1. Legal, Regulatory, and Political Issues
CHAPTER 4
Legal, Regulatory, and Political Issues

2. 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

3. 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.

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

5. 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)

6. 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)

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

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

9. 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

10. 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.

11. 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.

12. 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.

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

14. Corporate Approaches to Influencing Government
Lobbying
Political Action Committees
Campaign Contributions

15. 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

16. 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.

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