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Understanding Business and Government: Social Contracts, Regulation, and Ethics

This overview explores the relationship between business and government, focusing on the legal processes that shape social contracts and the ethical dilemmas that arise from changes to them. It analyzes power dynamics in society, government, and business, using real-world cases, including the impact of information technology on regulation. Key topics include the sources of American law, statutory and regulatory frameworks, and the historical patterns of governmental power. This study is essential for understanding the mechanisms of regulation, contractual agreements, and the ethical implications for society.

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Understanding Business and Government: Social Contracts, Regulation, and Ethics

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Presentation Transcript

  1. Class Objectives/Business Relationship Overview (Ch. 9-11) • 1. Describe an overview of the legal processes to change the social contract. • 2 Identify the ethical issues underlying changes to the social contract • 3. Analyze the levers of power among society, government, and business. • 4. Analyze the processes of change in relation to Information Technology & Microsoft cases. Gov. - Bus. Overview

  2. Regulation—If it is crazy, why it is happening? • Share some stories • Defining Ketchup • Height of the letters on pickle jars • Doctor told me $40,000 gets a law ($80,000) • If business can buy lobbyists, where is the regulation coming from? Gov. - Bus. Overview

  3. Primary Sources of American Law • US Constitution • Statutes, or laws, passed by government • Regulations by government agencies • Case law Gov. - Bus. Overview

  4. Regulatory Law • Constitution • substantially affect interstate commerce • Promote the general welfare • Regulatory powers of the states Gov. - Bus. Overview

  5. Statutory Law • Federal • State • Uniform Laws by the NCC • 200 laws adopted by all the states • Uniform Commercial Code -- 1952 Gov. - Bus. Overview

  6. Uniform Commercial Code (Statutory Law cont.) • Commercial transactions • Sales, leases • Banking & Financing • Shipping and Warehousing • Investments • Uniformity among jurisdictions • all 50 states, DC, & Virgin Islands Gov. - Bus. Overview

  7. Administrative Law • Congress/Executive Branches create Agencies • FTC • OMB • Rulemaking • Investigation and Enforcement • Adjudication • Administrative Law Judge Gov. - Bus. Overview

  8. Supreme Court Interpretations Over Time • Power/restricted power of state • Commerce issues “Affected with the public interest “ • Corporations get “Equal protection of the laws” • Monopoly competition is contrary to law • Shipping across state lines makes it federal Gov. - Bus. Overview

  9. Elements for a Contract--Review • Agreement • Consideration • Contractual Capacity • Legality Gov. - Bus. Overview

  10. Agreement --Review • Offer—charter to operate • Dartmouth: Not terminated by state Gov. - Bus. Overview

  11. Agreement (cont.)--Review • Acceptance • Unequivocal • Communication Gov. - Bus. Overview

  12. Consideration/Regulation--Key • Legally sufficient value • Bargained for exchange • Both get legal detriment Gov. - Bus. Overview

  13. Underlying Reasons for Regulation • Changing the Social Contract • Flaws in the market • Social, Political & Other • Why the changes—ETHICS! Gov. - Bus. Overview

  14. Define Ethics • What • Concepts of right and wrong • Good and evil • To: • Benefit society, and • Improve the human condition Gov. - Bus. Overview

  15. Underlying Reasons--Flaws • Natural monopoly—Salt mine, water rights—Hispanic culture, Kalamazoo hospital • Natural resources regulation—Muskegon Lumber in Chicago • Destructive competition—Garbage in Portland • Externalities—Down the river Gov. - Bus. Overview

  16. Underlying Reasons – Feel better and safer • Quality of life—child seats, air emissions • Protecting individual rights--FDA • Resolution of national/global problems—Tariffs • Regulate/benefit special groups—EEOC • Conserve natural resources— Gov. - Bus. Overview

  17. Historical Patterns • Traditional industry regulation—CAB • Second Managerial Revolution • Functions across all industries—Current theory Gov. - Bus. Overview

  18. Governmental Power • Recall the models of business power • Evaluate governmental power Gov. - Bus. Overview

  19. Governmental Power • Prescribe rules of game • Major purchaser--$542B/$8.9T—7% • Contracting power • Promotes & Subsidizes • Owns wealth—In Oregon what do they own? Gov. - Bus. Overview

  20. Governmental Power—Cont. • Architect of economic growth • Legal protections • Manage through regulations • Tax and redistribute wealth • Protect National Security—Drug enforcement • National arbiter of disputes • Foreign affairs diplomacy Gov. - Bus. Overview

  21. The Governmental Regulation Process • How are they made • Attempts to turn the tide Gov. - Bus. Overview

  22. Present and Future • Costs & benefits of complying • Demands for new regulations • Mixed economy Gov. - Bus. Overview

  23. Airline Degegulation • Fair and efficient competition • Net gains for major stakeholders of airlines? Gov. - Bus. Overview

  24. CAB: Fair and Efficient Competition • PAT Growth =4%, fares down 35% • Hub and spoke—did deregulation do that? • Fares – unequal for regions/inequitable on planes • Low cost carriers disappearing; concentration Gov. - Bus. Overview

  25. CAB Fair Efficient Competition- cont. • New entrants don’t • Exclusionary pricing • CSRs • Code sharing • Frequent flier • Fare discounting • Alliances Gov. - Bus. Overview

  26. CAB Stakeholders – Better/Worse • Airline stockholders • Airline businesses • Customers • Fares • Service • Safety • Employee welfare • Communities • Federal Government Gov. - Bus. Overview

  27. Business Government Relationship/Reforming (Ch. 10) • Describe an overview of the legal processes to change the social contract. • Identify the ethical issues underlying changes to the social contract • Analyze the levers of power among society, government, and business. • Analyze the processes of change in relation to Information Technology & Microsoft cases. Gov. - Bus. Overview

  28. Monsanto Company--BioTechnology • Is more regulation necessary? • FDA • USDA • EPA • What are the advantages and disadvantages? Gov. - Bus. Overview

  29. Monsanto – Issue Management • Social Response • Issue Management Gov. - Bus. Overview

  30. Patterns of Social Response • Rejection • Adversary strategy • Resistance strategy • Compliance • Accommodation • Proactive strategy Gov. - Bus. Overview

  31. Pressures for Social Response • Government – jaw boning • Community interests & demands • Environmental concerns • Competitive responses • Stockholder/investor pressures • Philanthropy • Crises Gov. - Bus. Overview

  32. Implementation Procedures • Issues Management • Crisis management • Corporate philanthropy • Business in education Gov. - Bus. Overview

  33. Issues management • What is it? • Identify important social issues • Potential of concern to the company • Develop responses Gov. - Bus. Overview

  34. Issues management methodology • Intuition • Scenario planning • Probability/Impact matrix • Setting priorities • Shaping public opinion • Legislation • Compliance Gov. - Bus. Overview

  35. Reforming the Regulatory Process • Congressional legislation is more deficient than administration • Government vs. Business expertise • Rely more on the free market • Privatize • Deregulate • Incentive controls Gov. - Bus. Overview

  36. Reforming the Regulatory Process (cont.) • Recent Congressional Initiatives • Cost/Benefits, easing, planning • Improve administration • Mining and Western lands issues • Reduce conflicts among administration • Increase speed of decisions • Performance based management Gov. - Bus. Overview

  37. Class Objectives/Political Process (11) • Describe an overview of the legal processes to change the social contract. • Identify the ethical issues underlying changes to the social contract • Analyze the levers of power among society, government, and business. • Analyze the processes of change in relation to Information Technology & Microsoft cases. Gov. - Bus. Overview

  38. Archer-Daniels-Midland • Ethanol=MBTE • 10% gas mix reduces emissions • Renewable, less dependent on oil • 5.4 tax credit/gallon • Tax credit for production • Case against • $7B lost revenue • Public pays more for corn • Public pays more for beef Gov. - Bus. Overview

  39. ADM/Ethanol Reform & Ethics • Reform • House opposed • Senate approved • Newt engineered passage—why? • Ethical • Yes--? • No--? Gov. - Bus. Overview

  40. Political Process • Shaped by balance of powers & rights • Historical diffusion of business political levers Gov. - Bus. Overview

  41. Lobbying vs. Special Interest Groups • Business--Money/Money/Money • Peak & Trade Associations • Lobbying • Elections—PACs & Loopholes • Special interest groups evolve—courts & actions & ethics Gov. - Bus. Overview

  42. Federal Express--Legislation • Legislation—ICC Act dropped “express” • RLA • Railroads and express company(s) • Minimal protection for unions/workers • NLRA • Protection for unions/workers in organizing • City by city • Truck drivers are non-air carrier? • Far more drivers than pilots • Air express is their business Gov. - Bus. Overview

  43. Federal Express--Lobbying • Republicans • Technical oversight • Democrats • Attack on worker’s rights • Solely to profit one company • Tactics • FAA bill--$19B • Conference committee, Hollings, 8-6 • Filibuster by Kennedy • Democrats 17 joined to kill it Gov. - Bus. Overview

  44. Anti-trust Theories • Structure--Avoid concentrations • Structure: sales or assets as % • Result: Inflation, inefficiencies, no competitors • Performance—Seek efficient business performance • Innovation, lower costs/prices, capacity, = profit, service Gov. - Bus. Overview

  45. U.S. Merger Guidelines • Market definition—structure in regions & products • Adverse competitive effects—performance: collusion & anti-competitive? • Entry—still possible? • Expected efficiency gains—passed on to consumers? Gov. - Bus. Overview

  46. Microsoft—ISPs & CSPs • DOJ • IE primarily/exclusively/better • ISP gets positioning power • MS • Cross licensing—mutual benefit • Where is the harm? Gov. - Bus. Overview

  47. Microsoft—OEMs • DOJ • Restricted OEM changes to Windows • Structure theory • MS • Standard practice: no modifications • Where is the harm? • Concentration is less 1% of PC Industry • Service, costs, prices, innovation Gov. - Bus. Overview

  48. Class Objectives • Describe an overview of the legal processes to change the social contract. • Identify the ethical issues underlying changes to the social contract • Analyze the levers of power among society, government, and business. • Analyze the processes of change in relation to Information Technology & Microsoft cases. Gov. - Bus. Overview

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