109
Unit One
Focus on Ethics:
Ethics and the Legal
Environment of Business
See Separate Lecture Outline System
INTRODUCTION
Unit One looks at the legal environment of business and presents a view of the common law, our legal system, and
significant fields of law. Unit One also offers a point from which to view the law in perspective. From our discussion of ethics,
students should see that the law reflects society’s ethical values.
110 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
Chapter 5 in the textbook is devoted entirely to a discussion of ethics. Throughout the textbook, the Focus on Ethics
sections highlight selected areas covered in each unit’s chapters. This Focus on Ethics highlights the relationship between
business ethics and the law, obstacles to ethical behavior in the business context, and corporate social responsibility,
underscoring that there are ethical limits to “how far business persons can go.”
ADDITIONAL RESOURCES—
VIDEO SUPPLEMENTS
The following video supplements relate to ethical issues on topics discussed in this feature—
Business Law Digital Video Library
The Business Law Digital Video Library at www.cengage.com/blaw/dvl offers a variety of videos for group or
individual review. Clips related to topics in this feature include the following.
• Ask the Instructor
human activity, business is dependent upon at least a basic set of moral standards. And in the long run, since unethical
conduct is detrimental to relationships and reputation, ethical corporate conduct can be a competitive advantage.
• Real World Legal
Pharzime Corporation, Scene 5—A new pharmaceutical sales rep confides his anxiety about an aggressive
marketing strategy for off-label uses of an FDA-approved drug. A veteran sales rep assures him that the strategy is
appropriate. The scene addresses corporate culture, whistleblowing, and the legality and ethics of marketing drugs for
off-label use.
Pharzime Corporation, Scene 6—A pharmaceutical sales rep meets with a doctor to introduce new uses of a
include the ethics and legality of marketing strategies and the relationship between pharmaceutical companies and the
medical profession.
• LawFlix
Breaking Away—Others do get ahead by cheating (Scene in which the Italian racing team switches his gears on a
hill, gesture rudely, then uses their tire pump to get him out of the race).
Hooziers—Lines you would not cross; individual safety (Scene in the quarter finals in which a player’s stitches are
pulled, and the coach tells the doctor to patch the player up, against the doctor’s advice.)
Jaws: The Bite That’s Right—Keeping the beaches open.
UNIT 1: FOCUS ON ETHICS—ETHICS & THE LEGAL ENVIRONMENT OF BUSINESS 111
FOCUS OUTLINE
I. Business Ethics and Business Law
Because the law reflects and codifies a society’s ethical values, many of our ethical decisions are made for us—by our
laws. But the law has its limits—it cannot make all our ethical decisions for us. When it does not, ethical standards
must guide the decision-making process.
112 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
A. ETHICS AND THE CORPORATE ENVIRONMENT
The collectivity of corporate decision making is an obstacle: voicing dissent to an unethical decision may have a
negative effect on one’s job or career, or the lack of dissent or the presence of enthusiasm of others may
influence one’s own beliefs. The corporate setting also distances individual decision makers from the effects of
their decisions.
B. ETHICS AND MANAGEMENT
III. Corporate Social Responsibility
How and when should corporations be accountable to society for their actions according to any standard other than
the law?
A. A CORPORATION’S DUTY TO THE COMMUNITY
A corporation’s stakeholders may include a community in which the firm does business by employing community
members, making goods, or providing services. Closing down or starting up, for example, can impact a community
greatly. A corporation may need to consider the effects when deciding whether to take one of those actions.
B. A CORPORATION’S DUTY TO SOCIETY
What is the nature of a corporation’s duty to society at large?
1, The Societal Effects of Corporate Profits
Is it by generating profit that a corporation best contributes to society? Profits are realized when society
2. The Appropriate Forum for Determining Society’s Best Interests
Should a corporation pursue social goals? As to whether a corporation should set other goals, some might
3. Social Goals Unmet through the Political Process
Some would argue that because so much of wealth and power is controlled by business, business has a
IV. It Pays to Be Ethical
If a corporation fails to conduct its operations ethically or to respond quickly to an ethical crisis, its goodwill and
reputation (and thus future profits) likely suffer. Companies that demonstrate a commitment to ethical behavior may
UNIT 1: FOCUS ON ETHICS—ETHICS & THE LEGAL ENVIRONMENT OF BUSINESS 113
TEACHING SUGGESTIONS
1. To introduce social responsibility, a hypothetical involving a violation of the law could be given, but a violation as
to which there is no risk of being caught. For example, have students suppose that as businesspersons they will have
an opportunity to make more money by meeting with competitors and fixing prices, conduct which is illegal. For this
caught? Why?
2. Explain that ethical concerns are constantly changing, as social desires, needs, and demands change. This makes it
ongoing and solution-oriented.
3. Ask students to express their ethical standards. Describe hypothetical situations in which the students can test
and apply those standards.
Cyberlaw Link
How does technology redefine the way business is done in cyberspace? What influence does this have on ethical
standards? From this perspective, is the Internet truly “new,” or is it simply another set of circumstances in which
traditional ethical standards can be applied?
ADDITIONAL QUESTIONS
1. What is the difference between business ethics and social responsibility? Business ethics involves the application of
2. Why is it difficult to evaluate corporate social responsibility? Because it means different things to different people,
3. Should the duty of corporate directors and officers to act in the shareholders’ interest take precedence over all other
corporate duties? Should the primary goal of corporations be to maximize short-term profits, restricted only by whatever the
law is at a given place and time? If not, to whom do corporate managers owe a duty? These questions have no “right” answer,
ACTIVITY AND RESEARCH ASSIGNMENT
Some business firms publish annual reports concerning their socially responsible activities. Critics of these reports call
them advertising ploys. Suggest that students obtain and read one or more of the reports. What activities do these firms
consider socially responsible? What influence might the reporting of these activities have on the firms’ management? Are firms
that issue these reports likely to increase these activities?
ETHICS AND THE LEGAL ENVIRONMENT OF BUSINESS—
ANSWERS TO DISCUSSION QUESTIONS
1. What might be some other deterrents to ethical behavior in the business context, besides those discussed in this
Focus on Ethics feature? Deterrents to ethical behavior in the business context discussed in this feature include the
2. Can you think of a situation in which a business firm may be acting ethically but not in a socially responsible
manner? Explain Situations in which business firms may be acting ethically but not in a socially responsible manner
3. Why are consumers and the public generally more concerned with ethical and socially responsible business
behavior today than they were, say, fifty years ago? Consumers and the public may be more concerned with ethical
4. Suppose that an automobile manufacturing company has to choose between two alternatives: contributing $1
million annually to the United Way or reinvesting the $1 million in the company. In terms of ethics and social
responsibility, which is the better choice? An automobile manufacturing company that has to choose between
Reinvesting profits might contribute to the increased production of wealth. This might increase the standard of
5. Have Internet chat rooms and online forums affected corporate decision makers’ willingness to consider the
community and public interest when making choices? Are corporate decision makers more apt to make ethical
choices in the cyber age? Explain. Chat rooms and online forums can be seen to have affected corporate decision
116 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION