CHAPTER 4 Legal Regulatory and Political Issues Chapter

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CHAPTER 4 Legal, Regulatory, and Political Issues

CHAPTER 4 Legal, Regulatory, and Political Issues

Chapter Objectives • To understand the rationale for government regulation of business • To

Chapter Objectives • To understand the rationale for government regulation of business • To examine the key legislation that structures the legal environment for business • To analyze the role of regulatory agencies in the enforcement of public policy • To compare the costs and benefits of regulation • To examine how business participates in and influences public policy • To describe the government’s approach for legal and ethical compliance

Government’s Influence on Business • Laws derived from the U. S. Constitution and Bill

Government’s Influence on Business • Laws derived from the U. S. Constitution and Bill of Rights influence business. • Laws are enforced through the judicial system. • Corporations have the same legal status as a person.

Major Laws Affecting Business • • • Sherman Antitrust Act Clayton Antitrust Act Federal

Major Laws Affecting Business • • • Sherman Antitrust Act Clayton Antitrust Act Federal Trade Commission Act Robinson-Patman Act Lanham Act

Law Enforcement Agencies • • • Food & Drug Administration (1906) Federal Reserve Board

Law Enforcement Agencies • • • Food & Drug Administration (1906) Federal Reserve Board (1913) Federal Trade Commission (1914) Federal Communication Commission (1934) Securities & Exchange Commission (1934) National Labor Relations Board (1935)

Law Enforcement Agencies (cont) • • • Equal Employment Opportunity Commission (1970) Environmental Protection

Law Enforcement Agencies (cont) • • • Equal Employment Opportunity Commission (1970) Environmental Protection Agency (1970) Occupational Safety & Health Administration (1971) Consumer Product Safety Commission (1972) Commodity Futures Trading Commission (1974) Federal Housing Finance Industry (2008)

Global Regulation • Import barriers • Product quality, safety, distribution, sales, and advertising regulation

Global Regulation • Import barriers • Product quality, safety, distribution, sales, and advertising regulation • North American Free Trade Agreement (NAFTA) • European Union (EU)

Costs of Regulation • Administrative spending patterns of federal regulatory agencies • Staffing levels

Costs of Regulation • Administrative spending patterns of federal regulatory agencies • Staffing levels of federal regulatory agencies • Business expenditures in compliance with regulations

Benefits of Regulation • • Greater equality in the workplace Safer workplaces Resources for

Benefits of Regulation • • Greater equality in the workplace Safer workplaces Resources for disadvantaged societal members Safer products More information about products Greater product variety Cleaner air and water Preservation of wildlife

Deregulation • Removal of all regulatory authority • Belief that less government intervention allows

Deregulation • Removal of all regulatory authority • Belief that less government intervention allows business markets to work more effectively • Many industries have been deregulated. • Critics of deregulation cite higher prices and poorer service/quality.

Self-Regulation • Companies attempt to regulate themselves to demonstrate social responsibility and preclude additional

Self-Regulation • Companies attempt to regulate themselves to demonstrate social responsibility and preclude additional regulation. • Firms may chose to join trade organizations with self -regulatory programs. • Best-known self-regulatory association is the Better Business Bureau. • Benefits include lower costs and more practicality and realism in programs.

The Contemporary Political Environment • Greater transparency in the congressional committee process • Limiting

The Contemporary Political Environment • Greater transparency in the congressional committee process • Limiting campaign contributions from individuals, political parties, and special interest groups (Federal Election Campaign Act) • Many states have shifted their electoral process from traditional party caucus to primary elections.

Special-Interest Groups Seek to educate the public about significant social issues and to support

Special-Interest Groups Seek to educate the public about significant social issues and to support legislation and regulation of business conduct they deem irresponsible

Corporate Approaches to Influencing Government • Lobbying • Political Action Committees • Campaign Contributions

Corporate Approaches to Influencing Government • Lobbying • Political Action Committees • Campaign Contributions

Federal Sentencing Guidelines for Organizations • Passed in 1991 to streamline the sentencing and

Federal Sentencing Guidelines for Organizations • Passed in 1991 to streamline the sentencing and punishment of organizational crime • Provides an incentive for organizations to establish due diligence ethics and compliance programs

Seven Steps to Effective Compliance and Ethics Program • Establish a code of ethics.

Seven Steps to Effective Compliance and Ethics Program • Establish a code of ethics. • Appoint a high-level compliance manager, usually an ethics officer. • Take care in delegation of authority. • Institute a training program and communication system. • Monitor and audit for misconduct. • Enforce and discipline. • Revise program as needed.

Sarbanes-Oxley Act • Legislation to protect investors by improving accuracy and reliability of corporate

Sarbanes-Oxley Act • Legislation to protect investors by improving accuracy and reliability of corporate disclosures • Many benefits