Ethical Behaviour, Social REsponsibility, and Legal Reasoning

Business Law, Sixth Edition
© 2019 BVT Publishing. All rights reserved.
S-1
Chapter 2:
Ethical Behavior, Social
Responsibility and Legal Reasoning

S-2
Learning Objectives
• Define ethics and ethical behavior.
• Compare ethics and law.
• Discern various ethical theories.
• Discuss framework for ethical decisions.
• Contrast the theories for conducting business in a
socially responsible manner.
• Define social responsibility.
• Describe models of corporate social responsibility.
• Understand the legal reasoning process.
• Recognize principal tools of legal reasoning.
• Distinguish among schools of jurisprudence.

S-3
2.0 In the News
Kellyanne Conway breaks Federal ethics
law on live TV (1:48) http://bvtlab.com/2MN8e
Conway promoted Ivanka Trump’s brand,
appearing to break a Federal ethics law on
February 9, 2017. Conway is the counselor to
President Trump.
• Discuss, from an ethical perspective, whether
this was a violation or not.

S-4
2.1 Ethical Behavior (Slide 1 of 2)
Significance of ethical behavior
• The desire to be seen behaving in an
ethical fashion and the recognition that
members of the business community
owe a duty to society are important
factors in shaping business decisions.

S-5
2.1 Ethical Behavior (Slide 2 of 2)
Definition of ethics
• Asks the question how one should act
based upon a group-derived definition of
right and wrong
The relationship of ethics to law
• To what extent is ethical conduct legal or
unethical conduct illegal?
• How extensive is the overlap between
the two?

S-6
2.1d Ethical Theories (Slide 1 of 2)
Rights/duties system
• Deontological or non-consequential ethics
- Religious standard theory
- Kantianism
- Justice theory
• Focuses on obligations, actions, and
processes emanating from fundamental
truths held by individuals or society

S-7
2.1d Ethical Theories (Slide 2 of 2)
Consequential system
• Teleological ethics
- Self-interest theory
- Utilitarianism
- Profit maximization
• Considers the impacts of a decision
when deciding if it is ethical

S-8
2.1d Critical Thinking
Case: Skilling v. U.S
• In the Enron situation, management officials,
board of directors, and stockholders all
benefited in the short run. Yet is the purpose
of a business to be a mechanism that makes
short-term profits or long-term wealth? Why?
• What evidence from the Court’s opinion
indicates Skilling received a fair trial?
Backgrounder on Enron trial as jury returns
with verdict (2:56): http://bvtlab.com/86X7P

S-9
2.1e Framework for Making
Ethical Decisions
• Decide legality.
• Establish the problem clearly.
• Determine the relevant values.
• Explore views of stakeholders.
• Consider the impact on the decision
maker.
• Reflect on possible courses of action.

S-10
2.1f Encouraging Ethical Behavior
within an Organization
• Adopt, teach, and enforce a
code of ethics.
• Cultivate an ethics culture
within top-level management.
• Embrace an ethical structure of
corporate governance.

S-11
2.2 Social Responsibility
The approach to conducting business that
takes into consideration internal and
external communities
Business Ethics Corporate Social Responsibility (5:53)
http://bvtlab.com/297rD

S-12
2.2a The Emergence of Social
Responsibility (Slide 1 of 2)
• Traditionally, a business has a social
responsibility to be as profitable as
possible.
• In today’s thinking, a business should
function to benefit society.

S-13
2.2a The Emergence of Social
Responsibility (Slide 2 of 2)
Market imperfections require
corporations to consider factors other
than profit maximization in their
decision-making process.

S-14
2.2b Competing Theories for
Conducting Business in a
Socially Responsible Manner
Game theory –
Businesses need only follow the rules of
the game prevalent to its industry.
Social contract theory –
Businesses are expected to meet the
expectations of society.

S-15
2.2c Models of Corporate Social
Responsibility
Stakeholder model –
Corporations owe duties to customers,
suppliers, and communities and environments
in addition to shareholders.
Triple bottom line model –
More suited to issues of sustainability

S-16
2.3a Definition of Legal Reasoning
A method of critical thinking and
persuading having analytical thinking
at its core
• Enhanced by factors appropriate to the
legal environment
• Often used to derive rules from factual
situations

S-17
2.3b Principal Tools of Legal
Reasoning
Deductive reasoning: analysis of existing
legal statutes and documents; often uses
syllogisms to draw logical conclusions from
major and minor premises.
Analogical reasoning: comparing facts in a
case at hand to those in previously decided
cases; then apply the legal rule in the
appropriate cases as precedents.

S-18
2.3c Legal Reasoning Process (Slide 1 of 2)
Step 1: Issue
• Identify the legal question.
Step 2: Rule
• Identify the legal rule.
Step 3: Application
• Apply the rule of law to the specific facts of
the situation.
Step 4: Conclusion
• What conclusion is reached?
The IRAC Method

S-19
2.3c Legal Reasoning Process (Slide 2 of 2)
Selection of appropriate law and facts may
involve dialectical reasoning.
Legal reasoning may lead to more than one
correct answer to a legal problem.

S-20
2.3c Critical Thinking
Case: Bammert v. Don’s Super Valu
• Did the legal reasoning process adopted by
the court achieve justice? If so, how do you
define the term justice?
• Was deductive reasoning, analogical
reasoning, or both types of legal reasoning
employed by the justice who wrote this
opinion? Describe your thinking in this
regard.

S-21
2.3d Jurisprudence (Slide 1 of 3)
The study of the philosophy of law
Common schools of jurisprudence
• Natural law: a higher law or group of
universal rules that should bind all human
behavior
• Positive law: There may not be a moral
component to the law. The law is a
command of government, which must be
enforced as written.

S-22
• Legal realism: The nature of the law is
in the decisions of juries and judges.
• Sociological: The law should reflect
social values, which may change
over time

S-23
• Law and economics examines the
relationship between law and
economics in non-market activities.
• Critical legal studies views the law as a
political expression of a ruling class.

S-24
2.3d Critical Thinking
Summary of Fuller, “The Case of the
Speluncean Explorers”
• What theory of jurisprudence was relied
upon by each of the following?
- Chief Justice Truepenney? Why?
- Justice Foster? Why?
- Justice Handy? Why?
• Which of the three approaches do you
most agree with? Why?

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