Corporate Responsibilities and Obligations under National and International Law - Research Paper Example

< COMPARE AND CONTRAST CORPORATE RESPONSIBILITIES AND OBLIGATIONS UNDER NATIONAL AND INTERNATIONAL LAW> by Abstract The research paper attempts to compare and contrast the differences existing in international and US national law, especially pertaining to social and legal obligations of corporations. It will also look at domestic laws from the business law perspective. Introduction The international law contains the principles and rules of general applications that deal with organizations that are operating within the United States and also outside the country. These laws deal with the international relations among each other along with any private individual, minorities group and many transitional companies (Spalding, 2011). The domestic law on the other hand deals with the same rules and principles but that is limited only to the ones that are operating within the country. The aim of this essay is to compare and contrast various differences that exist in national and international laws pertaining to corporations legal and social obligations. The essay is also focused on the reasons for the companies having the legal, corporate, socio-economic responsibilities and obligations under both the laws. Nature of the business It is always complex to operate and manage an international business compared to a domestic one. The legal compliance is way too complex in the international business as far as its operation is concerned. On the other hand the domestic law for business is less complex. It is mandatory for all the companies to abide by the law whether it is operating within the United States of America or in foreign soil. One of the striking social differences that can be cited in both the businesses, which is also reflecting in the business law, is the difference in the nationality of both the parties (Balloti & Finkelstein, 2010). Since the business law is not same in two countries it can be little difficult for the businesses to set the policies same as it has in the home country. The variation in the business practices and political systems along with the difference in currencies have contrasted the laws of both types of businesses. Scope The scope of both the businesses is wide apart from each other. Though the aim of both domestic and international business is to serve the society with their need and at the same time playing a role in the in the socio-economic development. However, the domestic business law states that the domestic businesses need to follow the business laws within the geographical boundaries of the United States of America. However, when it comes to business in the international arena there are certain international business rules and regulations that the corporations need to follow (Henderson, 2010, p. 373). The international traders need to abide by the law of procuring finance for the business only from the International Monetary Fund (IMF), World Bank, International Finance Corporation (IFC), International Development Association and many others, which is not mandatory for a domestic business. The law states the domestic business can procure financial assistance from any financial service providers within the country. While doing business in USA, the business needs to keep it in mind that the product or service they are offering must be lawfully imported to the country. The domestic law for doing business in USA Anyone importing goods from other country for operating their business in USA should comply with all the requirements of US customs and import laws. As per the business law in USA the business should have the necessary license and permits for importing and selling goods in the domestic market. The export-import documentation should be complete and should comply with the US business law. It is also stated in the Unites States business law; in general, there are legislations for particular products and services and also in particular with the type and content of the label (Business, 2011). Failing to comply with the same may lead to fines and penalties for the manufacturers, sellers and possibly others associated with the business. However, no business can be imprisoned for not complying with any of the legal requirements in the United Sates. This law is similar to any international laws. Certain specific examples are worth mentioning in this forum and will be discussed in the following sections of this essay. The domestic business setup needs to follow the set procedure to set up a business in the United States of America. In the first step the business needs to choose and reserve a name for the company’s business, which is optional though, followed by filing of company’s articles of organization and adopting company’s operating agreement. It is mandatory for the companies to apply for the Federal Identification Number for the purpose of tax and employment. The company needs to get registered for the collection of sales tax department with all the required norms. According to the domestic business law in the United States of America a company needs to be registered with Unemployment Insurance Division at the State Labor Department as an employer since with the starting of the operation the company will be going to create jobs in the particular state. As per the law the new business set up is bound to arrange for the compensation and disability insurance for the workers that are working in the company (Lindsey & Ikenson, 2012). It is necessary for the corporations to arrange for publication and also submit the certificates as well as the affidavits of publication. The overseas law for doing business in USA Does your company doing business for selling goods or services to the customers outside United States? Or procuring or purchasing raw materials or products from outside United States to sell in the country? If the answer is yes you need to ensure that your company does all the activities by meeting all the legal compliances. Many states in the United States of America, for example Maryland, welcome foreign direct investment in the business in terms of ownership and active management of the business. The country is liberal to the foreign investors in terms of organizing their business activities and the law is made in such a way that it offers sufficient flexibility to cater the needs of any particular business venture. However, the final determination will remain on the legal and tax considerations (Stathis, 2014). In the first place the US international business law asks the foreign investors to decide upon the business model – whether it will be an independent operation or a joint venture with another US firm. This is highly important for the international businesses in United States. If they want to operate independently then the law suggests establishing a branch in USA to operate the business. If they do not want to do so then they can choose to operate through a wholly owned subsidiary corporation organized under the law of the United States of America. The only ask for a foreign business to set up a branch office is to register or qualify with the State Department of Assessments and Taxation or SDAT. This varies from one state to another. Many foreign businesses prefer to operate in joint venture with a wholly owned US firm. The law states, in terms of subsidiary business, only the assets of the US subsidiary are at risk in the US operations (Milhaupt, 2013). In addition to that the use of a separate US subsidiary will help in clarifying the income that will be subjected to the US taxation law. As per the law the parent corporation is the sole shareholder of the venture and has the right to choose the Director of the company and through the Director the senior management. In the state like Maryland the rule suggests to have only one Director who might be a citizen or resident of another state or country. It is perfectly legal for a US companies to contract with an overseas manufacturer for labor, without insisting that those workers are paid a wage equal to the US Federal Minimum Wage system. The best example that can be cited here is Hon Hai and Foxconn. None of the US companies can get into legal trouble regarding the fact that, until very recently, the workers were paid wages equivalent to $132 per week, which is far below the US Federal Minimum Wage rule. In the above mentioned case Apple alleged that labor conditions were not contractually satisfied because of which Foxconn and Hon Hai Precision Industry Co. breached the agreement that they had made with Apple. In the United States of America contracts laws are state law rather than the federal law. Now the question is should the laws of a particular state, like California, be applied to this dispute or it should be Chinese law that can be applied? Corporate Responsibilities and Obligations under Domestic Law With the recent investigations into the corporate scandal fests in USA it is revealed that many of the corporate insiders across the country secretly dumping their stocks. This results in uninformed shareholders to bear the bulk of the losses when the company sank into bankruptcy (Greenwald, MacAskill & Ackerman, 2013, p. 13). In response to curb this wrong doing the Securities and Exchange Commission or SEC has tightened the norms of disclosure and has made it mandatory for the organizations to immediately disclose publicly any such kind of inside trades. As per section 16(a) it is mandatory for the organizations, which have stocks in the share market and making it for public, to declare the sales and stocks information to the public investors. The SEC have emphasized on the importance of section 16(a), which is permissible under the current definition of “sale”. As per the law the Congress has defined an “investment company” as the one that has 80% of its assets in the form of stocks and securities that are readily marketable. The partnership permissible regulation in 1966 was made by the Congress in the hope of closing the tax-free loophole. The domestic business law in the United States is subject to the law of sovereign state. In domestic law, it has long been accepted that the companies have certain legal obligations - for example under labour and environmental law - and they may be held liable for breaches of these obligations. As a matter of fact, companies cannot be imprisoned but in most states they can be sentenced to other criminal sanctions such as fines and other related penalties. Corporate Responsibilities and Obligations under International Law The businesses that are operating in the international arena need not to be involved in signing any treaty or the laws that are applied to the sovereign states (Schaffer, Agusti & Dhooge, 2014). In the United States of America the power with regard to the international law of business lies with the President however, the Congress also plays an important role. One interesting fact about the businesses operating in the international arena is that they need to abide by the law that is applicable on the home soil of United States as well the law of the foreign country where they are operating the business. For example, an US company Microsoft has a contract with a Chinese manufacturer named KYE Systems Corp. for assembling its products. There is provision to include a “choice of law” clause in the contract that would require any contract dispute to be settled in accordance with Washington State law. This clause offers contractual provision, which specifies the law and jurisdiction that would be applied to the disputes arising under the contract. The contract might contain such a clause because Microsoft’s headquarters are in Washington in United States and it would be more convenient for Microsoft to settle any disputes arising under a contract by using the laws in the state where it is located. In international law, there is no general rule that companies are responsible for their internationally wrongful acts. For obvious reasons it cannot be assumed that companies have the same obligations as states or even as individuals, even if developments appear to go in that direction. In 1998 the Rome Conference adopted the Statute of the International Criminal Court came close to provide the Court with jurisdictions to try not only natural persons but also legal persons for the offences listed in the Statute. In the end, however, the proposal was failed to gather sufficient support. Summary The international law would continue to address the conduct of private corporations in many different areas with very few exceptions and it can already be used as a yardstick in domestic law suits for determining whether a company has acted with the due diligence or due care that may be expected from it (Stigall, 2012, p. 323). Even if bad governments were made good, there would be discrepancy remain in economic power between large corporations and small governments, and the feared race to the bottom. A further explanation may lie in differences between the structure and approach of corporate law in the two countries. The formal qualities of corporate law in other country are markedly different from corporate legislation in the United States (Hopkins, 2011). The Corporations Law does not offer provisions to authorize merger transactions. The statutory treatment of compulsory acquisitions requires a high degree of assent from the minority. On several points, the Corporations Law in the United States is more complex and contains much more mandatory prescription than counterpart legislation (Goode & Goode, 2011). In contrast, requirements for extensive periodic disclosure of information have long been a feature of federal securities regulation in the United States compared to other countries. An information-rich environment may engender greater confidence in the integrity of corporate decision makers because greater visibility legitimates their decisions. References Balotti, R. F., & Finkelstein, J. A. (2010). The Delaware Law of Corporations & Business Organizations Statutory Deskbook 2011. Aspen Publishers Online. Business, D. (2011). Doing Business 2012: Doing business in a more transparent world. Washington DC: The World Bank. Goode, R., & Goode, R. M. (2011). Principles of corporate insolvency law. Sweet & Maxwell. Greenwald, G., MacAskill, E., & Ackerman, S. (2013). NSA collecting phone records of millions of Verizon customers daily. The Guardian, 6(5), 13. Henderson, W. D. (2010). Three Generations of US Lawyers: Generalists, Specialists, Project Managers. Modern Law Review, 70, 373. Hopkins, B. R. (2011). The law of tax-exempt organizations (Vol. 5). John Wiley & Sons. Lindsey, B., & Ikenson, D. J. (2012). 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