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Utilizing the concepts from the chapters from this week, post a message identifying and discussing a liability issue or ethical issue you have witnessed or may arise in business. What concerns may arise for the business? What are the legal ramifications of the issue? What if an employee acts in a manner that may raise liability or ethical concerns? How would you handle the issue or try to deter the issue from happening?Cite a minimum of two (2) scholarly peer reviewed sources (beyond your textbook or the Bible) applying APA guidelines (250-450 word count range).Liuzzo, A. L., & Hughes, R. C. (2019). Essentials of Business Law (10th ed.). New York, NY: McGraw Hill Education:Chapter 2, Ethics and the Law;Chapter 3, Criminal Law;Chapter 4, Tort Law;Chapter 34, Products Liability;Chapter 35, Professionals’ Liability;Chapter 37, Business and the Environment; andRomans 7:7-25 (Law and Sin).


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Chapter 2
Ethics and
the Law
©2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted
without the prior written consent of McGraw-Hill Education.
Unethical Behavior in Our World
Some multimillion-dollar companies have been
involved in acts society deemed unethical and
illegal behavior; questionable accounting practices,
fraud, deception, insider trading and attempts to
influence both politicians and the media.
As response to the unethical corporate behavior,
Congress passed the Sarbanes-Oxley Act (2002),
placing greater accountability on top management
to closely monitor financial dealings and corporate
©2019 McGraw-Hill Education.
Example of Unethical
Business Practices
• Entrepreneur Martha Stewart (2004) was
investigated for selling several thousand shares of
ImClone stock after allegedly receiving and
illegally acting on insider information.
• Found guilty of a federal crime for lying to federal
investigators, Stewart received a 10-month
sentence, a $30,000 fine, and 19 months of
supervised probation.
©2019 McGraw-Hill Education.
Ethics in a Global Marketplace (1)
Group and individual values are
influenced by religion, tradition, culture
and customs.
With expansion of businesses in a global
marketplace, business professionals face
different standards in different countries.
©2019 McGraw-Hill Education.
Ethics in a Global Marketplace (2)
Culture and Subculture influence the
development of individual and group values.
Culture is of utmost importance. It is the values
held those of a nation or an ethnic group.
Subculture are the values held by a smaller group
—for example, employees of a corporation, or a
department within a company—and may differ
from those of the larger culture.
©2019 McGraw-Hill Education.
Ethics, Morals, and Values
Ethics – An individual’s beliefs as to what is
right and wrong.
Morals – Standards and principles society has
adopted as a guide for acceptable behavior of
individuals within society
Values – Beliefs or standards considered
worthwhile which establish an individual’s
ethics and a society’s morals.
©2019 McGraw-Hill Education.
Sources of Group and
Individual Values
Group and individual values are influenced by
religion, traditions and customs.
• An individual’s values are significantly influenced by groups
to which the person belongs.
• Other influences shaping an individual and group values
• Culture: Values of a nation or ethnic group.
• Subculture: Values held by employees of a corporation or a specific
department (may be different from those of the larger culture).
©2019 McGraw-Hill Education.
Relationship between Law
and Ethics
Legal mandates are placed on individuals or
groups by authorities or governments.
Ethical considerations are generally derived
from within individuals or organizations.
Ethical ideas have been the foundation of
most legislation enacted by governments.
©2019 McGraw-Hill Education.
Responses of Business Firms
to Ethical Issues (1)
Organizations are concerned about possible
legal consequences of unethical behavior.
Executives may embrace ethical practices due
to favorable publicity it gives their firms.
Businesses concerned with ethics usually
focus on corporate responsibility and
development of codes of conduct.
©2019 McGraw-Hill Education.
Responses of Business Firms
to Ethical Issues (2)
Corporate Responsibility
• Actions taken by corporations are intended to
demonstrate their wish to behave responsibly.
• Corporate actions reflect a moral and ethical
concern with observed social problems.
Codes of Ethics
• Companies understand the need to be ethical.
• Some firms establish a code of ethics, sometimes
called a credo or a values statement.
• Sarbanes-Oxley requires codes for public firms.
©2019 McGraw-Hill Education.
Responses of Business Firms
to Ethical Issues (3)
Many firms expect employees to strictly follow
codes; others require employees to sign
contracts of adherence to ethics standards.
Management should consider relevant
stakeholders; those people or groups affected
by a firm’s actions or decisions, when
establishing codes or making ethical decisions.
©2019 McGraw-Hill Education.
Responses of Business Firms
to Ethical Issues (4)
A general list of topics covered in codes:

Fundamental honesty and adherence to the law
Product safety and quality
Workplace Health and safety
Avoiding conflicts of interest
Employment practices
Fairness in selling and marketing practices
Financial reporting
Supplier relationships
Pricing, billing, and contracting
Trading in securities and using insider information
Payments to obtain business
©2019 McGraw-Hill Education.
Responses of Educational Institutions
to Ethical Issues
Educational institutions have increased the
need to examine ethics by adding internal policies,
training courses, workshops, and programs.
Typical topics include:

Fairness in hiring practices
Ethical issues in multinational business
Ethical issues arising from technology
Economic justice, environmental ethics, and ecology
©2019 McGraw-Hill Education.
Responses of Governments
Governments try to protect consumers, the
environment and influence business ethical behavior.
Governments enact laws, regulations and programs
to ensure and encourage ethical behavior.
• For example, Federal Sentencing Guidelines
provide an incentive for corporations to act more
• Under this mandate, when an employee violates a law a
firm may reduce its liability by showing it took action to
develop moral guidelines for its employees.
©2019 McGraw-Hill Education.
Responses of Trade and
Professional Associations
Trade associations develop guidelines for
ethical business practices.
• Example: The direct marketing association (DMA)
provides self-regulatory standards for:

Telephone marketing
Marketing to children
Collection and use of marketing data
©2019 McGraw-Hill Education.
Ways to Ensure Ethical Practices (1)
Sometimes the driving force for reform may be the
individual whistleblower.
• Whistleblower: A person who reveals to a governmental
authority, or news media, confidential information
concerning some wrongdoing or conduct he or she regards
as unethical and/or illegal.
The federal government and many states have laws
that protect whistleblowers from retaliation.
The usual motivation behind whistleblowing is
outrage to a person’s sense of ethics.
©2019 McGraw-Hill Education.
Ways to Ensure Ethical Practices (2)
Federal government has now enacted laws to
encourage whistleblowing by providing
financial incentives for doing so.
• For example, the Securities and Exchange
Commission, in an effort to enhance its
reputation, has established a program to
reward whistleblowers with a percentage of
penalties imposed.
©2019 McGraw-Hill Education.
Integration of Ethics into
Business and Government (1)
Business should be conducted in ways that
will not harm the consumers or environment.
A chief executive officer or board of directors
may discontinue ethical practices if they
reduce profits or adversely affect the firm.
Likewise, firms of high ethics will maintain
practices that enhance the firm’s profits.
©2019 McGraw-Hill Education.
Integration of Ethics into
Business and Government (2)
Additional government regulation could
ensure compliance with ethical standards, but
such enforcement proves costly and at times
oppressive bureaucracy.
Ideally, individuals, industry organizations, and
watchdog groups should encourage business
and governments to reach mutually agreed
ethical practices.
©2019 McGraw-Hill Education.
Chapter 3
Criminal Law
©2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted
without the prior written consent of McGraw-Hill Education.
Crime versus Tort (Civil Law)
Crime: Violation of a statute that is an offense
against society; the public at large punishable by
state or federal government.
Tort (Civil Law): A private wrong causing injury to
another person’s physical well-being, property, or
Certain acts may be charged separately as a
criminal violation and as a tort (civil violation).
©2019 McGraw-Hill Education.
Crime versus Tort
While statutory law determines what constitutes a
crime, many laws reflect legal principles derived
from longstanding common law.
A high degree of uniformity normally exists among
states, thus a particular act to be legal in one state
and illegal in another is rare.

A current exception is marijuana use: legal in a few
states, illegal in others and illegal under federal drug
Legislatures attempt to reflect public interest
enacting laws making certain acts a crime if there is
sufficient public demand.
©2019 McGraw-Hill Education.
Classification of Crimes (1)
Crimes in the U.S. are classified into
three general categories according to
seriousness of the offense:
• Treason
• Felony
• Misdemeanor
©2019 McGraw-Hill Education.
Classification of Crimes (2)
Treason: Levying war against the United States, or
providing aid and comfort to the nation’s enemies.
(U.S. Constitution, Art. 3, Sec. 3)
Felony: A crime punishable by death or imprisonment
in federal or state prison for a term exceeding one year.
Misdemeanor: A less serious crime generally
punishable by a fine and/or a prison sentence of less
than one year.
©2019 McGraw-Hill Education.
Crimes in the Business World (1)
Crimes, do not always involve force or
violence against people or businesses.
Business crimes may also occur in the office,
over telephone, computer systems or in social
occasions and locations where employees may
©2019 McGraw-Hill Education.
Crimes in the Business World (2)
Crimes in the business world include:
• Securities Fraud
• Arson
• Bribery
• False pretenses
• Forgery
• Larceny
• Perjury
• Embezzlement
• Extortion
• Consumer and Government Contract Fraud
• Tax Evasion or Fraud
• Other business-related crimes…
©2019 McGraw-Hill Education.
White Collar Crime (1)
White-Collar Crime is a term used to describe
categories of crimes typically financial related
that do not involve force or violence by or
against businesses.
Depending on its seriousness and particular
state or federal law, a white-collar crime may
be a felony or a misdemeanor.
Laws governing white collar crime have
expanded at the federal and state level.
©2019 McGraw-Hill Education.
White Collar Crime (2)
RICO -Racketeer Influenced and Corrupt
Organizations Act of 1970 – is one of the most
successful federal laws used to combat white
collar crime.
• RICO prohibits organization’s employees
from engaging in a pattern of racketeering
or illegal acts.
• Under RICO, it is easier to prosecute corrupt
organizations and seize illegally obtained
©2019 McGraw-Hill Education.
Securities Fraud (1)
Securities Fraud occurs when a person or
company provides false information to potential
investors intended to influence decisions to buy
or sell securities.
Securities fraud encompasses:
• Theft of investor’s assets
• Stock trading based on non-public information
• Wrongful manipulation of financial statements
and/or intentional false information.
• Sales by unlicensed stock brokers.
©2019 McGraw-Hill Education.
Securities Fraud (2)
A Ponzi scheme is a type of securities fraud in
which large gains are promised to investors;
but, in reality, newer investments are used to
provide returns to earlier investors.
Knows also as Pyramid Schemes, these
schemes inevitably collapse over time as
required returns to earlier investors become
too large to cover income from new investors.
©2019 McGraw-Hill Education.
Arson is a willful or malicious act of causing the
burning of property belonging to the owner, another
person or business.
Most states have laws establishing particular criminal
penalties to persons who burn their own property
with intent to collect insurance money.
Such statutes establish a special category of crime
called burning to defraud.
Insurance companies and law enforcement have
developed sophisticated investigation techniques to
combat these illegal practices.
©2019 McGraw-Hill Education.
Example: Arson
• Filkins, the owner of a clothing manufacturer was
losing money so he hired an arsonist to set the
building on fire.
• The building, inventory, and equipment were insured.
• Insurance investigators and fire marshal found
evidence of arson.
• The insurance company refused to pay for the loss.
• Filkins and the arsonist were charged with the crime
of arson.
©2019 McGraw-Hill Education.
Larceny is a general term including most forms of
theft. It may be a felony or misdemeanor based on
• Classified as petty (small) or grand (large),
depending upon the value of the stolen property.
• Robbery: Taking of property in the possession of
another person against that person’s will and
under threat of bodily harm.
• Burglary: Forcible entry to another person’s
premises for the purpose of committing a crime.
©2019 McGraw-Hill Education.
Bribery consists of giving or taking money or
property of value with intent of influencing someone
(usually a public official or business official) to act
contrary to performance of his or her duty.
Some states have enacted laws that make it a crime
to bribe someone other than a public official.
Both the giver of the bribe and the receiver may be
charged with bribery.
Federal law prohibits bribery of foreign officials.
©2019 McGraw-Hill Education.
False Pretenses
False pretenses describe a broad category of
crimes involcing activities intended to deceive
others by making false claims, or to obtain
goods by using false pretenses.
• Example: A person who makes false
statements to a bank for the purpose of
obtaining a loan.
Federal and state statutes govern activities
considered unlawful false pretenses.
©2019 McGraw-Hill Education.
Forgery consists of wrongfully making or
altering the writings of another with the
intent to defraud.
• Example: Falsifying a signature on a check
or on the endorsement of a check.
The act of signing another person’s name to a
credit card charge slip, contract, or, other
official documents without permission is also
considered forgery.
©2019 McGraw-Hill Education.
Perjury consists of intentionally giving false
oral or written statements under oath in a
judicial proceeding after having sworn to tell
the truth.
• Example: A person knowingly lies in court
while under oath.
Often, giving false information on a
government form such as a tax return,
trademark application and the like is
considered perjury.
©2019 McGraw-Hill Education.
Embezzlement is the wrongful taking of money or
other property entrusted to a person as a part of his
or her employment.
• Example: A computer programmer at a bank
programs a computer so that interest earned on a
depositor’s account would be split; a portion
diverted into a deposit into his personal account.
©2019 McGraw-Hill Education.
Extortion is the act of taking or demanding
money or other property from someone by
using force, threats of force, personal
humiliation or economic harm.
The difference between extortion and bribery
is that in bribery both parties are willing
participants, whereas in extortion, one person
is willing and the other person is unwilling.
©2019 McGraw-Hill Education.
Other Business-Related Crimes
The number of crimes involving businesses has grown
with researchers suggesting there are now as many as
4,500 federal crimes in the U.S. Code.
As business practices and technology change, new
types of bad acts arise for which Congress and states
increasingly enact laws carrying criminal penalties and
forfeiture of illegal benefits.
Some examples are:
• Credit card fraud: Using stolen or counterfeit credit cards.
• Identity theft: Stealing someone else’s identity to get
credit cards or loans.
• Environment: Discharging waste into waterways.
©2019 McGraw-Hill Education.
Criminal Penalties in Business
Businesses convicted of crimes typically pay
large fines, incur court injunctions, legal and
other costs.
Some laws allow Responsible Corporate
Officers to be charged, convicted and jailed.
In extreme cases (RICO) the business or its
property may be seized by government
©2019 McGraw-Hill Education.
Chapter 4
Tort Law
©2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted
without the prior written consent of McGraw-Hill Education.
The Nature of Torts
Tort: A violation of the rights of an individual or
business that has been damaged either
intentionally or by negligence.
• Law of torts does not deal with duties from contract
but is concerned only with violation of private rights.
Common torts include:

Assault or Battery
©2019 McGraw-Hill Education.
Defamation: The harming of a person’s
reputation and good name by communication of
a false statement to 3d parties.
• For an act to be considered defamatory, it is
necessary to show the statement was made in such a
way that others hear or read it.
• Example: Writing an article that contains defamatory
statements about someone in a newspaper.
Defamation has been separated into two torts:
• Libel
• Slander
©2019 McGraw-Hill Education.
Libel and Slander
Libel: Spreading of damaging statements in
written form, including pictures, cartoons, and
effigies (likenesses).
• Defamation on radio, television, and Web sites is also
considered libel.
Slander: Spreading of damaging words or ideas
about a person, directly or indirectly, in all other
forms not considered libel.
• The most common form of slander is spoken words.
• Slander also can be committed by means of gestures
and actions.
©2019 McGraw-Hill Education.
Characteristics of Libel
While several libel cases involve defamatory
statements published in books, media, and Web
sites, the possibility of libel also exists in
business e-mails, memos, and letters.
• The libel need not be direct. Subtle suggestion or
implication is enough to bring about legal charges.
Example: In the case of a missing laptop
computer, a manager might write an e-mail to
his team asking them to check with Joe
Anderson, who was known to “borrow” things.
(Implication equals Joe is a thief)
©2019 McGraw-Hill Education.
Characteristics of Slander
Slander describes almost all defamation that
cannot be classified as libel.
• It includes spoken words, gestures, actions, and even
• Most cases of slander involve thoughtless statements
that reflect badly on another person’s good name and
• Anyone hearing a slanderous statement may be
called upon later to testify to having heard it.
• Slander does not require direct defamatory statement.
Gestures and actions may be as damaging.
©2019 McGraw-Hill Education.
Trade Libel
The tort of trade libel is similar to traditional
defamation but deals with an individual’s title to
property, or quality of product or service.
• Example: A manager sends an e-mail to his suppliers
claiming his competitor is having trouble with finances
and is planning on filing bankruptcy.
Humor and Slander
• A quick apology migh …
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