Legal and Ethical Aspects of Business Management
Individuals possess a powerful internal sense of what constitutes right and wrong that is informed by family, faith, community, and laws. Managers should foster an environment that rewards exemplary conduct while discouraging damaging misconduct.
Adopting this philosophy can boost company morale, foster stronger relationships with clients and communities, and take advantage of new sentencing guidelines that take account of corporate culture in employee misconduct cases.
Navigating Business Laws and Regulations
Business managers have legal and ethical responsibilities, including adhering to laws, codes, tax levies, and any additional mandatory organizational policies, practices, or procedures. Leaders who consistently implement an ethics code or program create an atmosphere of ethical behavior in the workplace while assuring all employees understand what actions constitute ethically questionable conduct.
Many individuals fear acknowledging the effect of organizational context on individual morality--particularly when discussing corporate misconduct--for fear that doing so will compromise their sense of personal accountability or suggest their wrongdoing is justified due to "the system." Yet, it's possible to be respectful and transparent when discussing how a system affects an individual's choices.
Reputations and relationships within companies can take a severe blow if their leaders violate ethical principles. For instance, a company engaging in corruption or bribery could experience sales, customer trust, and market share decrease even after all legal proceedings have concluded. A single reprehensible incident could even cause the closure of well-known brands.
Intellectual Property Rights and Protections
Intellectual property covers inventions, literary and artistic works, commercial symbols and images used for commerce, and creative works from individual creators. To limit unwarranted usage, intellectual property may be protected with copyrights, trademarks, and patents.
Copyright protects creators' work regardless of formal registration status; its enforcement falls to the Copyright Office at the Library of Congress. Most copyrights last up to 70 years past the creator's lifetime.
Trademarks and patents require formal registration processes, while trade secrets can be protected without official registration. Trade secret owners should take measures to minimize disclosure to unrelated third parties to protect their assets - failing which, they could face liability for trade secret infringement claims.
Business ethics and law often intersect in areas like minimum wage, misleading advertising of products or services, and hiring illegal immigrants. Effectively managing such situations requires knowing the law and a company's Code of Conduct, which must be observed.
Contract Negotiation and Management
An agreement that serves both parties' best interests is at the core of business. Negotiations involve compromises and back-and-forth discussions until an acceptable deal can be found that works for everyone involved. Managers must devise contract negotiation strategies that minimize risks while increasing revenue generation.
Consideration should also be given to each party's bargaining power when reaching agreements. Parties with superior bargaining power often present contracts and tell those less-advantaged parties, "Take it or leave it." Conversely, less privileged parties might assert that specific contract provisions are unfair or unconscionable and demand compensation.
Companies that fail to establish systems supporting ethical behavior risk public relations disasters, lawsuits, and possibly federal fines. Building an organizational culture that fosters ethical conduct is the best way to prevent damaging misconduct. For example, at WAI and Martin Marietta, management's commitment to ethics has contributed significantly to competitiveness, positive workforce morale, and lasting relationships with key constituents.
Employment Law and Worker’s Rights
Managers in business often hold responsibility for hiring, training, and firing employees. Therefore, they must remain aware of applicable laws regulating these issues, such as workers' rights to safety and fair wages.
Employment law encompasses wage and hour regulations, minimum wage laws, employee leave policies, recordkeeping standards, and federal child labor rules that affect most full-time employees in the United States. Special laws exist for garment industry workers, freelancers, fast food and grocery store employees, construction workers, and federal antidiscrimination laws prohibiting discrimination, such as race, age, sex, religion, national origin, disability, weight, etc.
Social sustainability is a growing trend in business ethics that emphasizes ethical considerations for those within their supply chains, such as factory working conditions, human trafficking, or even slavery. This approach to ethics reflects views that consider people the core asset of companies and a part of their social responsibilities to society - a shift away from earlier viewpoints that placed profit maximization as the top goal of businesses.
Ethical Decision-Making Frameworks
An ethical framework is invaluable when making business decisions, removing some guesswork from difficult moral situations and providing guidance on balancing values. A great framework should help evaluate alternative courses of action with their possible consequences before helping select one with ethical intentions in mind.
At its core, ethical theories focus on protecting non-human entities such as animals. Others take a utilitarian approach, considering all stakeholders, such as customers, employees, and shareholders. Accurate measurement of outcomes such as satisfaction levels, individual preferences, or gains/losses must also be done accurately to compare ethical theories.
Other approaches focus on compliance, with people expected to adhere to laws they perceive as ethical and fair. Unfortunately, research indicates otherwise: individuals may act unethically for numerous reasons that aren't solely self-motivated - these factors include social pressures, family or community mores, and religious beliefs, among many others.
Corporate Governance and Accountability
Legal and ethical aspects of business management usually revolve around corporate governance and accountability of a company. This involves setting high ethical expectations for its staff members and external parties such as investors or other stakeholders, providing transparent information, and regularly updating stakeholders on company developments.
A key stakeholder in this area, the board of directors serves as an overseer for all corporate activities and sets the tone at the top for ethical conduct. They make vital decisions such as selecting a chief executive officer, setting compensation policies, and authorizing strategic initiatives designed to create sustainable long-term value creation.
Managers and other company personnel must abide by all applicable local, state, and federal laws. This also includes adhering to industry/trade regulations/marketplace standards/any mandatory organizational policies.
Failing to do so can lead to corporate scandals that tarnish companies' reputations and undermine trust between employees and clients, cast aspersions on the reliability and ethical values of companies, and result in lost revenues, defunct businesses, and trillions in global wealth lost - creating widespread mistrust and distrust of business institutions.
Managing Legal Disputes and Litigations
Ethical business models must prioritize the well-being of employees, consumers, society, the environment, shareholders, and other stakeholders - including employees themselves - employees should feel respected by their employers, culture, and the environment; such businesses are untrustworthy. Transparency ensures that prices, wages and salaries, hiring practices, financial reports, and pertinent data are readily available without divulging trade secrets or prioritizing personal gain over fairness.
An open communication, honesty, and professionalism culture is also integral to managing litigation risk. Businesses should strive to abide by all laws; where there are any grey areas, compliance should always take precedence over exploiting any loopholes. Once settled, cases have been assessed to see if lessons can be drawn for future outcomes, such as changes to contracts, policies, or processes that might help mitigate legal disputes and litigations - taking this approach can reduce both the costs and reputational damage resulting from legal disputes and litigations.
Compliance Management and Auditing
Business ethics intersect with legal considerations in numerous ways. If a company hires illegal immigrants or makes false product claims, this would violate both ethical standards and legal regulations. Other examples would include business practices that harm the environment - for instance, dumping toxic waste into rivers and destroying ecosystems. Many companies conduct compliance audits to ensure they follow internal processes and procedures and satisfy regulatory requirements while assuring outside parties that agreements have been fulfilled.
Managers frequently need to pay more attention to legal compliance for ethics. Many associate "ethics" with conscience or an intuitive sense of right and wrong; others believe it should remain internalized as part of personal decisions to set moral guidelines.
Ethical systems require discipline to deter violations of moral norms and foster positive behaviors, but overemphasizing penalties may prove counterproductive, mainly if they are unrelated to the breach or unfair.