

Learning Objectives

At the conclusion of the course, students will know the general principles of business law and be able to identify and distinguish legal issues. They will acquire the legal terminology of business organization and finance. They will have improved their deductive reasoning skills and knowledge of both basic and advanced topics within the subject matter presented. Students will be able to identify legal issues and apply the applicable rules to legal regulations, ordinances and judicial decisions. They will recognize ethical conflicts in the governance of business organizations and be able to distinguish alternative actions to pursue.

Required Materials

Business Law (7th Edition)Author: Henry R. CheesemanPublisher: Prentice Hall (2010)ISBN-10:0136085547ISBN-13: 9780136085546

A subscription to the Wall Street Journal.

Office Hours

If students have any questions about the material covered in the class they should not hesitate to see me. However, if a student cannot make the regular office hours, they should send me an email to schedule an appointment. I can also be reached at 213-740-9307 where students should leave a message on my voice mail with their name and phone number (with area code). Email is the preferred method to contact me to schedule an appointment as the messages are checked frequently.

Prerequisites

Other than an interest in learning about the legal and regulatory environment in which business is conducted, there are no prerequisites for this course. This course is part of the minor in Business Law offered by the Marshall School of Business.

Course Notes

Copies of lecture slides and other class information are available through your Blackboard account. Prior exams are posted without answers. Questions are provided without answers as students should use them as a learning tool. Since legal analyses are fact dependent a minor change in the statement of the facts can result in a different answer in a law course examination. The material on your exam will vary from the one posted due to changes in the textbook, topics of interest during the semester, differing course coverage and class interest in particular topics different than that covered in this course. FBE 458 Sp. 2012.rev 01.06.12 2

The material presented and the classroom discussions are for the students’ edification. They are not intended to be legal advice to students in connection with any legal issue they or others may have. If students have a legal matter, they are advised to promptly consult an experienced attorney who can confidentially and fully review the facts and advise them of their legal rights and remedies. Quite often, the facts dictate the result and only in the context of an attorney-client relationship can they be reviewed and legal opinions rendered.

Grading Summary

The course grading is based on the following criteria:

Exam Dates

Date Time1st Midterm Exam February 6, 2012 During class2nd Midterm Exam March 28, 2012 During classFinal Exam May 7, 2012 2:00 – 4:00 p.m.

Course Grading Policy: Marshall’s target mean GPA is 3.0 for required classes and 3.3 for electives. The mean target for graduate classes is 3.3. Assignment/Exam Grading Policy: the instructor determines what qualifies as an accurate grade on an assignment, exam, or other deliverable, and the instructor’s evaluation of the performance of each individual student is the final basis for assigning grades for the course. (Content provided by Marshall to instructors).

Students’ grades for this course depend upon their performance and the grading standards and policies of the Marshall School of Business, and the academic policies and procedures of the University. For elective courses, such as this one, the suggested mean GPA is 3.3. There is no specific guideline with respect to the number or percentage of any specific grade given or the numbers of persons who pass or fail the course. Thus, discretion is given to each instructor regarding the assignment and distribution of grades.

As to their ongoing status in the class, students will receive a grade but the more important performance predictor is their class rank. Rank is more important than the interim letter grade because at the end of the semester, all pending letter grades are “curved” to ensure compliance with these policies. (e.g. if there are too many scores at a particular letter and grade point, then

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Assessment Maximum points1st Midterm Exam 1502nd Midterm Exam 150Team Presentation/IRAC 50Attendance (4 out of 5) 40Quizzes/in class participation (6 out 7)

60

Final Exam 150Total Points 600

the cut-off for a letter grade is raised and the scores below that cutoff require that a reduced letter grade(s) be assigned to ensure compliance with the Marshall grading policies. That is why rank is a better predictor of a student’s performance). Once these curves are in place, they will not be reset to accommodate individual requests. No relief will be granted on that basis. Grades are not open to negotiation. Petitions for exceptions or understanding of particular needs to attain a higher grade for some reason will not be honored. What is done for one student must be done for all, and the result is that if one student’s grade is adjusted, so will all other students’ grades.

Preparation for class: Students are expected to read each week’s reading and case assignments prior to class, and be prepared to discuss and examine them. In order to make the class periods as engaging as possible, there will be a concentration on the application of the material. Students should always proceed to the next reading assignment whether the previous reading has been fully discussed in class.

Exams: Generally, the material is unique to each exam; however, students may be asked to compare and contrast a substantive law rule with one learned earlier in the course. While every examination will ask students to recognize definitions, the focus of the examinations will be on the application of the legal principle involved. Students are strongly encouraged to form and use a study group in their learning of the material, well in advance of the exam dates. Cooperative learning is important as it will assist students in identifying their areas of weakness in advance.

Presentations and IRACs: During the first week of the course, students will select a team andto present during the course. Information is to be focused upon the case, law, regulation or casestudy at issue. You will present the material in PowerPoint form to the class. Be well prepared and give a strong presentation to earn maximum points. Be prepared to discuss any ethical issues related to your presentation.

Each team will be allowed a maximum of 15 minutes to present. E-mail your slides to me by 9 p.m. of the day prior to your presentation. Bring your

presentation materials to class on a USB. Hand me a copy of the presentation when you begin your presentation.

A separate file is posted on Blackboard to assist you in your presentation of a judicial decision in IRAC form (Issue, Rule, Analysis and Conclusion). The file is entitled Briefing a Case.

Presentations are graded as follows:

Start with 50 Points Deducts

0-50 for lack of depth in substantive material covered

0-35 for quality of presentation (e.g. reading the material, obviously unprepared, disjointed, incomplete table of authorities)

0-40 for lack of full participation by each team member/ lack of contribution, exceeding time limit, failure to e-mail presentation by 9:00 p.m. of prior day

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Missing team members will receive no credit unless prior arrangements have been made with me and been confirmed by email

Total

Attendance checks: Students do not need to email me in advance that the student will miss class on a particular day. We will take one extra attendance check during the semester so that each student may have a personal reason for not making a class. Such prior email notice to me is required only if a student were to miss several classes in a row for legitimate, verifiable reasons. In all cases regarding attendance credit, I reserve the right to make a decision based upon the exercise of my sole discretion.

In class participation: Quizzes and in class participation may occur electronically and or in written form. You will need a computer with wireless internet connectivity or a cell phone with text messaging capability. If you have neither resource, please make alternative arrangements with me during the first week of class. Always bring your computer or cell phone to class. Note, you are required to check the grade book posted on Blackboard on a weekly basis to ensure you have been credit by the www.polleverywhere.com// software. Should you fail to do so, you will not receive points later as grades and class rank are constantly updated in this course. Absent a verifiable medical emergency or similar occurrence quizzes may not be made-up.

Makeup Exams and Grading Issues: Make-up midterms will be given only in exceptional circumstances and will require prior arrangements. Student-athletes and others with verifiable schedule conflicts with the exam schedule must arrange for an alternate test and testing date one week prior to an exam date. No protests of unclear erasures of Scantron answers or failing to complete the key on a Scantron will be honored.

You will leave the exam room with your copy of the exam. The exam answer key will be posted following the exam. If you disagree with a posted answer, you must do the following within 24 hours of the posting of the answer key for each exam:

email me with the following information: o the name of the course,o the version number of the test, o the question involved, and,o your complete analysis and argument of why your choice is the best of those

presented within 1 calendar day of the examination. Your arguments are to be based upon what has been taught in the course. Arguments based upon analyses extracted from web-based sources are not read.

After the protest period has ended, no further discussion of the answers will be entertained. The curve will be set for the class one day following the examination.

The course gradebook is updated and posted weekly. You are responsible for verifying that your grades are properly recorded. The last day to make any correction to the gradebook is the last day of class. No gradebook corrections will be made thereafter, including after the final exam is taken.

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Statement for Students with Disabilities

Any student requesting academic accommodations based upon a disability is required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP. Please be sure the letter is delivered to me as early in the semester as possible. DSP is located in STU 301 and is open 8:30 a.m. – 5:00 p.m. Monday through Friday. The phone number for DSP is (213) 740-0776. Please provide the appropriate form one week in advance of an examination. (Content provided by Marshall to instructors).

If you are taking an examination at the DSP office and believe that a question is unclear, incomplete, ambiguous or otherwise defective, you are advised to attach additional pages to the examination placed at DSP. If you are making such a contention, then, you are required to state clearly the problem you encountered with the question and why you answered the question in the manner you did. Only with such information in hand at the time I grade your examination will I be able to gauge the appropriateness of giving you credit for your answer to the subject question. If for some reason, you must take the examination after the class has taken the examination, you will take a comparable examination to that given the students in class. You will not receive the same examination as your classmates as all students leave an exam with a copy of the exam questions.

Add/Drop Process

http://www.usc.edu/dept/publications/cat2011/academic/policies.htmlIn compliance with USC and Marshall’s policies classes are open enrollment (R-clearance) through the first week of class. All classes are closed (switched to D-clearance) at the end of the first week. This policy minimizes the complexity of the registration process for students by standardizing across classes.  You will be dropped from the class if you don’t attend the first two sessions. If you decide to drop, or if you choose not to attend the first two sessions and are dropped, you risk being not being able to add to another section this semester, since they might reach capacity. You can only add a class after the first week of classes if you receive approval from the instructor. (Content provided by Marshall to instructors).

Statement on Academic Integrity

USC seeks to maintain an optimal learning environment. General principles of academic honesty include the concept of respect for the intellectual property of others, the expectation that individual work will be submitted unless otherwise allowed by an instructor, and the obligations both to protect one’s own academic work from misuse by others as well as to avoid using another’s work as one’s own. All students are expected to understand and abide by these principles. SCampus, the Student Guidebook, contains the Student Conduct Code in Section 11.00, while the recommended sanctions are located in Appendix A. http://www.usc.edu/dept/publications/SCAMPUS/gov//.

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Students will be referred to the Office of Student Judicial Affairs and Community Standards for further review, should there be any suspicion of academic dishonesty. The Review process can be found at: http://www.usc.edu/student-affairs/SJACS/ Failure to adhere to the academic conduct standards set forth by these guidelines and our programs will not be tolerated by the USC Marshall community and can lead to dismissal. (Content provided by Marshall to instructors).

Any use of external assistance during an examination shall be considered academically dishonest. The following are considered unacceptable examination behaviors: communication with fellow students during an examination, copying materials from another student’s exam, allowing another student to copy from an exam, the use of electronic devices to communicate to others during the exam, possession or use of unauthorized notes, electronic or other dictionaries during exams. Students cannot achieve grades that they have not legitimately earned. Part of Marshall’s mission is to remind students of the value systems that will regulate their business lives, and breaching ethical standards cannot be condoned.

Emergency Preparedness/Course Continuity

In case of emergency, and travel to campus is difficult, USC executive leadership will announce an electronic way for instructors to teach students in their residence halls or homes using a combination of Blackboard, teleconferencing, and other technologies. In such an event, we are prepared to assign students a "Plan B" project that can be completed at a distance. For additional information about maintaining this class in an emergency please access: http://cst.usc.edu/services/emergencyprep.html//. (Modified content provided by Marshall to instructors).

Other Course Policies

Electronic usage policy: Laptop and Internet usage is not permitted during academic or professional sessions unless otherwise authorized by me. Use of other personal communication devices, such as cell phones, is considered unprofessional and is not permitted during academic or professional sessions. All electronic devices (including, but not limited to, iPads, computers, cell phones, netbooks, laptops and other texting devices) must be completely turned off during class time. Upon request, you must comply and put your device on your desk in off mode, face down or in your book bag. You might also be asked to deposit your devices in a designated area in the classroom. (Content provided by Marshall to instructors).

No recording and copyright notice. No student may record any lecture, class discussion or meeting with me without my prior express written permission. The word “record” or the act of recording includes, but is not limited to, any and all means by which sound or visual images can be stored, duplicated or retransmitted whether by an electro-mechanical, analog, digital, wire, electronic or other device or any other means of signal encoding. I reserve all rights, including copyright, to my lectures, course syllabi and related materials, including summaries, PowerPoints, prior exams, answer keys, and all supplementary course materials available to the students enrolled in my class whether posted on Blackboard or otherwise. They may not be reproduced, distributed, copied, or disseminated in any media or in any form, including but not limited to all course note-sharing websites. Exceptions are made for students who have made prior arrangements with DSP and me. FBE 458 Sp. 2012.rev 01.06.12 7

Incomplete Grades Explanation: Grading and Correction of Grades handbook, found at: http://www.usc.edu/dept/ARR/grades/gradinghandbook/index.html//. An incomplete (IN) grade may be assigned due to an “emergency” that occurs after the 12th week of classes. An “emergency” is defined as a serious documented illness, or an unforeseen situation that is beyond the student’s control, that prevents a student from completing the semester. Prior to the 12th week, the student still has the option of dropping the class. Arrangements for completing an IN course should be initiated by the student, and negotiated with the instructor. Class work to complete the course should be completed within one calendar year from the date the IN was assigned. The IN mark will be converted to an F grade should the course not be completed.

Course Readings

The following is a discussion of the course coverage:

1. Ethics and Social Responsibilities This is an introduction to our course, the sources of the law, and ethical decision-making. Students will examine ethical theories and their contemporary applications. The language, concepts and application of these theories will be addressed within the course objectives for this course. The material in this unit will be applied throughout the entire course.

Ethical philosophy is not exacting or precise in character. It is an art of informal navigation among conflicting choices. The purpose of this unit is to provide the student with the information to make informed choices, and to illuminate the pathways to making those choices. Students will sharpen their current abilities to identify, analyze and resolve the ethical dilemmas they are required to address in their personal and professional lives.

The conflict between law, what one has a right to do, and ethics, what is right for one to do, is the focus of this unit. The students should take with them a firm understanding and respect for the conflicting ethical positions others assert.

2. Introduction to Business Relationships In this part of the course, the basic relationships that are the characteristics of doing business are reviewed. The material covers the relationships between principals and agents and the basic forms of operating a business.

3. Other Forms of Doing Business This section surveys the law of the substantive areas of partnership law, limited partnerships, limited liability partnerships, limited liability companies and franchising. This unit covers many of the forms of doing business. It is intended to address the relevant substantive law and to highlight the potential rewards and risks in doing business in these forms. Throughout these sections, the ethical conflicts arising within the operation of the business will be identified and discussed.

4. Administrative Law, Credit, Secured Transactions and Bankruptcy In this part of the course, the effect of specific statutory and regulatory treatment of the business-operating environment will be addressed. The means and methods by which every facet of

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business life is controlled by the regulatory process will be explored. The basic principles of bankruptcy law and the procedures that most often are invoked by businesses as both creditors and debtors will be reviewed. The federal Bankruptcy Code must be understood within the context of state law. The relationships between bankruptcy law and those interests created and protected under state law will be reviewed within the context of this unit. The basic elements of secured transactions will be reviewed.

Each of these substantive areas presents unique circumstances for ethical conflicts to arise and they will be considered during each segment of our study.

5. Accountant’s Liability Using the material from the text as our starting point, we will explore the developments of the liability of accountants in light of the recent events that have involved public accounting firms and major corporations.

The ethics coverage required by the AICPA Code of Professional Conduct and the California Accountancy Act and Accounting Rules and Regulations will be addressed.

6. Corporate Law This section is a survey of the legal compliance issues addressed by the business manager in both public and private corporations. Aspects related to the law of agency and closely held corporations will be addressed. Topics include principles of fiduciary law, shareholder voting, derivative suits, executive compensation, and control transactions. The emphasis is on the practical or legal aspects of a transaction, and not the finance aspects. This unit will also address in summary form the events relating to a merger or acquisition. How the transaction can be structured and implemented will be addressed. Highlights from the important aspects of a mergers and acquisition practice will be addressed.

Case studies involving challenging ethical and corporate governance will be analyzed and presented by students.

7. Investor Protection and Online Securities Transactions This part of the course introduces the two most important federal securities laws: the Securities Act of 1933 and the Securities and Exchange Act of 1934. The material will also include the relationship between disclosure obligations and anti-fraud rules, the duties of participants in securities transactions.

The ethical lapses presented by recent corporate scandals will be highlighted and reviewed in class.

8. Antitrust Law This section addresses the governmental control of economic transactions through the adoption and enforcement of the antitrust laws. The major pieces of federal legislation and the key cases in the areas addressed will be reviewed. Among the subjects covered are the following: the collaboration among competitors through price fixing and other restraints of trade, monopolization, price discrimination and remedies available. Due to time constraints, economic theory is not addressed in detail.

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Course Schedule

Date Material Covered Miscellany

January 9 IntroductionCourse introduction

Syllabus & ground rulesTeams formed

January 11

EthicsChapter 42: Ethics and Social Responsibility of

Business

Ethics video

January 16 No Class Martin Luther King’s Birthday

January 18 AgencyChapter 29: Agency

Formation and TerminationTeam Presentation 1: Ethics case

study

January 23

Liability of Principals and Agents

Chapter 30: Liability of Principals and Agents

Team Presentation 2: Ethics case study

January 25

Small Businesses, Entrepreneurs and

General Partnerships Chapter 34

Team Presentation 3: 2 IRACs from the end of the chapter

problems on liability of principals and agents (Chap. 30).

January 30

Small Businesses, Entrepreneurs and

General PartnershipsChapter 34

Team Presentation 4: 2 IRACs from the end of the chapter problems on partnerships

February 1

Limited Partnerships and Limited Liability Limited

PartnershipsChapter 35: Limited

Partnerships

Team Presentation 5: 2 IRACs from the end of the chapter

problems on limited partnerships

February 6 Midterm Examination #1 No team presentation

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February 8

Limited Liability Companies and Limited Liability Partnerships

Chapter 39: Limited Liability Companies

Team Presentation 6: personal and business lines of credit

February 13 Limited Liability Companies continued

Team Presentation 7: Bond rating agencies

February 15

Franchises and Special Forms of Business

Chapter 40: Franchises and Special Forms of Business

Team Presentation 8: Hedge funds

February 20 No Class President’s Day

February 22Administrative Law

Chapter 43: Administrative Law

Video

February 27Credit

Chapter 26: Creditor’s and Debtor’s Rights

Team Presentation 9: Ethics case study

Team Presentation 10: 2 IRACs selected from end of the chapter

problems on credit.

February 29

Secured Transactions

Chapter 27: Secured Transactions and Electronic

Filing

Team Presentation 11: Causes for current recession; and

Team Presentation 12: Ethics case study

March 5 Secured Transactions continued

Team Presentation 13: 2 IRACs selected from end of the chapter

problems on secured transactions.

March 7Bankruptcy

Chapter 28: Bankruptcy and Reorganization

Team Presentation 14: 2 IRACs selected from end of chapter

problems

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March 12 Spring Break

March 14 Spring Break

March 19 Bankruptcy continued

Team Presentation 15: 2 IRACs from the end of the chapter problems on bankruptcy.

March 21Liability of Accountants

Chapter 51: Liability of Accountants

Team Presentation 16: Case study of high profile Chapter 11 bankruptcy proceeding

March 26Midterm Examination #2

No team presentation

March 28Corporations

Chapter 36: Corporate Formation and Financing

Team Presentation 17: Where to incorporate

April 2 Corporations contd. Start Corporate Governance

Fields: Presentation on corporate formation issues and alter ego

liabilities

April 4

Corporate GovernanceChapter 37: Corporate

Governance and Sarbanes-Oxley Act

Team Presentation 18: Corporate governance

April 9

Corporate Acquisitions and Multinational

CorporationsChapter 38: Corporate

Acquisitions and Multinational Corporations

Video

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April 11

Review and analysis of transactional

documentation of an acquisition

Team Presentation 19: litigation against directors

April 16

Securities RegulationChapter 41: Investor

Protection and Online Securities Transactions

Team Presentation 20: IPOs

April 18 Securities Regulation continued

Team Presentation 21: Securities arbitration

April 23Antitrust Law

Chapter 46: Antitrust Laws and Unfair Trade Practices

Team Presentation 22: Current U.S. antitrust case study

April 25 Antitrust Law continued No team presentation

May 7 Final Examination(2:00 p.m. – 4 p.m.)

Location: Verify on Blackboard

END

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