Business Ethics and Business Law - Coursework Example

Business Law Part i) Registering a Company: In order to register as a company in the United Kingdom, certain forms must be provided to the Registrar of Companies, which must contain details about the proposed business, its principals, its location, the shareholders and the distribution of responsibilities. The forms must also specify what kind of a Company it is, i.e, a private or public limited company and name the principal officers. The forms must be accompanied by documents providing support for the facts claimed in the forms and also the necessary fee that needs to be paid. Additional information to be sent to the Registrar of Companies together with these forms and documents includes mortgage details of the location of the business, details of any charges in the UK as well as the accounts of the proposed directors/principal officers of the Company1. (ii) Types of Companies: A company can register itself either as a private or public limited company. If it registers as a public limited Company, then its shares can be bought and sold on the London Stock Exchange, whereas in the case of a private limited Company, the shares can only be bought and sold privately and a private Company cannot offer its shares for sale to the public. The public limited Company also differs from a private Company in that it must have at least two directors, while a private company can have just one. A public limited Company must allot and issue a minimum of 50,000 pounds of its share capital, with a quarter of it fully paid up before it can carry on business or borrow money, while a private Company can allot shares at any value it wants.2 A public limited company must also have the words plc appearing after its name and it is regulated to a higher degree by the Government than a private Company is. Thus, at the outset, a Company must decide whether it will register itself as a private or a public company. If not public, a Company can choose to register itself as a private unlimited Company, a private company limited by shares or a private company limited by guarantee. Private limited companies are owned by their shareholders. When a private limited company is limited by shares, it means that those shareholders who have paid in full for their shares will not be liable for the Company’s debts; however those shareholders who have paid only in part for their shares will be liable to the Company for the amounts that are outstanding on their shares. When private limited companies are limited by guarantee, it means that the shareholders who get together to form the Company agree on the limits to be placed upon liability when they set up the Company. This kind of arrangement is suitable for companies engaged in social activities, where the personal liability of directors and/or trustees may need to be limited.3 Unlimited private companies are those formed by sole traders or partnerships, where there may be no limit allowed on liabilities, because they make all the decisions regarding the business and they are not subject to regulation under the law, neither do they have to disclose their financial situation to the public.4 On the basis of the above, it may thus be seen that the main types of companies which may be registered are (a) public limited company whose shares are bought and sold on the public stock exchange (b) private company limited by shares (c) private company limited by guarantee and (d) private unlimited company, as in the case of sole traders or partnerships. (iii) Documents required for registering: Four documents are required to incorporate a limited company in the U.K. They are (a) Form 10 – which must set out where the registered office will be situated, and details of the Secretary and the Director (b) Form 12 – a declaration signed by the Company, regarding compliance with the Companies Act of 1985 (c) Memorandum of Association – which gives the Company name, location of the Registered office, the objects of the Company and liability and (d) Articles of Association – setting out the internal management and running of the Company as well as the list of shareholders.5 (iv) Documents to register as a Private Limited Company: In registering my company as a private limited Company limited by shares, I would first of all download the required forms 10 and 12 from the Companies House website at http://www.companieshouse.gov.uk/. This would be supplemented with the Memorandum of Association and the Articles of Association, listing the Director, the principal officers and the shareholders, with their addresses and contact numbers as well as the number of shares they possess in the Company. These would be sent with the required fee to the Registrar of Companies, who would then issue a registration certificate and registration number, which provides the required authorization for the Company to carry on its business in the UK, in the location and nature of business specified in the registration documents. (v). Advantages and disadvantages of registering as a Private Limited Company: One of the major advantages in registering a Company limited by share is the tax advantages it can enjoy. Another major advantage is the limited liability that will rest on the shareholders of the Company, so that any losses sustained by the Company will not need to be borne by the shareholders, whose liability will be limited to the extent of the value of their shares6. As a result, it is easier to find investors willing to invest in private limited companies limited by share. However, limited liability will be a problem when share capital in the Company is low, because in such asset-poor companies, the company may be unable to provide security for any borrowing. The disadvantage in a private company limited by shares is that it is not allowed to raise money from the public through the issue of shares. Moreover, shares allotted among members are not freely transferable among them. There is also a much higher level of Government regulation of private companies limited by share as compared to partnerships or private unlimited companies. Part 2. Code of Practice in financial matters: The company will carry out all its operations in an ethical framework, in adherence to the law and in such a manner as to reflect corporate social responsibility. The Company and all its employees will conduct themselves in a manner promoting transparency of operations and activities The officers and employees of the Company will ensure that all financial transactions of the Company are clearly recorded and circulated to concerned personnel. The officers of the Company will consistently apply policies and practices that are guided by fairness and equal opportunity for all employees and a concern for shareholder interests. There will be clear and consistent information made available to all individuals on policies and procedures, of the Company, as well as opportunities and responsibilities. The policies and procedures of the Company will be monitored on a regular basis to ensure that they are serving their stated purposes. Importance of this code of practice: This position will be a very important one for my organization to take, especially in the context of earlier corporate scandals which have erupted where public funds of shareholders have been misused for individual profit. The corporation evolved as a means to limit the liabilities of individual investors to the extent of their investments to promote innovation and risk taking.7 The corporate veil has been zealously guarded thus far, since the facility of limited liability available to a corporation has been deemed fundamental in the propagation of a capitalist economy8. However, the result is that corporate powers have aggregated such that they are creatures of money driven solely by profits, against which action becomes difficult and obscure. Under UK law, the only recourse for a shareholder who has a dispute is to try and invoke an order from the Court under Section 459 of the Companies Act of 1985 to declare that the company’s affairs are being conducted in a manner prejudicial to shareholder interests, which is a time consuming, expensive option. Within the organizational framework, a corporation does not share the same moral status as that of individuals, since corporate speech is in the context of the corporation’s commercial interests, rather than the dynamics of reason and desire which constitute individual moral choices.9 The need to introduce and enforce good corporate governance has also been highlighted in the wake of recent corporate scandals such as Enron10 HIH11 and misuse of pension funds as in Maxwell12. In the interest of making profits, corporate individuals may eschew the moral codes and values they may espouse as individuals and adopt a position devoid of social responsibility in their drive towards the accumulation of profits. Thus, there is increased Governmental and public pressure on corporations to function in a legal, ethical and moral manner. If my company is able to promote itself as a responsible, ethical organization, it is likely to be more productive in the long run, because it will earn the trust and loyalty of customers. Members of the public are increasingly concerned with the moral and ethical standards of practice within a Company. Part 3: Code of practice on human rights in the workplace: All officers of this organization will respect the rights of each individual employee. All employees are to be treated with fairness, courtesy and a lack of discrimination. The Company will apply policies and procedures to ensure that individual privacy and security of employee is respected and protected. The Company will set into motion policies to monitor the successful implementation of the procedures and policies of the Company. Importance of this code of practice: The Rights Approach in ethics is based upon the principle that every individual has a fundamental right to be respected and must be allowed to lead his or her life. If this freedom is to be provided to an individual, then his or her rights to privacy must be respected. On this basis therefore, any action or policy implemented by a Company will be ethical and moral only if it takes into account the people who are likely to be affected by that decision, to ensure that they are not used “merely as instruments for advancing some goal, but are fully informed and treated only as they have freely and knowingly consented to be treated.”13 Ethical conduct by a business requires the application of fairness and morality in dealing with issues within the organization, such as respecting the privacy of individuals working in it. One issue where there may be an interference with human rights is that of workplace surveillance. This practice is increasingly being resorted to by organizations, where employee emails are scrutinized, sometimes without their knowledge. Since an increasing amount of work is being done online, employee surveillance of employee online activity has become increasingly common. In the year 2000, there were an estimated 40 million workers whose activities were being monitored through workplace surveillance.14 There have been several studies conducted which have shown that electronic surveillance by employers has an adverse impact upon employees and affects job productivity and satisfaction.15 According to Botan16 who conducted a survey among employees who considered themselves to be heavily surveilled vis a vis those who were not so heavily surveilled, the findings were that those employees subjected to heavy amounts of workplace surveillance reported negative effects such as increased uncertainty, a loss in their privacy and reduced amounts of communication. Mishra and Crampton17 have also pointed out the ethical aspects involved in the issue of workplace surveillance. The practice ignores the question of fairness and respect for the privacy of employees. In effect, it is equivalent to placing the employees under a public microscope so that they feel under scrutiny all the time. However, at the same time, employers often feel constrained to resort to workplace surveillance to prevent instances of misuse of the online medium by a few employees. When incidence of individuals engaging in pornographic activity is revealed in public and the employee in question happens to be an employee at a particular organization, there is a resulting backlash on the organization in question. The reputation of the Company is affected and it may also become criminally liable for the actions of its employees under the principle of vicarious liability. As a result, many employers are resorting to workplace surveillance in order to maintain a check on employee online activity. In effect, they are resorting to imposing surveillance on all employees in the interest of keeping a tab on the activities of a few individual employees who may engage in this kind of behavior which is detrimental to a firm. Business Ethics refers to the moral principles that govern the kind of behavior which is considered to be acceptable or non acceptable by business people. It refers to what is considered good or bad practice for them. Business ethics may be defined as “the study of business practice at varying levels and contexts through the lenses of moral philosophy and relevant environmental issues.”18 Ethical considerations invoke the human element and social dynamics of the consumer oriented environment where a failure to maintain ethical standards could result in an adverse impact upon the organization. In the wake of corporate scandals such as Enron, there has been an increasing focus in recent times on the issue of ethical behavior within organizations and there is an increasing cognizance of this issue. As a result, where the issue of workplace surveillance is concerned, a corporation is faced with a dilemma – on the one hand is the question of protecting itself from adverse publicity and criminal action that may arise due to the illegal online activities of its employees and on the other is the question of maintaining ethical standards within the organization and respecting the privacy of its employees. This is an important issue for my organization as well, since it must also achieve that balance between ensuring that the privacy of individuals is not infringed, while also ensuring that the employees do not engage in illegal online activity that could be damaging to its reputation. An employer can become aware of illegal online activity only through periodic surveillance. However such surveillance cannot be a regular feature; rather it should be conducted on rare occasions and only when there are grounds which exist to suspect that there may be some degree of misuse. In such instances, if the organization has also warned employees beforehand that it may conduct spot checks anytime, it will be quite ethical for the Company to conduct sporadic checks. This may be acceptable and ethical way to monitor employee activity. Part 4: Mediation offers a paradigm that is different from the adversarial litigant position that is adopted in the Courts and the formal judicial system. Mediation is a process whereby a third party that is neutral steps in to help two disputing parties arrive at a consensual resolution to their problem – one that is fair to both the parties. Mediation can be entered into at any point in the dispute and can employ a variety of forms in its settlement. Mediation is increasingly emerging as a viable, cost effective mode of dispute resolution that is being preferred to the adversarial court based systems. Mediation may be used for a wide variety of conflicts because it is flexible enough to be adapted in any situation. Mediation offers a paradigm that is different from the adversarial litigant position that is adopted in the Courts and the formal judicial system. Mediation has been defined as a process by which a "neutral third party who has no authoritative decision making power" intervenes in a dispute or negotiation "to assist disputing parties in voluntarily reaching their own mutually acceptable agreement."19 As opposed to the adversarial Court based system and expensive lawyers, mediators are viewed as a “consumer friendly” approach and according to Mosten, “Disputants consider mediation less damaging to relationships, and…mediation helps parties identify real issues, feel as if they were treated fairly, and feel as if they were treated with dignity and respect.”20 Mediation could be a formal or an informal process, depending upon what kind of conflict it is and how serious it is. As Mayer points out however, “these people [mediators] and institutions have sometimes been formalized, neutral, and process focused…”21 In some instances, mediation is conducted through the use of a caucus, wherein the mediator meets separately with the individual parties, so that they feel free to disclose information that they may not feel comfortable disclosing before the other parties22. Mediation offers the facility of a democratic solution to a dispute that is derived from a democratic process of discussion and compromise between the two parties – thereby enabling them to arrive at a solution that is determined by themselves, rather than subjecting themselves to a decision that comes from above, from a Judge or a judicial authority, which also allows them less flexibility in the matter. Mayer23 has pointed out four ways by which mediators change the nature of a conflict: (a) changing the structure of the conflict (b) allowing the parties to communicate and present their cases in a confrontational environment (c) introduce their humanity, vision and commitment to the process (d) conflict resolution skills, which mediators develop as a result of dealing with disputes daily, as a result of which they are able to reframe the issues and present pave the way to the achievement of more viable solutions (e) mediators bring sets of values and ethics which helps them to build respect and trust among the parties. The Benefits of Mediation: Mediation offers several benefits. Some of them are as follows: saving of costs, privacy and confidentiality, savings in time, options for solutions that are outside the legally restricted options, flexibility in the process, the possibility of eschewing legal precedents and the opportunity to arrive at a solution that is mutually beneficial and acceptable to both parties24. Studies conducted on divorce have revealed that adversarial litigation costs 66 percent more than mediation25. Additionally, mediation was also shown to be a more viable alternative in terms of child custody arrangements with parents playing a bigger role in the lives of their children and maintaining higher levels of contact with them.26 Daiker points out the following benefits of mediation27: (a) Informal environment: As opposed to the formal, court based, procedural environment that is laden with codes and rules of conduct, the atmosphere at mediation is one that is friendly and informal and where free communication is encouraged. (b) Interest based problem solving: In the conventional legal environment, lawyers are trained to adopt an adversarial position in regard to the opposite party, however this feature can be done away with in mediation. The focus in a mediated dispute is in arriving at a solution that will be acceptable to both parties and in attaining to this process, there may be no winner or loser, as would be the case where a dispute was litigated in the courts. Therefore, a mediated procedure allows for the actual interests of both parties to be served – if necessary through compromise – rather than the fierce desire to win all. (c) Mediation offers the option to the parties involved in the suit to be active participants in the process of resolution of their dispute. In a court based system, the parties are not permitted to participate in the process of the case through the case, rather it is their counsel who speak for them. This could also be the case in a mediated dispute where one or both parties are represented by counsel, however in general, mediation offers the parties the opportunity to come to the bargaining table and state their position freely and participate actively in putting their viewpoints forward, rather than allowing their Counsel to do it for them. (d) Mediation is non binding. In most jurisdictions all over the world, the role of the mediator is seen as a purely facilitative one and it has been recommended that the mediator’s hand should not be seen in the outcome, since the resolution to the dispute should come through the parties themselves sunder a purely facilitative approach.28 Mediation, if done well is able to yield the right kind of solutions to disputes, which are pareto optimal solutions, wherein the pareto efficient point as the one where the resources are allocated in such a manner that one person cannot make his own position one where he is better off without simultaneously putting the other person in a position where he is much worse off. The goal of good mediation is to move the parties closer to that point of reaching a pareto optimal solution. Baruch Bush29 has pointed out how mediation is growing rapidly and is expanding into new areas such as administrative, commercial and workplace areas and the kind of practice is becoming increasingly evaluative where expert evaluation is also provided as a part of the evaluation process. He has also pointed out that during the 1980s arbitration was the preferred method of resolving disputes, and even became the Court recommended alternative in many cases. However, formalization and legalization inevitably entered the arbitration process when in several cases that involved security and employment contexts, the concept of “mandatory binding arbitration” began to be questioned. As a result, some of the formal features of the legal process such as discovery, written opinions by arbitrators and formal review processes became available which only contributed to making the arbitration process more long drawn out and costly, negating the attractive quick and low cost features that were responsible for the popularity of arbitration. Disadvantages of Mediation: Some of the disadvantages of mediation are: (a) Participation is not mandatory so the process can succeed only if both parties wish to take part in it (b) Mediation may function as a disadvantage for a party with a very strong case, who had an excellent change of success with litigation (c) No case precedents may be available to serve as a guide on how similar problems were resolved in the past (d) If the mediation process fails, there is no recourse to appeal, so the fees may be wasted. (e) In the case of commercial disputes arbitration or independent expert referral may be more appropriate.30 Mediation is also being resisted by some parties when it is pressed upon them by the courts as mandatory mediation, where the parties are forced to mediate despite any resistance they may have to the idea of mediating their dispute. Boettger31 points out some of the reasons why parties are reluctant to take up mandatory mediation early on in their cases. While mandatory mediation is meant to reduce the case load in the courts and help the parties to reach a settlement with some economy and efficiency, the realities that exist are that the parties do not approach mandatory mediation in a favorable way, largely due to their ignorance about how the system works and the benefits that may be accrued from it. They do not participate in the process in a meaningful way, viewing it more as an extension of the court process. Measures are being mooted to introduce a good faith requirement from the parties in the case of mandatory mediation, wherein the parties are required to be faithfully present at the mediation proceedings and to participate meaningfully in the discussions. There are several aspects that could constitute bad faith in mediation proceedings – for example delays in answering correspondence, not showing up at mediation proceedings and sending negotiators to settle, going back on commitments that are made during the bargaining process, changing positions midway, making new demands that have not been articulated before, refusing to sign written agreements, withholding information – all of these are signs of bad faith in a mediation proceeding32. Thus, while mediation is increasingly emerging as a cost effective option and is often imposed mandatorily by the courts, there is also some resistance to it which needs to be overcome. Mediation is not always successful and in many cases, the parties are fiercely resistant to the notion of compromising their positions and accepting a mediated outcome. Holler and Linder 33 have pointed out that there appears to be some resistance to the notion of accepting mediation as a means of dispute resolution. The reason they suggest has to do with disclosure. During the mediation process, both the parties make certain disclosures of information as they attempt to find some means of resolution of the conflict. The parties are then afraid that what they have disclosed during the mediation proceedings could be used against them in a court of law in the event the mediation is not successful and the case goes to trial. Holler and Linder34 have equated this flow of information during mediation to a signal, which could provide fuel from one party to another. In fact, the very call for mediation could constitute a signal from one party to another about the weakening of its own legal position. Where international trade disputes are concerned however, some alternative form of dispute resolution such as mediation or arbitration may in general, offer a more cost effective, speedy process of dispute resolution and help to simplify issues in complex cases where multiple parties are involved. The adversarial litigation system is likely to consume time and money; however if one of the parties has a very good case and seeks to gain damages in larger amounts, then the litigation process may be more successful in arriving at the that outcome, although it may be time consuming as well. Other attractions of mediation in international dispute resolution are the lack of prejudice, the informal and less structured process of resolution of the dispute35. Parties also have the option to agree on the procedure and the extent of information exchange, which is especially attractive in international law. The lack of availability of precedents may in fact be an asset in these cases, where such existing precedent by WTO could be unfavorable. Bibliography * “Approaching Ethics” Available online at: http://www.scu.edu/ethics/practicing/decision/approach.html * Billikopf-Encina, Gregorio, 2002. “Contributions of Caucusing and Pre-Caucusing to Mediation.” Group Facilitation: A Research and Applications Journal. 4: 3-11, at 3 * Botan, C.H., 1996. “Communication work and electronic surveillance: A model for predicting panoptic effects”, Communication Monographs, 63: 293-313. * Baruch-Bush, R and Folger, J, 1994. “The promise of mediation: responding to conflict through empowerment and recognition.” San Fransisco: Jossey bass. * Baruch Bush, Robert A, 1999. 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