The legal/ ethical issues

in business
-----------o0o-------------

Lecturer: Dr. Ho Thuy Ngoc (LLM)

Deputy Dean of
Faculty of International Education
Foreign Trade University

1
Recap
1- Introduction to Law- Business Ethics and Social
Responsibility
2- History and Sources of Law in the United States
3- Dispute Resolution
4- Torts- Crime
6- Contract Law
7- The Uniform Commercial Code, Sales, Product Liability
and Negotiable Instruments
8-Starting a Business- Business Organizations- Agency-
Corporations
9- Employment Law
10- Secured Transactions and Bankruptcy, Securities
Regulation
11- Consumer Law, Cyberlaw

2
Books and references

1) Legal Environment, 3rd Ed. Beatty

and Samuelson (Thomson
Southwestern, 2005)
2) The Uniform Commercial Code
3) Tutorials

3
Grading Breakdown

30%- 30% 2 Mid-Term Exams

30% Final Exam
10% ClassParticipation and
Attendance
Total: 100%

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Rules required
when you are in class
 No mobile phone;
 No eating (drinking is allowed);
 Time for class shall be flexible and
depend on the load of work;
 Feel free to stop the lecture and ask;
 Doing private things shall be seriously
punished.

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Q&A
You are manager of a company and you
face with these claims
- Your staff- Sarah,complains that Rob, her
boss but under your level, is constantly
touching her and making lewd comments
- You have a business dinner with Jake- a
director of a software company and he
would like to cooperate with you. You
want to engage but not to be bound
- You wanna invest in a kind of software but
similar products exist in the market.

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Lecture 1-
Introduction to Law;
Business Ethics and Social Responsibility

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 1- Introduction to Law

UNITED STATES — FEDERAL GOVERNMENT

 Alabama Hawaii  Massachusetts New Mexico  South Dakota

 Alaska  Idaho  Michigan  New York  Tennessee
 Arizona  Illinois  Minnesota  North Carolina  Texas
 Arkansas  Indiana  Mississippi  North Dakota  Utah
 California  Iowa  Missouri  Ohio  Vermont
 Colorado  Kansas  Montana  Oklahoma  Virginia
 Connecticut  Kentucky  Nebraska  Oregon  Washington
 Delaware  Louisiana  Nevada  Pennsylvania  West Virginia
 Florida  Maine  New Hampshire   Rhode Island  Wisconsin
 Georgia  Marylan  New Jersey  South Carolina  Wyoming
 American Samoa • District of Columbia • Guam • Northern Mariana Islands
Puerto Rico • Virgin Islands 
Read page 100 to understand the history of
America! 8
What is the difference bwt a state
and a territory?
 State is a political unit  Territories, like Guam,
in the United States the Virgin Islands, and
that occupies a definite Wake Islands, have
laws enacted by the
territory and has an Congress (Articles I and
organized government IV of the Constitution)
with the power to and can also enact laws
make laws and enforce as long as they abide
those laws without by the laws enacted by
approval from any Congress
higher authority.  The federal government
has more direct control
over territories than it
does over states.

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Sources of law

>
Statute law Common
Common law law

make >
Equity

Parliaments Judges

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 Three Sources of Law

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11
 Changes in Common Law –
Bystander Cases
 Over time, changes in society’s norms have an
effect on long-standing common law. An
example of this is the law that applies to
bystanders in emergencies.
 Under common law, bystanders have no obligation to
assist a victim in an emergency.
 Over time, courts have created exceptions, making
employers obliged to help an employee who is
suddenly stricken with an emergency situation when
the employer is present.
 Some courts now hold that anyone witnessing an
extreme situation or if there is a special relationship,
such as patient-therapist, should be required to help,
though this is not universal.

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 Statutory Law
p Most new law is statutory, that is, it is
legislation passed by either a state
legislature or the Congress of the United
States.
p Citizens who vote have some control over
statutory law. We elect the state
congressional representatives and the
United States Senators and
Representatives.

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 How New Laws are Made
p Any member of Congress can initiate a bill,
or proposed law.
p A bill is debated in a committee in the house
where it was introduced.
p It then goes to the full house for a vote.
p If it passes both houses this way, it goes to
the President for his signature.
p A President’s signature turns a bill into law.
p If the President does not sign the bill (veto),
Congress can override the veto by passing
the bill again, with a two-thirds margin.

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 Why Are Bills Proposed?
p New issues or new worries – such as
employment discrimination and Internet
privacy or copyright issues
p Unpopular judicial rulings – if Congress
disagrees with a judicial interpretation of a
statute, it may pass a new statute to “undo”
the decision of the court, unless the decision
at hand is based on the U.S. Constitution.
p Criminal law – must be set forth in clear
terms through statutes rather than left to
judicial interpretation.

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15
 Creation of a Statute: Example
p In 1963, President Kennedy proposed legislation
to guarantee equal rights to African Americans in
jobs, housing, voting, schools and other basic
areas of life.
p The bill was debated vigorously in Congress.
• Wording was changed, terms added, meaning of
phrases discussed and clarified.
p Since the wording had changed through debate,
a committee of members of both houses of
Congress had to meet to reach a compromise.
p Interpretation and enforcement of the Civil
Rights Amendment varied with the make-up of
the Supreme Court.

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16
 How New Laws Are Made
IfOnce both houses
the second Housepass the
of Congress If vetoed,
made any changes, or amendments, to the bill, it goes
it must go back to the
to a Conference
Ifcompromise
signed, themade
Committee, bill becomes
bill, it up
is sent Congress,
tolaw. of both houses. Here, they work out compromises
of members where
between theit two
must pass
the President
different to be
versions of signed. both
the bill. The compromise bill then goes back to both houses for houses by a 2/3 majority.
a final vote.

House of
Representatives Senate
Conference
Committee
IfAfter it passes
it passes committee,
there, it goes tothe
the
bill goes
other to the
house full body
(House of that
to Senate It is assigned to a Foreign
house
or for atovote.
Senate House). committee and the Relations
process repeats.
Banking, Education
Judiciary Judiciary
Finance, and and Appropriation
Committee Committee
Urban Affairs Labor
A bill, or proposed law, is introduced in the House ofMajor
Representatives or
Senate Committees
Major House Committees
the Senate and then assigned to a committee for Aeronautical
discussion and voting.
Armed Ways and Armed
Agriculture and Space
Services Means Services
Sciences

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 Statutory Interpretation
p
(giai thich luat)
Sometimes wording is ambiguous, either by
oversight, or intentional -- as a compromise.
p New laws must be interpreted by the courts.
• Plain Meaning Rule -- the courts must use the
common sense definition of words. (canadia, England:
literal rule)
• Legislative History and Intent (purpose approach)--
sometimes the court can look to the reasons behind
the law to determine the legislators’ intent.
• Public Policy -- the courts will use accepted social
policies, such as reducing crime or providing
education to interpret a law.
p Once the law (statute) has been applied by the
courts, its interpretation becomes a precedent to
be used in future court cases.

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 The Other Player -- Money
$ In today’s political climate, running a campaign for
political office is an expensive endeavor.
$ Financial contributions to candidates or political parties
come from many sources. Some limits have been
placed on contributions, but loopholes exist.
$ Donors usually expect to receive some benefit, such as
favored treatment in future legislative issues.

$ Supporters of contribution limits aim to equalize the

access to politics for rich and poor; opponents claim
that the First Amendment guarantees their right to
support whomever they choose.
$ The very green bottom line is, MONEY TALKS -- and
it often talks loudly in the political arena!

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 Administrative Law
p Federal agencies such as the Federal
Aviation Agency (FAA) and the Federal
Trade Commission (FTC) and the
Bureau of Land Management, all have
the power to make regulations which
affect citizens and businesses.
p Agencies are often called the fourth
branch of government.

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 Classification of Agencies
 Executive Federal Agency: Part of
executive branch, under the control of
the President; usually support the
President’s policies.
 Independent Federal Agency: Not part
of executive branch; President does
not have the power to fire the head of
the agency.
 Agencies also exist at the state and
local levels.

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 Administrative Law
p Agencies were -- and are -- created to fulfill a
need. Someone needs to oversee changing
technologies and practices and their effects on
society. An agency is created when Congress
passes enabling legislation, describing a
problem and defining the agency’s powers.
p Agencies often have considerable power in
their areas of specialty, sometimes leading to
controversy. The Administrative Procedure
Act regulates how agencies operate, in an
attempt to reduce the controversy.

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 Power of Agencies --
Rulemaking
 Two types of rules
Legislative rules -- require
businesses and people to act a
certain way; have the effect of a
Congressional statute.
Interpretive rules -- these do not
change the law; they define or
apply the laws to new situations.

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23
 Power of Agencies --
Rulemaking
 Three types of rulemaking
Informal rulemaking -- proposed rule
must be published and public allowed to
comment.
Formal rulemaking -- must hold a public
hearing before establishing the rule.
Hybrid rulemaking -- some elements of
both of the above -- perhaps the
proposal and comment, with cross-
examination, but not a full hearing.

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 Power of Agencies --
Investigation
p Voluntary -- Some businesses freely give
information and readily comply with agency
recommendations.
p Subpoena -- an order to appear at a hearing
and produce evidence, sometimes documents.
• Must be relevant to the investigation and under
the agency’s jurisdiction, or area of authority.
• Must not be unreasonably burdensome on the
business.
• Must not be privileged; this means that a
corporate officer may not be required to
incriminate himself.

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 Power of Agencies --
Investigation
 Search and Seizure -- a legal search of
a business, in order to take evidence of
wrongdoing.
Most require a warrant before the search.
Some industries are closely regulated and
may be searched at any time, with no
warning.

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 Power of Agencies --
Adjudication
p Adjudicate -- means to hold a hearing,
then decide how to proceed with an issue.
p Procedures for adjudication
• A hearing before an administrative law judge.
• Parties have counsel, but there is no jury.
• Informal; both sides present evidence.
• Judge makes ruling on testimony and evidence.

p If parties are unhappy with results

• Loser may appeal to an appellate board.
• Appellate board may make a de novo decision, and
ignore the administrative law judge’s decision.
• Appeals go to a federal court.

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 Limits on Agency Power
 Statutory Control
 The enabling legislation that created the agency
places controls on it through requirements and
restrictions.

p Political Control
• The President has control over agencies through
political pressure and through nominations of
agency heads.
• Congress controls the budgets of agencies. They
can eliminate funding for any program or an entire
agency.
• Congress can amend enabling legislation to place
limits.

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 Limits on Agency Power
p Judicial Review
• A party injured by an agency decision is entitled to
an appeal in a federal court, after all appeal
options are exhausted within the agency itself.

p Informational Control and the Public

• The Freedom of Information Act (FOIA) -- allows
any citizen to request information from an agency.
• The Privacy Act -- prohibits agencies from giving
information about an individual to other agencies
without consent. There are some exceptions.

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Classification of law
 Criminal law  Civil law
 Substantive law  Procedure law
 Public Law  Private law

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Criminal law (hinh luat) Civil law (dan luat)
 Government – Wrong  Between Individual and
organizations (sue, rights and
doers (prosecute, duties)
threatening behavior)  Plantiff – Defendant (2 tu nay
chi dung cho dan su. Lan 1:
 Injured parties – nguyen don, bi don. Nguyen
Wrong doers (neu cao/ ben khoi to, bi cao ->
nan nha di kien: applle: Appelant –
Respondent/ Appelee – ben
nguyen cao – bi cao: khang an, ben bi k.a.)
prosecutor - accused)  No jail but damages (neu so
nhieu la boi thuong thiet hai;
 Jail, Imprisoned/ fine money go to who suffer, not
(money go to state) nguoi di kien); conjunction

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Criminal/ civil
 A killed B for money. Both Damages to
heir
 Customer got poinsoned after having
lunch in a restaurant. Criminal if
severe….
 Disagree sharing hose, brothers fought.
Both. Civil: on how to share….
 Similar labels – lam hang gia ->
criminal. Both.
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Doctrine of
the separation of powers
***

Parliament Government Courts

makes law administers the interpret the
law law

Legislative Executive Judicial

power power power

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Laws are legally enforceable rules
made by authorities within a
society.

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Law and Morality

Actions may beinlegal,

Owning slaves but America
Colonial immoral was
to some
legal, but
people.
this violates most people’s moral standards today.

Actions may be required by both

Drunk driving is both immoral and illegal.
moral standards and the law.
LAW

Helping
Actions amay
hurtbe
person
moral,isbut
required by moral
not required by law.
standards, but is not mandated by the law.
MORALITY

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Jurisprudence, or “What is
Law?”
Legal “Law is what the sovereign says it is.”
Positivism Decisions stand, regardless of morality.

“An unjust law is no law at all and

Natural Law need not be obeyed.”
Laws must have a good moral basis.

“Enforcement of the law is more

important than the law itself.”
Legal Realism
Enforcers determine if the law is
applied in a fair and consistent way.

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 Case Analysis
PLAINTIFF:
the party
who is suing
QUIGLEY v. FIRST Facts: Gayle Quigley and James Wantland
DEFENDANT: CHURCH OF CHRIST, had divorced. They had joint custody of
FACTS:
the party SCIENTIST their 12-year-old son, Andrew, who lived
background
being sued with his father. James was a member of the
65 Cal. App. 4th 1027, 76 Cal. information on
Rptr. 2d 792, 1998 Cal. App. Christian Science church, a religion that
the case
LEGAL LEXIS 677 regards disease as an “error of the mind”
CITATION: where and discourages the use of traditional
California Court of Appeal, 1998 ISSUE: the
to find the case medicine. Members of the faith…
question being
in a law library
decided
Issue: Did the defendants have a duty to
Where and when
summon medical help for Andrew?
the case was
decided. Excerpts from Judge Bedsworth’s
Decision: [The judge began by
EXCERPTS:
mentioning an earlier California the
case, in
which the state’s highestdecision -- also
court ruled that
called
one person generally has the
no duty to protect
another from harm, unless there is aand
holding -- special
the court’s
relationship between the two, such as
custody or control... rationale

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“We depend upon the law to give
us a stable nation and economy,
a fair society, a safe place to live
and work. …But while law is a
vital tool for crafting the society
we want, there are no easy
answers about how to create it.
...Legal rules control us,
yet we create them.”

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2- Business Ethics and Social Responsibility
Quotes of the Day

“The one and only social responsibility of

business is to increase its profits.”
Milton Friedman (b. 1912),
Nobel laureate in economics

“The business of business is serving

society, not just making money.”
Dayton Hudson corporate constitution

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Ethics
Ethics is the study of how
people ought to act.

Law and ethics may not always agree...

Sometimes it is ethical to commit

an illegal act...

And some legal acts are unethical!

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 Why Bother With Ethics?
There is little evidence that ethical behavior
increases profits or that unethical behavior
decreases profits… so why bother?

p Society as a whole benefits by encouraging

fair economic competition.
p Money does not buy happiness.
p People feel better when they behave ethically.
p Unethical behavior can be costly, if there is
public outrage leading to a boycott.
p Ethical behavior is more likely to pay off.

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 What is Ethical Behavior?
Questions to Ensure Ethical Behavior
p What are the facts?
p What are the critical issues?
p Who are the stakeholders?
p What are the alternatives?
p What are the implications of each choice?
• Are the alternatives legal?
• Do they “look bad?”
• What are the consequences of this choice?
• Does this action violate important values?
p Is more than one alternative right?

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 Responsibility To Society
Businesses must take a stand on sexual
and racial exploitation in advertising.
p Alternatives in advertisement ethics
• Ignore ethics and try to create ads that sell the
most product, no matter the underlying
message.
• Try generally to minimize exploitation.
• Include a systematic, focused review of
underlying messages as part of the
development process.
• Refuse to create any ads that are even
potentially offensive.

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 Other Responsibilities
p To customers
• Is a business responsible if its decisions create a
financial hardship for someone else? What if a
decision leaves someone homeless?
p To employees
• Should employers be required to treat all
employees the same in regard to benefits?

p To shareholders
• Questions are often raised about uses of a
company’s profits -- distributed to shareholders,
raising executives’ salaries, improving business?
• Should a company be allowed to intentionally
lower profits to improve in other areas?

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Other Responsibilities (cont’d)
p To -- and in -- foreign countries
• Companies with operations in foreign countries are
often criticized for deplorable working conditions
and low wages.
• Response to these criticisms is often that even low-
wage jobs are better than destitution and that these
jobs are the beginnings of economic growth.
p Employees’ responsibility to organization
• Should employees report unethical behavior among
co-workers? Should promotion decisions be made
based on friendships?
• These questions show the difficult choices that
have to be made every day in the work place.

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 The Best Insurance
Even employees who are ethical in their
personal lives may find it difficult to
uphold their standard at work if those
around them behave differently.

The surest way to infuse ethics

throughout an organization is for top
executives to behave ethically
themselves.

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“Ethical behavior offers significant
advantages: society as a whole
benefits; executives who behave
ethically have happier, more
fulfilled lives; and unethical
behavior can destroy a company.”

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2- Business Ethics and Social
Responsibility

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