1. FHF McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. FHF Appendix B-2 Appendix B: The Legal and Regulatory Environment Appendix A: Guidelines for the Development of a Business Plan Appendix C: Personal Career Plan Appendix D: Personal Financial Planning

3. FHF Business Law  The rules and regulations that govern the conduct of businesses The regulatory environment offers a framework and enforcement system for businesses  The regulatory environment is shaped by: Inputs from competitors, customers, employees, special interest groups and the public’s elected representatives Lobbyists Appendix B-3

4. FHF Sources of Law Criminal Law : Prohibits a specific kind of action and imposes a fine or imprisonment as punishment for violating the law A violation of a criminal law is thus called a crime Enforced by state or nation  Laws come from four sources: the Constitution, precedents established by judges, federal and state statutes and federal and state administrative agencies Appendix B-4

5. FHF Sources of Law Civil Law : Defines all the laws not classified as criminal, and it specifies the rights and duties of individuals and organizations (including businesses) Violations of civil law may result in fines Enforced through the court system  Laws come from four sources: the Constitution, precedents established by judges, federal and state statutes and federal and state administrative agencies Appendix B-5

6. FHF CourtsCourts Lawsuits : An individual or organization takes another to court using civil laws  Primary method of resolving disputes Appendix B-6

7. FHF CourtsCourts Jurisdiction  The legal power of a court, through a judge, to interpret and apply the law and make a binding decision in a particular case Appendix B-7

8. FHF CourtsCourts Trial Court  Two tasks must be completed The court must determine the facts of the case The judge must decide which law or set of laws is pertinent to the case and must then apply those laws to resolve the dispute Appendix B-8

9. FHF CourtsCourts Appellate Court  Deals solely with appeals relating to the interpretation of law Appendix B-9

10. FHF Dispute Resolution Alternatives Mediation  A form of negotiation to resolve a dispute by bringing in one or more third-party mediators to help reach a settlement Appendix B-10

11. FHF Dispute Resolution Alternatives Arbitration  Submission of a dispute to one or more third-party arbitrators whose decision is final Differs from mediation in that an arbitrator’s decision must be followed Appendix B-11

12. FHF Dispute Resolution Alternatives Mini-Trial  Both parties agree to present a summarized version of their case to an independent third party That person then advises them of his or her impression of the probable outcome if the case were to be tried Increasingly popular Appendix B-12

13. FHF Dispute Resolution Alternatives Private Court System  Similar to arbitration in that an independent third party resolves the case after hearing both sides of the story Appendix B-13

14. FHF Regulatory Agencies  Federal regulatory agencies influence many business activities and cover product liability, safety and the regulation or deregulation of public utilities Have the power to enforce some specific laws Appendix B-14

15. FHF Regulatory Agencies  The Federal Trade Commission (FTC) Most influences business activities related to questionable practices that create disputes between businesses and their customers Focus on curbing false advertising, misleading pricing and deceptive packaging and labeling Can issue cease-and-desist orders and penalties Assists businesses in complying with new laws Appendix B-15

16. FHF Other Regulatory Agencies  Food and Drug Administration (FDA) Enforces regulations prohibiting the sale and distribution of adulterated, misbranded, or hazardous food and drug products  Environmental Protection Agency (EPA) Develops and enforces environmental protection standards and conducts research into the adverse effects of pollution  The Consumer Product Safety Commission Recalls unsafe products Copyright © 2011 The McGraw-Hill Companies, Inc. All rights reserved. Appendix B-16

17. FHF Uniform Commercial Code  A code to which all states but Louisiana comply Creates uniformity across state business laws  Covers many different business areas, including: Sales Agreements and warranties Torts and Fraud Contract law Law of agency Laws of property and intellectual property Bankruptcy Appendix B-17

18. FHF Laws Affecting Business Practices  Sherman Antitrust Act Passed in 1890 Prevents businesses from restraining trade and monopolizing markets  Clayton Act Passed in 1914 Prohibits price discrimination, forming exclusive agreements and the acquisition of stock in another corporation where the effect may be to lessen competition/create a monopoly Prohibits members of one company’s board of directors from holding seats on the boards of competing corporations Copyright © 2011 The McGraw-Hill Companies, Inc. All rights reserved. Appendix B-18

19. FHF The Internet: Legal and Regulatory Issues  Internet’s spread has created legal issues  What is an acceptable level of privacy?  Few Internet-specific laws Most basic business laws on basic behavior and property protection apply  Some Internet-focused laws exist: CAN-SPAM Act of 2004 Children’s Online Privacy Protection Act of 2000 Federal Trademark Dilution Act of 1995 Appendix B-19

20. FHF Legislation that Protects Consumers Appendix B-20

21. FHF Legal Pressure for Responsible Business Conduct  Movement toward increased organizational accountability for misconduct  The Federal Sentencing Guidelines for Organizations (FSGO) holds both the responsible employees and their firms accountable for violations of federal law 2004 amendment requires that a business’s governing authority be informed about its ethics program Organizations must develop programs that detect and deter misconduct Failure to comply to FSGO standards may result in penalties Appendix B-21

22. FHF The Sarbanes-Oxley Act  Criminalized securities fraud and strengthened penalties for corporate fraud  Created an accounting oversight board that requires corporations to establish codes of ethics for financial reporting and to be more transparent in financial reports  Top executives must sign off on their firms’ financial reports  Noncompliance results in fines and jail sentences  Corporations think SarBOx is expensive and burdensome  Benefits are greater accountability and transparency Appendix B-22