Regulations & Ethics Flashcards
Terminal Values (+2 e.g.’s)
Purposes we should strive for, 1. Personal Values (peace of mind), 2. Social values (world piece)
Instrumental Values (+2 e.g.’s)
How one should behave, 1. Moral Values (being honest), 2. Competence Values (behave imaginatively)
Business Norms
Triple bottom line and trust
Ethical Dilemma (definition + 3 conditions)
A situation in which a difficult choice must be made between two courses of action, either of which entails transgressing a moral principle. Neither of the options will resolve the situation in a morally acceptable manner.
Conditions:
1. The person is obliged to make a decision
2. There must be different courses of action to choose from
3. Some moral principles are always compromised
Reasoning business Ethics (2 ways including it’s definition)
Consequentalism (utilitarianism)
- Intended outcome based
- The greatest happiness principle
e.g. train track -> moving the switch
Non-consequentalism (deontology)
- Principle based
- Doing the right thing for the right reasons
e.g. train track -> not moving the switch
Whistleblower
an individual who exposes or brings to light information about illegal, unethical or fraudulent activities within an organization. The dillema: do I expose my company or am I loyal?
The principle agent theory
A conflict in priorities between the owner of an asset and the person whom control of the asset has been delegated.
Moral hazard of the principle
The difference of interests between the principal and the agent. E.g. An employee might take more risks because they know their employer will bear the cost of any failures.
Information assymetry
There may be a situation in which the principal has limited knowledge about the agent’s decisions and behaviours. E.g. a docter (agent has more medical knowledge than the patient (principal)
How can moral hazard and information asymmetry be avoided?
- Clear contracts
- Reliable reporting
- Strict external supervision
- Self regulation
Name 7 Principles of ethical decision making and explain them
- Long term self interest: you should never take any action not in your organisations long term self interest.
- Personal virtue: you should never do anything that is not honest, open & truthful
- Religious injunctions: You should never take any action that is unkind or that harms a sense of community
- Government requirements: the law represents minimal moral standards of society, so you shouls never take any action that violates the law.
- Utilitarian benefits: You should nev er take an action that doesnt result in greater good for society
- Distributive justice: you should never take any action that harms the least fortunate among us in some way
- Individual rights: You should never take an action that infringes on others agreed upon rights
3 trends and developments in ethics
AI, humanisation of climate and animals, inclusion of perspectives
Contract (+ what could happen without a contract)
Spoken or written agreement
Without a contract the following could occur:
- Misunderstanding of what was agreed
- The supplier does not supply what was agreed
- The buyer refuses to pay the agreed amount
- What the supplier delivers is substandard or dangerous
- The supplier causes damage to the buyer on delivery
Conditions to enter into a contract
- The offer (would you like to?)
- Acceptance (i accept your offer)
- Considerations (who is paying what)
- Competency and capacity (we know what we are doing - age, mental competence)
- Legal intent (we intend this to be legally binding)
Formal elemants of a contract
- Parties involved
- Definition and interpretation of terms used in the contract
- The jurisdiction under which the validity, correctness and enforcement of the contract will operate
- Duration and territory of the contract (when and where)
- The nature of consideration e.g. fees, goods etc
- Obligations associated with each role, including terms and conditions for invoicing and payment
Electronic B2B contracts allow for
- Location and time tracking
- Electronic negotiations throughout various locations
- E-signature and virtual-evident agreements
etc.
CISG and UCC
CISG (United Nations Convention on Contracts for the International Sale of Goods): An international treaty that provides uniform rules for international sale of goods to facilitate global trade.
UCC (Uniform Commercial Code): A comprehensive set of laws in the United States standardizing commercial transactions, including sales, across different states to ease domestic commerce.
Mistakes and misinterpretations that can affect the validity of a contract (name 3 and if the contract is now voidable or not)
Mutual mistake (voidable); occurs when both parties are misguided about the same tangible facts. Business contract of sale is voidable by mutual consent.
Common mistake (voided): occurs when both parties agree, but performance of the contract is impossible. A contract is voided if it is clear that the mistaken terms are fundamentally different from the intended terms.
Unilateral mistake (not voided): occurs when one party to an agreement is misguided by terms and conditions. The contract remains valed.
Supplier code of conduct
A Supplier Code of Conduct is a set of guidelines and ethical standards that a company expects its suppliers or vendors to follow. E.g. Labor practices, environmental responsibility, ethical business practices
Framework agreement
A framework agreement is a pre-established arrangement between buyers and suppliers that sets the terms and prices for future purchases, eliminating the need for repeated, individual contract negotiations for each procurement.
DD
Due Diligence (DD) is a comprehensive appraisal conducted by a prospective buyer to evaluate a business or investment opportunity, assessing all aspects including legal, financial, and operational risks.
Where does DD come in an M&A transaction?
M&A transaction:
Step 1: Strategy definition
Step 2: Target screening & selection
Step 3: DD
Step 4: Negotiation & transaction execution
Step 5: Integration/value creation
When an M&A transaction (goes ahead/doesnt go ahead)
Goes ahead:
- Nothing untoward uncovered
- Relevant information is shared (detailed checks done, no issues found, value creation expected)
You can now: pay/adjust price due to something discovered/add additional clauses into contract
Does not go ahead:
- Issues uncovered
- Common deal killing surprises (ip issues, tech issues, finance issues)
You can now: pull out of the deal/look for an alternative candidate
Steps in a DD
- Analyze purpose of the project
- Pre-analysis of financial business case
- Full check of documents
- Full analysis of business case and plans
- Risk analysis
- Final offering creation and ongoing monitoring
