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MGT 340 TEST #2 - Flashcards

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Class:MGT 340 - ETHICAL/REGULATORY ENVIR
Subject:Management
University:University of Kentucky
Term:Fall 2011
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Ethical Standards
  • Higher than legal standards.
  • They are generally accepted rules of conduct that govern society.
  • Law is the starting point for ethical decision making
Stakeholders
  • Primary-stakeholders who will feel a direct impact
               -Investors, owners, shareholders
  • Secondary-feel consequence of business decisions in an indirect way
               -Community, suppliers, customers, employees
  • Key- those who influence a project
               -Managers

Management and Ethics Managers, other superiors, and co-workers set the tone/atmosphere at work
Categories of Ethical Dilemmas
  • Stealing
  • Lying
  • Conflict of Interests
  • hiding or divulging info
  • taking unfair advantage
  • unfair treatment of ppl.
  • false impressions

Generated by Koofers.com
Values Management Prioritizing of moral values for an organization and making sure the organizations behavior reflects those moral values
Strategic Advantages of Values Mgt.
  • Able to handle times of crisis
  • Stronger public image
  • Stronger teamwork from employees
  • Increased productivity

Written Code of Ethics Train employees on the code of ethics and implement it
Ideal Code of Ethics- is organized, comprehensive, and applies to all employees
States punishment for unethical behavior and reward for ethical behavior
Resolving Ethical Dilemmas Define the Dilemma
Examine the impact of problem
Apply any relevant standards
Consider choices
Implement the planned course of action

Generated by Koofers.com
Blanchard and Peale Model According to blanchard and peale, there are three questions you should ask yourself whenever you are faced with an ethical dilemma:
1. Is your planned course of action legal?
  • Will you be violating any laws
2. Is your planned course of action balanced?
  • Is it fair to all parties concerned both short term and long
3. How does this decision make you feel?
  • about yourself, would you like this decision if made by others and affected you.
Wall Street Journal Model: Laura Nash Model Consists of compliance, contribution, and consequences
  • Compliance-am i in compliance with the law?
  • Contribution-Who is affected?
  • Consequences-What are the long term results of the decision?
Laura Nash:
How view if on other side of fence?
Can you discuss decision with family and friends?
Is it impt? what am I trying to accomplish?
Will i be comfortable with my decision over time?


CSR(Corporate Social Responsibility) Form of corporate self regulation integrated into a business model. CSR policy functions as a built in, self-regulation mechanism whereby business monitors and ensures its active compliance with the spirirt of the law, ethical standards, and intl. norms
Narrow View: Invisible Hand The goal of the business is solely to maximize shareholder wealth
-MIlton Friedman argues that the company's only responsibility is to increase profits
The invisible hand is the market
-The common good is best served not when we pursue moral purpose, but when we pursue the competitive advantage

Generated by Koofers.com
Moderate View: Govts. Hand Govts. Standards are the majority of the ppls. standards
Corporations are responsible to pursue rational, legal, and purely economic objectives
Broad View: Managements Hand
  • Social responsibility is primary and profitability is secondary
  • Corporations are only alllowed to exist bc they can serve some public good
  • Triple bottom line: emphasizes economic, environmental, an social value

Formation of Contracts Importance:
  • Tons exist daily
  • contract must be valid and enforceable in order for court to back it up
  • we need to have a reliable system in contract law and deal need to be completed as bargained for. WE look to courty system for help and make them do what they were supposed to do under contract.
Contract: DEfinition
  • An agreement that a court of law willl recognize an enforce
  • a promise or set promises enforceable by law which gives us a remedy. Contracts area of private law
  • A promise is not always a contract.

Generated by Koofers.com
Written Vs. Oral
  • Written contracts easier to prove
            -Preferred
  • Oral contracts can also be binding and enforceable

Bilateral vs. Unilateral Bilateral is a contract thjat has 2 promises and 2 performances
-most contracts bilateral
EX: Person A promises to person B to buy his truck for $3000. Person A promises to buy, person B promises to sell. A has to bring the money and B has to sell the truck to A
Express Contract
  • parties overtly and expressly manifest their intent to enter into a contract/agreement
  • can be written or oral
  • Exampe is a lease agreement
Implied in fact contract An implied-in-fact contract is a contract agreed by non-verbal conduct, rather than by explicit words.
Generated by Koofers.com
Quasi Contract A quasi-contract is a fictional contract created by courts for equitable, not contractual purposes.
Valid vs. Voidable
  • Valid contract is when all requirements are met
  • A void contract is not an actual contract bc it is missing one or more of the necessary legal elements
  • A contract has to have a legal purpose

Voidable vs. Unenforceable
  • Voidable contracts can be enforced but can also be cancelled
         ex: contract with minors. minors can enforce contract or cancel it
         ex: mentally handicapped: shouldnt be taken advantage of
  • Unenforceable contracts have all requirements but something else is wrong.
          ex: If you ahve a valid contract that is breached by the other party, you cant sure them 20 yrs later bc of statute of limitations
Executory vs. Executed Executory- We label a contract this until all parties have performed; it is not fully completed, still ongoing.
Executed- When all parties have completed their performance as described in the contract.
Generated by Koofers.com
Common Law(Judge-made law)
  • Deals with the sale of services
  • Not all contracts are going to be governed by common law but some that are include land, building a home, employment.

Statutory Law Deals with the sale of goods from article 2 of the uniform commecial code.
Helps laws to be the same accross the nation
Formation of Contracts Legally enforceable: We care to have legally enforceable contract bc if not we may have nothing to take to the court an say help
5 things to make contract legally enforceable 1.Agreement- consists of the offer and acceptance
2. Consideration- giving up something of value like time, money, good etc. This is usually what will distinguish a contract from a gift; bargain for a legal value
3. Capacity- someones mental capacity. whether you are sane, sober, an of age
4. Legality of purpose- Purpose of contract has to be legal. The court system will not help with illegal contracts
5.Genuineness of Assent-the contract must be genuine
   - party must knowingly enter into contract.
Generated by Koofers.com
Agreement:Part 1 of 2: Offer Valid offer
  • promise to do or not to do something
  • valid offer requirements(needs all 3 parts)
            1. Present intent to enter into contract
            2. Reasonable definite terms:identification of parties involved
            3. Has to be communicated to the offeree by the offerer. The offeree cannot accept an offer that never arrives.
Option Contract An option contract is defined as "a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer." Restatement of Contracts 25 (1981).
Agreement:Part 2 of 2: Acceptance -the offeree's positive response to the offerer's proposed contract
-Mirror Image Rule- the acceptance must reflect the offer
-Only the offeree can accept the offer.
-How to accept often set forth:
Mailbox rule- acceptance is effective when sent; even if the offer is never recieved

4 ways termination Revocation
Rejection-offeree indicates "no"
                rejection by changes in terms
Counter Offer-adding something to the offer
Contract becomes impossible to perform
Generated by Koofers.com
Contract Defenses: Age
  • general idea that we want both parties of contract to be age 18 or older
  • underage get protection, contracts voidable
  • Exceptions: if the contract is food, clothing, or shelter, the minor cannot void contract.

Legality of Purpose
  • the court system will not enforce contracts that would violate a statute
  • unconscionable: a contract is so unfair that it actually shocks the concious
  • performance and subject matter must be legal
  • public policy- contract may of may not be illegal but wont be enforced bc its immoral


Assent -meeting of the minds
- issues: Mistake- mutual mistake- courts cancel contract
Unilateral mistake- one party mistaken- court makes parties proceed as planned
Duress Physical Duress- one party is physically forced into contract by another
Common Duress- one party is deprived of a meaningful choice when deciding whether to enter into contract or not
Ex: boss says sell me your stock, or lost job
Contract voidable if person under duress
Generated by Koofers.com
Fraud and Misrepresentation
  • Scienter element is the intent to deceive and deals with fraud
  • Fraud is knowingly and intentionally disclosing false info about a material fact
  • When someone is deceived it is usually a way  to get out contract
  • Misrepresentation is when one party is not given complete/accurate info. This can lead to contract being dismissed
Statute of Frauds certain contracts, in order to be enforceable must be in writing
Ex: Sale of land
    Consideration of marriage(prenuptial agreements)
Sale of Goods over $500
Parole Evidence Rule When a contract has been reduced to writing and it is the intent of the parties that the written document represents the entire agreement., neither party can introduce oral or written evidence to prove or disprove the written agreement.
Exceptions: If contract missing terms of incomplete
                  If contract is ambiguous in parts
             If duress, fraud, illegality, or mistake is present in contract
Legal Remedies Deal w money
Put parties in position would have been if contract complete
  1. Compensatory Damages- puts non breaching party in position had the breach not occured
  2. Incidental Damages- Ex: having to drive extra to get something
Generated by Koofers.com
Equitable Remedies general idea to bring justice to parties
  • specific performance-make breaching party perform under contract
  • Injunctive relief-order party to do something or not do something
Administrative Law
  • Body of law that defines, regulates, and limits the exercise of authority by admin. agencies
  • Regulatory agencies-pass laws that we have to follow
  • Executive depts.-dept. justice, education etc.
  • Non-regulatory welfare agencies-oversee certain areas(public health, welfare)
  • State and local
  • History-dont need to take notes


Sources of Admin. Law: Enabling Legislation
  1. Constitution
  2. APA(Administrative Procedures Act)- establishes uniform procedures for agencies to follow when they are creating and enforcing their regulations
  3. Congress-Create Agencies
  • law congress passes to make each individual agency which can act in congresses place.
  • do so bc dont have time or expertise
        4. President-assign head of agency
Rulemaking-Legislative Types of Rules:
  • Procedural-agencies internal op. structure
  • Interpretive- agencies viewpoint on its own regulations
  • Legislative(have the force of law)- traditional rules and regulations; substantive laws- rules that get businesses attention
Generated by Koofers.com
Rulemaking-Process
  • Informal rulemaking- agency has to allow written comments on the proposal rule(receive and review comments)
  • Formal rulemaking- agency ends up having public hearing about the proposed rule (hear testimony)

Federal Register daily pubication that provides updates on all public regulations
CFR(Code of Federal Regulations) compiliation that contains the regulations from all federal agencies
Enforcement (Executive Branch) supreme court has given agencies broad discretion
  • Inspections
  • Issue, renew, revoke permits
Generated by Koofers.com
Hearings Two Types:
  1. Rulemaking-effect entire industry
  2. Adjudications-applies to certain party
Consent Order/Decree not admitting or denying but will comply with agency standards
Hearing No jury trial, in front of administrative law judge
Appeal After hearing, appeal with agency first then traditional court
Generated by Koofers.com
Administrative Law: Types
Limits on Agency Power
  • Executive-president appoints head of agency, money they get
  • Legislative- congress controls them by limited funding, creates agencies, removes agencies, grant an take power
  • Judicial- (greatest threat to agency power)
               =Changes are immediate

Public Accountability
  • Private Suits- citizens can sue agency
  • Statutory Disclosures-
  1. Freedom of Information act- requires agencies to make matters available to public
  2. Sunshine act-agencies must make meetings available to public a week in advance
  • Cons- intl market, costs time and money spent
  • Pros- increased public safety, no public issues
Generated by Koofers.com

List View: Terms & Definitions

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 Ethical Standards
  • Higher than legal standards.
  • They are generally accepted rules of conduct that govern society.
  • Law is the starting point for ethical decision making
 Stakeholders
  • Primary-stakeholders who will feel a direct impact
               -Investors, owners, shareholders
  • Secondary-feel consequence of business decisions in an indirect way
               -Community, suppliers, customers, employees
  • Key- those who influence a project
               -Managers

 Management and EthicsManagers, other superiors, and co-workers set the tone/atmosphere at work
 Categories of Ethical Dilemmas
  • Stealing
  • Lying
  • Conflict of Interests
  • hiding or divulging info
  • taking unfair advantage
  • unfair treatment of ppl.
  • false impressions

 Values ManagementPrioritizing of moral values for an organization and making sure the organizations behavior reflects those moral values
 Strategic Advantages of Values Mgt.
  • Able to handle times of crisis
  • Stronger public image
  • Stronger teamwork from employees
  • Increased productivity

 Written Code of EthicsTrain employees on the code of ethics and implement it
Ideal Code of Ethics- is organized, comprehensive, and applies to all employees
States punishment for unethical behavior and reward for ethical behavior
 Resolving Ethical DilemmasDefine the Dilemma
Examine the impact of problem
Apply any relevant standards
Consider choices
Implement the planned course of action

 Blanchard and Peale ModelAccording to blanchard and peale, there are three questions you should ask yourself whenever you are faced with an ethical dilemma:
1. Is your planned course of action legal?
  • Will you be violating any laws
2. Is your planned course of action balanced?
  • Is it fair to all parties concerned both short term and long
3. How does this decision make you feel?
  • about yourself, would you like this decision if made by others and affected you.
 Wall Street Journal Model: Laura Nash ModelConsists of compliance, contribution, and consequences
  • Compliance-am i in compliance with the law?
  • Contribution-Who is affected?
  • Consequences-What are the long term results of the decision?
Laura Nash:
How view if on other side of fence?
Can you discuss decision with family and friends?
Is it impt? what am I trying to accomplish?
Will i be comfortable with my decision over time?


 CSR(Corporate Social Responsibility)Form of corporate self regulation integrated into a business model. CSR policy functions as a built in, self-regulation mechanism whereby business monitors and ensures its active compliance with the spirirt of the law, ethical standards, and intl. norms
 Narrow View: Invisible HandThe goal of the business is solely to maximize shareholder wealth
-MIlton Friedman argues that the company's only responsibility is to increase profits
The invisible hand is the market
-The common good is best served not when we pursue moral purpose, but when we pursue the competitive advantage

 Moderate View: Govts. HandGovts. Standards are the majority of the ppls. standards
Corporations are responsible to pursue rational, legal, and purely economic objectives
 Broad View: Managements Hand
  • Social responsibility is primary and profitability is secondary
  • Corporations are only alllowed to exist bc they can serve some public good
  • Triple bottom line: emphasizes economic, environmental, an social value

 Formation of ContractsImportance:
  • Tons exist daily
  • contract must be valid and enforceable in order for court to back it up
  • we need to have a reliable system in contract law and deal need to be completed as bargained for. WE look to courty system for help and make them do what they were supposed to do under contract.
 Contract: DEfinition
  • An agreement that a court of law willl recognize an enforce
  • a promise or set promises enforceable by law which gives us a remedy. Contracts area of private law
  • A promise is not always a contract.

 Written Vs. Oral
  • Written contracts easier to prove
            -Preferred
  • Oral contracts can also be binding and enforceable

 Bilateral vs. UnilateralBilateral is a contract thjat has 2 promises and 2 performances
-most contracts bilateral
EX: Person A promises to person B to buy his truck for $3000. Person A promises to buy, person B promises to sell. A has to bring the money and B has to sell the truck to A
 Express Contract
  • parties overtly and expressly manifest their intent to enter into a contract/agreement
  • can be written or oral
  • Exampe is a lease agreement
 Implied in fact contractAn implied-in-fact contract is a contract agreed by non-verbal conduct, rather than by explicit words.
 Quasi ContractA quasi-contract is a fictional contract created by courts for equitable, not contractual purposes.
 Valid vs. Voidable
  • Valid contract is when all requirements are met
  • A void contract is not an actual contract bc it is missing one or more of the necessary legal elements
  • A contract has to have a legal purpose

 Voidable vs. Unenforceable
  • Voidable contracts can be enforced but can also be cancelled
         ex: contract with minors. minors can enforce contract or cancel it
         ex: mentally handicapped: shouldnt be taken advantage of
  • Unenforceable contracts have all requirements but something else is wrong.
          ex: If you ahve a valid contract that is breached by the other party, you cant sure them 20 yrs later bc of statute of limitations
 Executory vs. ExecutedExecutory- We label a contract this until all parties have performed; it is not fully completed, still ongoing.
Executed- When all parties have completed their performance as described in the contract.
 Common Law(Judge-made law)
  • Deals with the sale of services
  • Not all contracts are going to be governed by common law but some that are include land, building a home, employment.

 Statutory LawDeals with the sale of goods from article 2 of the uniform commecial code.
Helps laws to be the same accross the nation
 Formation of ContractsLegally enforceable: We care to have legally enforceable contract bc if not we may have nothing to take to the court an say help
 5 things to make contract legally enforceable1.Agreement- consists of the offer and acceptance
2. Consideration- giving up something of value like time, money, good etc. This is usually what will distinguish a contract from a gift; bargain for a legal value
3. Capacity- someones mental capacity. whether you are sane, sober, an of age
4. Legality of purpose- Purpose of contract has to be legal. The court system will not help with illegal contracts
5.Genuineness of Assent-the contract must be genuine
   - party must knowingly enter into contract.
 Agreement:Part 1 of 2: OfferValid offer
  • promise to do or not to do something
  • valid offer requirements(needs all 3 parts)
            1. Present intent to enter into contract
            2. Reasonable definite terms:identification of parties involved
            3. Has to be communicated to the offeree by the offerer. The offeree cannot accept an offer that never arrives.
 Option ContractAn option contract is defined as "a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer." Restatement of Contracts 25 (1981).
 Agreement:Part 2 of 2: Acceptance-the offeree's positive response to the offerer's proposed contract
-Mirror Image Rule- the acceptance must reflect the offer
-Only the offeree can accept the offer.
-How to accept often set forth:
Mailbox rule- acceptance is effective when sent; even if the offer is never recieved

 4 ways terminationRevocation
Rejection-offeree indicates "no"
                rejection by changes in terms
Counter Offer-adding something to the offer
Contract becomes impossible to perform
 Contract Defenses: Age
  • general idea that we want both parties of contract to be age 18 or older
  • underage get protection, contracts voidable
  • Exceptions: if the contract is food, clothing, or shelter, the minor cannot void contract.

 Legality of Purpose
  • the court system will not enforce contracts that would violate a statute
  • unconscionable: a contract is so unfair that it actually shocks the concious
  • performance and subject matter must be legal
  • public policy- contract may of may not be illegal but wont be enforced bc its immoral


 Assent-meeting of the minds
- issues: Mistake- mutual mistake- courts cancel contract
Unilateral mistake- one party mistaken- court makes parties proceed as planned
 DuressPhysical Duress- one party is physically forced into contract by another
Common Duress- one party is deprived of a meaningful choice when deciding whether to enter into contract or not
Ex: boss says sell me your stock, or lost job
Contract voidable if person under duress
 Fraud and Misrepresentation
  • Scienter element is the intent to deceive and deals with fraud
  • Fraud is knowingly and intentionally disclosing false info about a material fact
  • When someone is deceived it is usually a way  to get out contract
  • Misrepresentation is when one party is not given complete/accurate info. This can lead to contract being dismissed
 Statute of Fraudscertain contracts, in order to be enforceable must be in writing
Ex: Sale of land
    Consideration of marriage(prenuptial agreements)
Sale of Goods over $500
 Parole Evidence RuleWhen a contract has been reduced to writing and it is the intent of the parties that the written document represents the entire agreement., neither party can introduce oral or written evidence to prove or disprove the written agreement.
Exceptions: If contract missing terms of incomplete
                  If contract is ambiguous in parts
             If duress, fraud, illegality, or mistake is present in contract
 Legal RemediesDeal w money
Put parties in position would have been if contract complete
  1. Compensatory Damages- puts non breaching party in position had the breach not occured
  2. Incidental Damages- Ex: having to drive extra to get something
 Equitable Remediesgeneral idea to bring justice to parties
  • specific performance-make breaching party perform under contract
  • Injunctive relief-order party to do something or not do something
 Administrative Law
  • Body of law that defines, regulates, and limits the exercise of authority by admin. agencies
  • Regulatory agencies-pass laws that we have to follow
  • Executive depts.-dept. justice, education etc.
  • Non-regulatory welfare agencies-oversee certain areas(public health, welfare)
  • State and local
  • History-dont need to take notes


 Sources of Admin. Law: Enabling Legislation
  1. Constitution
  2. APA(Administrative Procedures Act)- establishes uniform procedures for agencies to follow when they are creating and enforcing their regulations
  3. Congress-Create Agencies
  • law congress passes to make each individual agency which can act in congresses place.
  • do so bc dont have time or expertise
        4. President-assign head of agency
 Rulemaking-LegislativeTypes of Rules:
  • Procedural-agencies internal op. structure
  • Interpretive- agencies viewpoint on its own regulations
  • Legislative(have the force of law)- traditional rules and regulations; substantive laws- rules that get businesses attention
 Rulemaking-Process
  • Informal rulemaking- agency has to allow written comments on the proposal rule(receive and review comments)
  • Formal rulemaking- agency ends up having public hearing about the proposed rule (hear testimony)

 Federal Registerdaily pubication that provides updates on all public regulations
 CFR(Code of Federal Regulations)compiliation that contains the regulations from all federal agencies
 Enforcement (Executive Branch)supreme court has given agencies broad discretion
  • Inspections
  • Issue, renew, revoke permits
 HearingsTwo Types:
  1. Rulemaking-effect entire industry
  2. Adjudications-applies to certain party
 Consent Order/Decreenot admitting or denying but will comply with agency standards
 HearingNo jury trial, in front of administrative law judge
 AppealAfter hearing, appeal with agency first then traditional court
 Administrative Law: Types
 Limits on Agency Power
  • Executive-president appoints head of agency, money they get
  • Legislative- congress controls them by limited funding, creates agencies, removes agencies, grant an take power
  • Judicial- (greatest threat to agency power)
               =Changes are immediate

 Public Accountability
  • Private Suits- citizens can sue agency
  • Statutory Disclosures-
  1. Freedom of Information act- requires agencies to make matters available to public
  2. Sunshine act-agencies must make meetings available to public a week in advance
  • Cons- intl market, costs time and money spent
  • Pros- increased public safety, no public issues
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