introduction to legal and ethical issues in business 14 aug

7/31/2019 Introduction to Legal and Ethical Issues in Business 14 Aug

1/40

Legal and Ethical Issues inBusiness

Coordinator:

Dr. Tanvir A. KhanMBA 515: Legal and Ethical Issues in Business

School of Business

Independent University, Bangladesh
http://rds.yahoo.com/_ylt=A0Je5xVf5GdED4wAkM.jzbkF;_ylu=X3oDMTA4NDgyNWN0BHNlYwNwcm9m/SIG=127a15109/EXP=1147745759/**http%3a//www.cdc.gov/diabetes/pubs/images/balance.gif


2/40

Introduction toLegal and Ethical Issues in Business

Resource Person:

Dr. Tanvir A. Khan


3/40

What do we understandby

LAW?


4/40

In general, a rule of being or of conduct, established by an authority able to enforce

its will; a controlling regulation; the mode or order according to which an agent ora power acts.

What do we understand by LAW?Source: Online Dictionary - Webster's 1913 Dictionary

In morals: The will of God as the rule for the disposition and conductof all responsible beings toward Him and toward each other; a rule ofliving, conformable to righteousness; the rule of action as obligatoryon the conscience or moral nature.

An organic rule, as a constitution or charter,establishing and defining the conditions of theexistence of a state or other organized community.

In philosophy and physics: A rule of being, operation, or

change, so certain and constant that it is conceived of asimposed by the will of God or by some controlling authority;as, the law of gravitation; the laws of motion; the law ofheredity; the laws of thought; the laws of cause and effect;law of self-preservation.


5/40

In mathematics: The rule according to which anything, as the

change of value of a variable, or the value of the terms of aseries, proceeds; mode or order of sequence.

What do we understand by LAW?Source: Online Dictionary - Webster's 1913 Dictionary

In arts, works, games, etc.: The rules of construction, or of procedure,conforming to the conditions of success; a principle, maxim; orusage; as, the laws of poetry, of architecture, of courtesy, or of whist.

However, in its most general and comprehensive sense, law signifies a rule ofaction; and this term is applied indiscriminately to all kinds of action; whetheranimate or inanimate, rational or irrational.

In its more confined sense, law denotes the rule, not of actions in general, but of

human action or conduct.

+ - X /


6/40


ETHICS?


7/40

study of morality's effect on conduct: the study of moral standards andhow they affect conduct

15th century. Via Old French ethiques < Greekthika


8/40

What do we understand by ETHICS?Source: Internet

Philosophers have been discussing

ethics for at least 2500 years, sincethe time of Socrates and Plato. Manyethicists consider emerging ethicalbeliefs to be "state of the art" legalmatters, i.e., what becomes anethical guideline today is oftentranslated to a law, regulation or ruletomorrow.

Values which guide how we ought tobehave are considered moral values,e.g., values such as respect,honesty, fairness, responsibility, etc.Statements around how the values

are applied are sometimes calledmoral or ethical principles.


9/40


BUSINESS


10/40

That which busies one, or that which engages the time, attention, orlabor of any one, as his principal concern or interest, whether for alonger or shorter time; constant employment; regular occupation; as,the business of life; business before pleasure.

Financial dealings; buying and selling; traffic in general; mercantiletransactions.

What do we understand by BUSINESS?Source: Online Dictionary - Brainy Dictionary


11/40

Any particular occupation or employment engaged in for livelihood orgain, as agriculture, trade, art, or a profession.

That which one has to do or should do; special service, duty, or mission.

Affair; concern; matter; -- used in an indefinite sense, and modified bythe connected words.

What do we understand by BUSINESS?Source: Online Dictionary - Brainy Dictionary


12/40

What do we understand by BUSINESS?Source: Online Dictionary - Encarta Dictionary

1. line of work:a particular trade or profession

the retail business

2. commercial organization:a company or other organization that buys andsells goods, makes products, or provides servicestake over an ailing business

3. commercial activity:commercial activity involving the exchange of moneyfor goods or servicesa good person to do business with

4. level of commerce:the amount of commercial activity or patronage thatexists at a particular timeBusiness is poor right now.

5. commercial practice:commercial practice or procedure

It's bad business to neglect smaller clients.6. patronage:the commercial dealings that a person or organization has withanother person or organizationIf this goes on, I shall take my business elsewhere!


13/40

What do we understand by BUSINESS?Source: Online Dictionary - Encarta Dictionary

7. important matters:tasks or important things that somebody has to do or

deal withWe have important business to discuss.

8. private matters:personal responsibilities and concernsWhat business is it of yours?

9. affair:a situation or event that is characterized by difficulty, fuss, orunpleasantnessthat business about the tickets

10. unspecified activities:activities or things that are not clearly described ordefineddesigning, measuring, and all that kind of business

11. something excellent:something very impressive or excellent ( informal)

He thinks his new car is really the business.12. theater actor's small actions:an action or series of actions performed byan actor for dramatic or comic effect or to fill in a pause when little is happeningon stage


14/40

Q A

Q & A
http://www.barrysclipart.com/barrysclipart.com/showphoto.php?photo=27440&papass=&sort=1&thecat=194http://www.barrysclipart.com/barrysclipart.com/showphoto.php?photo=27440&papass=&sort=1&thecat=194


15/40

What are the

LEGAL ISSUESIN BUSINESS?

What are the


16/40

There are a multitude of legal issues to think about when it comes to starting orrunning a business. Everything from the business name to its structure to itsoperation has legal implications.

The issues may be brought down to the following diverse but cross-cuttingcategories:

1. Organizational

2. Bankruptcy

3. Business & Corporate

4. Computers & Technology

5. Labour & Employment

6. Administrative Law

7. Commercial Law

8. Communications Law

9. Constitutional Law

What are theLEGAL ISSUES IN BUSINESS?

10. Contracts

11. Environmental Law

12. Intellectual Property

13. Legal

14. Tax Law

15. Insurance Law

16. Mediation & Arbitration

17. Securities


17/40

1. Organizational

1.1 Business NameYou will need to make sure that the business name you plan to use is notalready being used by another business. You can do this by doing a namesearch with the appropriate state agency, which is usually the office of the CityCorporation or Municipality. If your chosen name is not already in use, you canapply with the name for the Trade License while you prepare your articles of

incorporation, or articles of organization, or a partnership agreement.1.2 Business Structure

You will need to decide which business structure best suits your business.Your business could be structured as a sole-proprietorship, partnership,limited partnership, corporation, S-corporation, or limited liability company. Todecide what form is best, you will need to consider liability issues associated

with your business and which form will provide the best tax structure for yourbusiness.

THE LEGAL ISSUES IN BUSINESS

(Contd)


18/40

1. Organizational

1.3 Business LicensesDepending on what type of business you plan to engage in, you may need avariety of licenses or permits. At a minimum, you will need a Trade License,Tax Information Number (TIN) and VAT (Value Added Tax) Registration.

1.4 Non-Disclosure Agreements (NDA)

If you will be setting up financing for your business or entering into contractswith suppliers, you should consider confidentiality and non-disclosureagreements. Since these outside firms will have access to businessinformation that you may want to keep private, you should consider havingthem sign these agreements. If you are ordering a thousand gizmos for yourgrand opening, you don't want the supplier to call your competitor to see ifthey want a thousand gizmos so that they can offer them on the same day. The

more confidential information your business plan contains, the more importantthese agreements are.


(Contd)


19/40

1. Organizational (Contd)

1.5 ZoningWhen you are selecting the location for your business, you will need to makesure it is properly zoned for the type of business you plan to operate. It is notokay to just assume that, if your business is of the same type as the one that iscurrently there, the zoning is appropriate. Zoning may have changed while theother business was operating, and that business might have been provided an

exemption that won't be provided to yours.



20/40

2. Bankruptcy

Bankruptcy can be a frightening topic. Don't face it unprepared.

3. Business & Corporate

Most people approach a new business opportunity with great enthusiasm.While this enthusiasm provides much of the needed fuel to help a newbusiness get started, business people must arm themselves with important

legal information that will guide their most basic decisions.The form of a business organization creates specific legal consequences formatters as diverse as taxes, insurance, and management. Once formed, abusiness faces challenges in its relationships with its shareholders, creditors,employees, and other businesses. Every business concern has important legalissues that can dramatically affect the likelihood of future success.

Experienced lawyers can help create a business strategy that manages legalrisks.


(Contd)



21/40

4. Computers & Technology

Technology is changing rapidly and the law must adapt as well.

5. Labour & Employment

For both employers and employees up-to-date information on labor laws,insurance, discrimination and other issues relevant to today's workplace isvery important.

6. Administrative LawSometimes the govt. imposes some administrative laws on the businessconcerns in the country. Sometimes again, it is seen that some organizationsfollow administrative laws of their own (MNCs usually follow the laws of theircountry of origin) and some other align their administrative laws with thesame implemented by the govt.

7. Commercial Law

This is more related to the transactions of goods and money. The company actof the country may be referred to regarding this.


(Contd)



22/40

8. Communications Law

Law regarding ICT, VOIP etc. will fall under its purview.

9. Constitutional Law

There might be some constitutional laws binding the economic activities.

10.Contracts

Contracts are very important working and legal documents. Not every contracthas to be in writing to be valid and enforceable, but some contracts should bedepending on the size and value of contract, and the business relationshipbetween the parties concerned.

11.Environmental Law

For example, that the waste water cannot be downloaded into the river withouttreatment, implementation of HACCP (Hazard Analysis of Critical Control Point)and ISO 14000 and so on.


(Contd)



23/40

12.Intellectual Property

If the business you are venturing into is a knowledge-based operation, thenIntellectual Property Rights (IPR) is of a great concern for both the developersand the buyers.

13.Legal

It will cost a lot less to hire a lawyer to prevent legal problems than it will to

hire one after you have a problem. If you've never worked with a lawyer before,you may not know what to expect from the Attorney-Client relationship. Alawyer owes certain duties to his or her clients, including a duty to avoidconflicts of interest, a duty of confidentiality, a duty to provide competentrepresentation, and others.

14.Tax Law

From individuals to large corporations, everyone needs to know about taxes.


(Contd)



24/40

15.Insurance Law

Insurance Law may vary from country to country. However, other than theregular insurance scheme which may provide tax-waiver, there are mandatoryinsurance schemes for exports.

16.Mediation and Arbitration

Mediation and Arbitration are forms of alternative dispute resolution (ADR) that

are intended to avoid the high cost and unpredictable outcome that couldresult from a lawsuit. For this, a third party is engaged who is acceptable toboth the parties in question. In standard contracts, usually a provision is keptfor Mediation and Arbitration under a clause.

17.Securities

In case your business has to be registered with the stock exchange, you need

to know all the legal implications starting from IPO issuing, Circuit Breaker,Holding the AGM in due time and giving profit to the shareholders regularlyetc.


(Contd)

Q & A


25/40

Q A

Q & A
http://www.barrysclipart.com/barrysclipart.com/showphoto.php?photo=27440&papass=&sort=1&thecat=194http://www.barrysclipart.com/barrysclipart.com/showphoto.php?photo=27440&papass=&sort=1&thecat=194


26/40

What are the

ETHICAL ISSUESIN BUSINESS?

THE ETHICAL ISSUES IN BUSINESS


27/40

The concept has come to mean various things to various

people, but generally it's coming to know: What is right or wrong in the workplace and

Doing what's right

in regard to effects of products/services and in

relationships with stakeholders.


(Contd)



28/40

Wallace and Pekel explain that attention to business ethics is critical

during times of fundamental change -- times much like those facednow by businesses, both nonprofit or for-profit.

In times of fundamental change,

Values that were previously taken for granted are now stronglyquestioned.

Many of these values are no longer followed. Consequently, there is no clear moral compass to guide leadersthrough complex dilemmas about what is right or wrong.

Attention to ethics in the workplace sensitizes leaders and staff tohow they should act.

Perhaps most important, attention to ethics in the workplaces helpsensure that when leaders and managers are struggling in times ofcrises and confusion, they retain a strong moral compass.

Consequently, business ethics can be strong preventative medicine.


(Contd)



29/40

Two Broad Areas of Business Ethics

1. Managerial mischief.Madsen and Shafritz, in their book "Essentialsof Business Ethics"(Penguin Books, 1990) further explain that"managerial mischief" includes "illegal, unethical, or questionablepractices of individual managers or organizations, as well as thecauses of such behaviors and remedies to eradicate them."

There has been a great deal written about managerial mischief, leadingmany to believe that business ethics is merely a matter of preachingthe basics of what is right and wrong. More often, though, businessethics is a matter of dealing with dilemmas that have no clearindication of what is right or wrong.

2. Moral mazes. The other broad area of business ethics is "moralmazes of management" and includes the numerous ethical problemsthat managers must deal with on a daily basis, such as potentialconflicts of interest, wrongful use of resources, mismanagement ofcontracts and a reements etc.


(Contd)



30/40

Business ethics is now a management discipline

Business ethics has come to be considered a management discipline,especially since the birth of the social responsibility movement in the

1960s.

In that decade, social awareness movements raised expectations ofbusinesses to use their massive financial and social influence to

address social problems such as poverty, crime, environmentalprotection, equal rights, public health and improving education.

An increasing number of people asserted that because businesseswere making a profit from using our country's resources, thesebusinesses owed it to our country to work to improve society. Many

researchers, business schools and managers have recognized thisbroader constituency, and in their planning and operations havereplaced the word "stockholder" with "stakeholder," meaning toinclude employees, customers, suppliers and the wider community.


(Contd)



31/40

Business ethics is now a management discipline

The emergence of business ethics is similar to other managementdisciplines.

For example, organizations realized that they needed to manage a morepositive image to the public and so the recent discipline of publicrelations was born.

Organizations realized they needed to better manage their humanresources and so the recent discipline of human resources was born.

As commerce became more complicated and dynamic, organizationsrealized they needed more guidance to ensure their dealings supportedthe common good and did not harm others -- and so business ethics

was born.90% of business schools now provide some form of training inbusiness ethics.

Today, ethics in the workplace can be managed through use of codesof ethics, codes of conduct, roles of ethicists and ethics committees,


(Contd)



32/40

10 Myths About Business EthicsBusiness ethics in the workplace is about prioritizing moral values for theworkplace and ensuring behaviors are aligned with those values -- it'svalues management. Yet, myths abound about business ethics. Some ofthese myths arise from general confusion about the notion of ethics. Othermyths arise from narrow or simplistic views of ethical dilemmas.1. Myth: Business ethics is more a matter of religion than management.

Diane Kirrane, in "Managing Values: A Systematic Approach to BusinessEthics,"(Training and Development Journal, November 1990), asserts that"altering people's values or souls isn't the aim of an organizational ethicsprogram -- managing values and conflict among them is ..."2. Myth: Our employees are ethical so we don't need attention to businessethics.Most of the ethical dilemmas faced by managers in the workplace

are highly complex. Wallace explains that one knows when they have asignificant ethical conflict when there is presence of a) significant valueconflicts among differing interests, b) real alternatives that are equalityjustifiable, and c) significant consequences on "stakeholders" in thesituation.


(Contd)



33/40

10 Myths About Business EthicsKirrane mentions that when the topic of business ethics comes up, peopleare quick to speak of the Golden Rule, honesty and courtesy. But whenpresented with complex ethical dilemmas, most people realize there's awide "gray area" when trying to apply ethical principles.3. Myth: Business ethics is a discipline best led by philosophers,academics and theologians.Lack of involvement of leaders and managers

in business ethics literature and discussions has led many to believe thatbusiness ethics is a fad or movement, having little to do with the day-to-day realities of running an organization. They believe business ethics isprimarily a complex philosophical debate or a religion. However, businessethics is a management discipline with a programmatic approach thatincludes several practical tools. Ethics management programs have

practical applications in other areas of management areas, as well.


(Contd)



34/40

10 Myths About Business Ethics4. Myth: Business ethics is superfluous -- it only asserts the obvious: "do

good!"Many people react that codes of ethics, or lists of ethical values towhich the organization aspires, are rather superfluous because theyrepresent values to which everyone should naturally aspire. However, thevalue of a codes of ethics to an organization is its priority and focusregarding certain ethical values in that workplace. For example, its obviousthat all people should be honest. However, if an organization is struggling

around continuing occasions of deceit in the workplace, a priority onhonesty is very timely -- and honesty should be listed in that organizationscode of ethics. Note that a code of ethics is an organic instrument thatchanges with the needs of society and the organization.5. Myth: Business ethics is a matter of the good guys preaching to the badguys.Some writers do seem to claim a moral high ground while lamentingthe poor condition of business and its leaders. However, those people wellversed in managing organizations realize that good people can take badactions, particularly when stressed or confused. (Stress or confusion arenot excuses for unethical actions -- they are reasons.) Managing ethics inthe work lace includes all of us workin to ether to hel each other remain


(Contd)



35/40

10 Myths About Business Ethics6. Myth: Business ethics in the new policeperson on the block.Many believe

business ethics is a recent phenomenon because of increased attention tothe topic in popular and management literature. However, business ethicswas written about even 2,000 years ago -- at least since Cicero wrote aboutthe topic in his On Duties. Business ethics has gotten more attentionrecently because of the social responsibility movement that started in the1960s.

7. Myth: Ethics can't be managed.Actually, ethics is always "managed" --but, too often, indirectly. For example, the behavior of the organization'sfounder or current leader is a strong moral influence, or directive if you will,on behavior or employees in the workplace. Strategic priorities (profitmaximization, expanding marketshare, cutting costs, etc.) can be verystrong influences on morality. Laws, regulations and rules directly influencebehaviors to be more ethical, usually in a manner that improves the generalgood and/or minimizes harm to the community. Some are still skepticalabout business ethics, believing you can't manage values in anorganization. Donaldson and Davis (Management Decision, V28, N6) notethat mana ement, after all, is a value s stem. Ske tics mi ht consider the


(Contd)



36/40

10 Myths About Business Ethics8. Myth: Business ethics and social responsibility are the same thing.The social

responsibility movement is one aspect of the overall discipline of businessethics. Madsen and Shafritz refine the definition of business ethics to be: 1) anapplication of ethics to the corporate community, 2) a way to determineresponsibility in business dealings, 3) the identification of important businessand social issues, and 4) a critique of business. Items 3 and 4 are often mattersof social responsibility. (There has been a great deal of public discussion and

writing about items 3 and 4. However, there needs to be more written about items1 and 2, about how business ethics can be managed.) Writings about socialresponsibility often do not address practical matters of managing ethics in theworkplace, e.g., developing codes, updating polices and procedures, approachesto resolving ethical dilemmas, etc.9. Myth: Our organization is not in trouble with the law, so we're ethical.One can

often be unethical, yet operate within the limits of the law, e.g., withholdinformation from superiors, fudge on budgets, constantly complain about others,etc. However, breaking the law often starts with unethical behavior that has goneunnoticed. The "boil the frog" phenomena is a useful parable here: If you put afrog in hot water, it immediately jumps out. If you put a frog in cool water andslowl heat u the water ou can eventuall boil the fro . The fro doesn't seem


(Contd)



37/40

10 Myths About Business Ethics10. Myth: Managing ethics in the workplace has little practical relevance.

Managing ethics in the workplace involves identifying and prioritizing valuesto guide behaviors in the organization, and establishing associated policiesand procedures to ensure those behaviors are conducted. One might callthis "values management." Values management is also highly important inother management practices, e.g., managing diversity, Total QualityManagement and strategic planning.


(Contd)


38/40

1. Give examples of three legal issues in business in Bangladesh.

2. Give examples of three ethical issues in business in Bangladesh.

3. Pick any five of 10 Myths about Business Ethics and give yournotion in terms of rejection, acceptance or just observation.

Bibliography


39/40

Bennett, "Unethical Behavior, Stress Appear Linked" (Wall Street Journal,

April 11, 1991, p. B1) Donaldson and Davis, Business Ethics? Yes, But What Can it Do for the

Bottom Line? (Management Decision, V28, N6, 1990)

Drake and Drake (California Management Review, V16, pp. 107-123)

Diane Kirrane, "Managing Values: A Systematic Approach to BusinessEthics,"(Training and Development Journal, November 1990)

Mark Pastin, The Hard Problems of Management: Gaining the Ethics Edge(Jossey-Bass, 1986),

Bibliography


40/40

THANK YOU

introduction to legal and ethical issues in business 14 aug

Documents