Business Law
Business Law
- The three ethical frameworks discussed by Halbert and Ingulli (2012) include free market ethics, utilitarianism and deontology (rights and duties). Free market ethics focuses on the main objective of the business to be profitable. In this case, the manager has the sole responsibility to improve the value of investments from shareholders. Therefore, if the manager fails to run the company, he is answerable to the company owner. Money-making must also conform to the fundamental rules of the society. For example, there is a growing demand of oil all over the world, while there is renewable energy, however, the situation remains. On the other hand, the current oil supply is at 1.3 trillion gallons. Given this condition, oil is now extracted in the sea. The Gulf of Mexico BP provides a strong competitive advantage with the 30-40 billions of gas reserves. However, it is also important to note whether the action for oil exploration is legal. Utilitarianism involves greatest no. of happiness for the greatest number of goods. A cost-benefit analysis always accompanies the utilitarian principle. For instance, the long-term and short-term effects of development of oil mining extraction to the stakeholders. When the good side outweighs the bad side in the cause benefit analysis, the decision then to continue the extraction is ethical. Deontological ethics on the other hand focuses on the loyalty to the universal principles that serve as the foundation of ethics. Regardless of the consequences, a person still respects life, fairness, truth, and promises. For example, although the company in Deepwater Horizon explosion uses submersible robots to work on it does not permit anyone to have access to confidential information.
- Schaefer (2008) argues that gaining profit is not only the social responsibility of a business and that shareholders have the duty to call the attention of the corporation management to take the course of action. According to Schaefer (2008), shareholder must be aware of where the managers invest their money most especially if the money is invested into mutual funds. Further, since not all shareholders have a great influence on the decision making because some have few shares. Thus, to those who own bigger shares have the responsibility to have a voice although through a series of collective actions smaller investors can have an effect to make a change to the management. Shareholders must also have the knowledge on how the corporations they have invested in perform with respect to social responsibility. Lastly, Schaefer (2008) also pointed out that shareholders can-reinvest their money in top performing companies in the area of social responsibility. And if the management lacks appropriate actions to address the demands of social responsibility, the shareholders should then have a moral obligation to address such. In cases, like the oil extraction in the Gulf of Mexico, it is very important to exercise corporate social responsibility especially when there are people that are gravely affected by such activities. Corporate social responsibility must be founded on the idea that money-making must “conform to the fundamental rules of the society” and that it should be also founded on fairness and truth. Since shareholders are gaining profits at the expense of other people who are directly impacted from the business activity.
- There are three factors that Maffei (2010) identified as elements that the court will use to pierce the veil of the corporation. These factors include investment results, standard of care and diversification. Investment results covers the overall market performance of the corporation when making decisions on regarding the prudence of trustee in handling the finances; attempting to defend the amount of losses through a down market situation; exonerating a trustee as a result of misconduct from gaining profits on questionable investments; and when there is evident loss in the portfolio due to misconduct. The trustee has the responsibility to take care of the investments as well as to be loyal and obedient in the pursuing the goal of investment. A trustee should act in the best interest of the investor even if there is a conflict of interest. He must also exercise due diligence and prudence in managing assets and must follow the rules and standards in investing trust funds. Further, a trustee should take care of the investment and use his skills and appropriate sense of precaution to make rational decisions based on the data from the portfolio and the conditions of the governing body. Diversification of assets is generally required as per Prudent Investor Act. A diverse portfolio indicates that all holdings will not react similarly to the factors that affect market instability. Thus, all the places of the trust would not diminish altogether because of a single market force. Some of the factors that affect the court’s decision regarding the trustee’s acquittal include the assets to be liquidated, heavy taxes, and the intention of the settlor and falure to diversify the assets
- Some of the major laws enforced by the US Department of Labor include the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA). The FLSA covers the aspects of the “minimum wage, overtime pay, child labor, records, and special minimum wage standards that apply to most private and public employees.” FLSA grants therapies for agencies with civil and criminal issues to include provisions for individual employees in filing private lawsuit. This law also include certain conditions on civil monetary penalties against recurring or obstinate violations on “minimum wage or overtime.” The FMLA is a federal law that covers the aspects of entitlements of an eligible employee to a twelve-week of “unpaid, job-protected leave in case of a family and personal health emergency.” The employee or employer has the option to choose the kind of paid leaves in lieu of the unpaid leaves. Further, the employees are entitled to take a leave when works have been completed or when under a the supervision of a covered employer for at least one year, and over 1,250 hours for the past 12 years and if there are at least 50 employees within 75 miles. The employee must provide a leave notice in advance as well as a medical certificate. The employer on the other hand must pay for the employee’s health coverage for the duration of the leave. Further, the employee must return to his original position or must be given an equivalent position to include equivalent compensation, benefits and other entitlements (US Department of Labor, 2014).
- While sole proprietorship may not create more liabilities, the Missouri Bar Center (2014) indicates that there are three disadvantages to sole proprietorship. The primary disadvantages of sole proprietorship is the restricted prospects for growth and expansion of investments that also comes with the owner’s personal accountability related to duties, debts and other dangers that the business may sustain. Another disadvantage has been noted on the aspect of the availability of insurance for such hazard. That is; the cost of the insurance may be limiting. Further, the growth in sole proprietorship typically leads to a change in structure. In sole proprietorship, the business owner is directly responsible for any losses and the owner could be sued in behalf of the employee who committed unlawful acts. Self-employment taxes can also be a drawback to the owner and some tax benefits may not be deducted (i.e. insurance premiums). The business does not also continue when the sole proprietor dies and may even lead to huge taxes on the beneficiaries. Further, it is also difficult to raise funds in sole proprietorship since it does not issue stocks or money-generating investments as opposed to corporations.
References
Halbert, T. and Ingulli, E. (2012). Law and Ethics in the Business Environment. Mason, OH: Cengage Learning.
Maffei, S. (2010). Trustee liability under the New York prudent investor act. Review of Business, 31(1), 91-97.
Missouri Bar Center. (27 Nov 2014). Doing Business in Missouri: Legal Formation. Missouri Business Development Program. Retrieved from: http://missouribusiness.net/article/doing-business-in-missouri-legal-formation/.
Schaefer, B. P. (2008). Shareholders and social responsibility. Journal of Business Ethics, 81(2), 297-312. doi:http://dx.doi.org/10.1007/s10551-007-9495-0.
US Department of Labor. (27 Nov 2014). Wage and Hour Division. Washington, DC: US Department of Labor. Retrieved from: http://www.dol.gov/whd/regs/statutes/summary.htm.
