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Class Objectives/Business Relationship Overview (Ch. 9-11)

Class Objectives/Business Relationship Overview (Ch. 9-11). 1. Describe an overview of the legal processes to change the social contract. 2 Identify the ethical issues underlying changes to the social contract 3. Analyze the levers of power among society, government, and business.

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Class Objectives/Business Relationship Overview (Ch. 9-11)

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  1. Class Objectives/Business Relationship Overview (Ch. 9-11) • 1. Describe an overview of the legal processes to change the social contract. • 2 Identify the ethical issues underlying changes to the social contract • 3. Analyze the levers of power among society, government, and business. • 4. Analyze the processes of change in relation to Information Technology & Microsoft cases. Gov. - Bus. Overview

  2. Regulation—If it is crazy, why it is happening? • Share some stories • Defining Ketchup • Height of the letters on pickle jars • Doctor told me $40,000 gets a law ($80,000) • If business can buy lobbyists, where is the regulation coming from? Gov. - Bus. Overview

  3. Primary Sources of American Law • US Constitution • Statutes, or laws, passed by government • Regulations by government agencies • Case law Gov. - Bus. Overview

  4. Regulatory Law • Constitution • substantially affect interstate commerce • Promote the general welfare • Regulatory powers of the states Gov. - Bus. Overview

  5. Statutory Law • Federal • State • Uniform Laws by the NCC • 200 laws adopted by all the states • Uniform Commercial Code -- 1952 Gov. - Bus. Overview

  6. Uniform Commercial Code (Statutory Law cont.) • Commercial transactions • Sales, leases • Banking & Financing • Shipping and Warehousing • Investments • Uniformity among jurisdictions • all 50 states, DC, & Virgin Islands Gov. - Bus. Overview

  7. Administrative Law • Congress/Executive Branches create Agencies • FTC • OMB • Rulemaking • Investigation and Enforcement • Adjudication • Administrative Law Judge Gov. - Bus. Overview

  8. Supreme Court Interpretations Over Time • Power/restricted power of state • Commerce issues “Affected with the public interest “ • Corporations get “Equal protection of the laws” • Monopoly competition is contrary to law • Shipping across state lines makes it federal Gov. - Bus. Overview

  9. Elements for a Contract--Review • Agreement • Consideration • Contractual Capacity • Legality Gov. - Bus. Overview

  10. Agreement --Review • Offer—charter to operate • Dartmouth: Not terminated by state Gov. - Bus. Overview

  11. Agreement (cont.)--Review • Acceptance • Unequivocal • Communication Gov. - Bus. Overview

  12. Consideration/Regulation--Key • Legally sufficient value • Bargained for exchange • Both get legal detriment Gov. - Bus. Overview

  13. Underlying Reasons for Regulation • Changing the Social Contract • Flaws in the market • Social, Political & Other • Why the changes—ETHICS! Gov. - Bus. Overview

  14. Define Ethics • What • Concepts of right and wrong • Good and evil • To: • Benefit society, and • Improve the human condition Gov. - Bus. Overview

  15. Underlying Reasons--Flaws • Natural monopoly—Salt mine, water rights—Hispanic culture, Kalamazoo hospital • Natural resources regulation—Muskegon Lumber in Chicago • Destructive competition—Garbage in Portland • Externalities—Down the river Gov. - Bus. Overview

  16. Underlying Reasons – Feel better and safer • Quality of life—child seats, air emissions • Protecting individual rights--FDA • Resolution of national/global problems—Tariffs • Regulate/benefit special groups—EEOC • Conserve natural resources— Gov. - Bus. Overview

  17. Historical Patterns • Traditional industry regulation—CAB • Second Managerial Revolution • Functions across all industries—Current theory Gov. - Bus. Overview

  18. Governmental Power • Recall the models of business power • Evaluate governmental power Gov. - Bus. Overview

  19. Governmental Power • Prescribe rules of game • Major purchaser--$542B/$8.9T—7% • Contracting power • Promotes & Subsidizes • Owns wealth—In Oregon what do they own? Gov. - Bus. Overview

  20. Governmental Power—Cont. • Architect of economic growth • Legal protections • Manage through regulations • Tax and redistribute wealth • Protect National Security—Drug enforcement • National arbiter of disputes • Foreign affairs diplomacy Gov. - Bus. Overview

  21. The Governmental Regulation Process • How are they made • Attempts to turn the tide Gov. - Bus. Overview

  22. Present and Future • Costs & benefits of complying • Demands for new regulations • Mixed economy Gov. - Bus. Overview

  23. Airline Degegulation • Fair and efficient competition • Net gains for major stakeholders of airlines? Gov. - Bus. Overview

  24. CAB: Fair and Efficient Competition • PAT Growth =4%, fares down 35% • Hub and spoke—did deregulation do that? • Fares – unequal for regions/inequitable on planes • Low cost carriers disappearing; concentration Gov. - Bus. Overview

  25. CAB Fair Efficient Competition- cont. • New entrants don’t • Exclusionary pricing • CSRs • Code sharing • Frequent flier • Fare discounting • Alliances Gov. - Bus. Overview

  26. CAB Stakeholders – Better/Worse • Airline stockholders • Airline businesses • Customers • Fares • Service • Safety • Employee welfare • Communities • Federal Government Gov. - Bus. Overview

  27. Business Government Relationship/Reforming (Ch. 10) • Describe an overview of the legal processes to change the social contract. • Identify the ethical issues underlying changes to the social contract • Analyze the levers of power among society, government, and business. • Analyze the processes of change in relation to Information Technology & Microsoft cases. Gov. - Bus. Overview

  28. Monsanto Company--BioTechnology • Is more regulation necessary? • FDA • USDA • EPA • What are the advantages and disadvantages? Gov. - Bus. Overview

  29. Monsanto – Issue Management • Social Response • Issue Management Gov. - Bus. Overview

  30. Patterns of Social Response • Rejection • Adversary strategy • Resistance strategy • Compliance • Accommodation • Proactive strategy Gov. - Bus. Overview

  31. Pressures for Social Response • Government – jaw boning • Community interests & demands • Environmental concerns • Competitive responses • Stockholder/investor pressures • Philanthropy • Crises Gov. - Bus. Overview

  32. Implementation Procedures • Issues Management • Crisis management • Corporate philanthropy • Business in education Gov. - Bus. Overview

  33. Issues management • What is it? • Identify important social issues • Potential of concern to the company • Develop responses Gov. - Bus. Overview

  34. Issues management methodology • Intuition • Scenario planning • Probability/Impact matrix • Setting priorities • Shaping public opinion • Legislation • Compliance Gov. - Bus. Overview

  35. Reforming the Regulatory Process • Congressional legislation is more deficient than administration • Government vs. Business expertise • Rely more on the free market • Privatize • Deregulate • Incentive controls Gov. - Bus. Overview

  36. Reforming the Regulatory Process (cont.) • Recent Congressional Initiatives • Cost/Benefits, easing, planning • Improve administration • Mining and Western lands issues • Reduce conflicts among administration • Increase speed of decisions • Performance based management Gov. - Bus. Overview

  37. Class Objectives/Political Process (11) • Describe an overview of the legal processes to change the social contract. • Identify the ethical issues underlying changes to the social contract • Analyze the levers of power among society, government, and business. • Analyze the processes of change in relation to Information Technology & Microsoft cases. Gov. - Bus. Overview

  38. Archer-Daniels-Midland • Ethanol=MBTE • 10% gas mix reduces emissions • Renewable, less dependent on oil • 5.4 tax credit/gallon • Tax credit for production • Case against • $7B lost revenue • Public pays more for corn • Public pays more for beef Gov. - Bus. Overview

  39. ADM/Ethanol Reform & Ethics • Reform • House opposed • Senate approved • Newt engineered passage—why? • Ethical • Yes--? • No--? Gov. - Bus. Overview

  40. Political Process • Shaped by balance of powers & rights • Historical diffusion of business political levers Gov. - Bus. Overview

  41. Lobbying vs. Special Interest Groups • Business--Money/Money/Money • Peak & Trade Associations • Lobbying • Elections—PACs & Loopholes • Special interest groups evolve—courts & actions & ethics Gov. - Bus. Overview

  42. Federal Express--Legislation • Legislation—ICC Act dropped “express” • RLA • Railroads and express company(s) • Minimal protection for unions/workers • NLRA • Protection for unions/workers in organizing • City by city • Truck drivers are non-air carrier? • Far more drivers than pilots • Air express is their business Gov. - Bus. Overview

  43. Federal Express--Lobbying • Republicans • Technical oversight • Democrats • Attack on worker’s rights • Solely to profit one company • Tactics • FAA bill--$19B • Conference committee, Hollings, 8-6 • Filibuster by Kennedy • Democrats 17 joined to kill it Gov. - Bus. Overview

  44. Anti-trust Theories • Structure--Avoid concentrations • Structure: sales or assets as % • Result: Inflation, inefficiencies, no competitors • Performance—Seek efficient business performance • Innovation, lower costs/prices, capacity, = profit, service Gov. - Bus. Overview

  45. U.S. Merger Guidelines • Market definition—structure in regions & products • Adverse competitive effects—performance: collusion & anti-competitive? • Entry—still possible? • Expected efficiency gains—passed on to consumers? Gov. - Bus. Overview

  46. Microsoft—ISPs & CSPs • DOJ • IE primarily/exclusively/better • ISP gets positioning power • MS • Cross licensing—mutual benefit • Where is the harm? Gov. - Bus. Overview

  47. Microsoft—OEMs • DOJ • Restricted OEM changes to Windows • Structure theory • MS • Standard practice: no modifications • Where is the harm? • Concentration is less 1% of PC Industry • Service, costs, prices, innovation Gov. - Bus. Overview

  48. Class Objectives • Describe an overview of the legal processes to change the social contract. • Identify the ethical issues underlying changes to the social contract • Analyze the levers of power among society, government, and business. • Analyze the processes of change in relation to Information Technology & Microsoft cases. Gov. - Bus. Overview

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