Reference no: EM131761072

Legal Environment of Business

1. You are the Compliance Officer for a midsize software development company, Software, Inc. Your company's stock is publically traded on all of the major domestic stock exchanges.

The primary business of your company is to develop and then sell inventory-control software to large retailers. In the last few years, however, more and more of your business is supplying software to the various branches of the U.S. Military. The company employs a group of 100 salespeople whose primary duty is to market and sell the company's software exclusively to the military.

In recent meetings with the supervisor of military sales, you have been told that certain military procurement officers have asked some salespeople for small gratuities to help "sway" the procurement officer in the company's favor. For example, one procurement official suggested that in the absence of any identifiable difference between the company's product and a competitor's, the choice may come down to which one would come across with tickets to an upcoming major league baseball game.

You recognize that this sort of behavior is wrong, but you also recognize that these things often happen in the sales business, and that the salespeople may be tempted to cut corners this way. This is especially true because the salespeople work on commission---the more software they sell, the more they get paid.

Accordingly, you have decided to create a "compliance plan" that will effectively prevent this type of bad conduct by the employees. You recognize that the company can be held criminally liable for the crimes committed by employees.

Your final exam, then, is to write a compliance plan for the company that will prevent the problem described above, and any other problems that are related to the business as detailed above.In other words, your compliance plan must address this possible bribery issue, as well as any other issues that could result in liability for the company.

I recognize that a fully detailed compliance plan can cover dozens of pages. That's not what I'm looking for on this exam. Rather, I want you to identify 3 or 4 issues that you will address in your compliance plan (one of them being, of course, the giving of gratuities to obtain business).

2. You are the CEO of a small hospital located in a southeastern state. You have successfully competed with larger hospitals in the area because your hospital is more efficient than the larger hospitals, and you have a dedicated staff of doctors who have remained loyal to you despite receiving lower pay than doctors at the large hospitals.

Your hospital serves a rural population of mostly lower middle class farm families who work small tracts of land. Most of those small farms have been passed down from generation to generation. In addition, your hospital serves a large population of immigrant families who work as farm hands on the local farms. Most of these families live at or below the poverty level. Yours is the only hospital within 50 miles.

Recent news reports have caused you great concern. Several of the large hospitals have been successfully sued by patients who claimed they were injured as the result of medical malpractice. At least six hospitals have paid out multi-million-dollar damage claims, some of which included punitive damages.

You realize that even one such lawsuit would likely put your hospital out of business. At a recent conference of small rural hospitals that you attended, several CEO's warned that ours had become a very litigious society and that small hospitals need to protect themselves from these frivolous lawsuits.

One speaker suggested that the tort laws should be changed in order to prevent these huge damage awards. The more you listened, the more you realized that these kinds of lawsuits could destroy your business, leaving many patients without hospital service.

The last speaker at the conference was a lobbyist hired by the hospital industry to try to convince the state legislature to pass, among other things, a law placing a cap on damage awards for medical malpractice. He invited all interested hospital CEO's to join in the effort to reform the tort law.

One of the members of the Board of Directors of your hospital also attended the conference. She has reported back to the full Board. As a result, the Board has voted to support the idea of tort reform. The Board has directed you to present, at the next meeting of the Board, a plan for tort reform in your state. Describe, in detail, the plan for tort reform that you will present at the next Board meeting.