Week 8 - Outline.Ethics

Week 8: Ethics “Outline.Ethics” / “Business Ethics” / Professor Sanford / “rough notes with video lecture” Topic #1 The “Theory” on business ethics / Ethics Video Part 1 = 25:18 1 Business law teachers are supposed to discuss “business ethics” 2 Every business law book has a chapter on “Business Ethics” Note : Our book chapter “Business Ethics & Social Responsibility” 3 The theory is that if we discuss this topic, somehow, this will influence students to be better, more ethical business people . . . 4 There are 3 approaches to discussing business ethics #1 We could discuss the ethics chapter in the book (we will not—explain) #2 We could discuss how you developed your “ethical compass” and the influence of your parents, church, scout leaders, coaches, school teachers, etc. (we will not—explain) Your ethical compass is important . #3 We will discuss the “Sanford approach ” (intended to be more fun and interesting as we discuss this important topic. 4 Keep in mind, if you don’t like the “Sanford approach” #3 that is OK. The important item is that we agree that it is important to be honest and ethical. If approaches #1 or #2 are more helpful, follow that approach. Topic #2 Why Ethics (and business ethics) is Important 1 Think independently & critically about this discussion on ethics! 2 Remember : Being an honest, ethical person is important if you hope to be a leader in any organization. 3 Peter Drucker, a famous management expert once said . . . “Character is not something you can fool people about. The people with whom a person works, and especially subordinates, know in a few weeks whether he or she has integrity or not. They may forgive a person for a great deal: incompetence, ignorance, insecurity or bad manners. But they will not forgive a lack of integrity.” A business person wants to develop a reputation for honesty, ethical conduct, and someone who can be trusted (these are generally the people who will get promoted). Note : “Good Character” is a pattern of thoughts, acts, choices, a person makes over time that indicate a person, overall, makes choices that are honest, fair, caring, respectful, responsible, and indicate a disposition to do good. It is a pattern about doing the right thing. Making a mistake doesn’t mean you don’t have good character. Ethics and good character go together. You can develop good character. A good person is worthy of trust and admiration. Note : A person with good character and ethics is said to have “good integrity .” 4 Not only do businesses want to hire employees with good character / integrity / ethics, but parents want their children to “date people” with these traits. A mother, Michelle Wisdon-Ellis, wrote her daughter and gave her “8 dating tips that she wanted her daughter to remember. One tip was this, “Never fall for a boy just because he is good looking. Instead I want you to look for integrity. If settle for anything less than honorable character it will lead to heartache and 1

disappointment.” (reference supplied on request) 5 Ethics is about doing the “right thing” / The world needs more people, and in particular business people, doing the “right thing” as we work to solve the many problems of our society and world. The importance of good character & ethics is the foundation of business leadership / business ethics. Many books have been written on this subject (check the internet including authors David Brooks, James Stavridis, etc.). 6 What is the “right thing?” To be answered . . . . 7 The world needs honest / ethical people—Note the following: 1 “porch pirates” / leads to door camera’s / lead to spying / hacking . . . 2 Parents who lie / cheat to get their children into college (Felicity Hoffman / Lori Loughlin) 3 You want to be in relationships with honest, ethical people 4 Other examples (in the news) 8 Business needs honest / ethical people—Note Business Roundtable Statement On August 19, 2019 , chief executives from the Business Roundtable offered a new definition of the purpose of a corporation. No longer was the primary job of the corporation to advance only the interest of the shareholders via profit maximization. The new definition requires that the firm take into account all stakeholders , such as employees, customers, and society at large (including future generations). This statement is a major philosophical shift in how the corporation (and a business) should be managed. In proposing this management change, the Roundtable is recognizing the heightened scrutiny companies currently face. Today, perceptions have changed and business as usual is no longer acceptable . People expect more from corporations, and business, than just producing profits for their shareholders / owners. Also, this shift acknowledges that corporate stakeholders are pushing companies into sensitive social and political issues, especially after the failure of governments to effectively deal with various issues. Managers should make sure they consider all the relevant stakeholders when they engage in ethical reasoning (when managing the business). C.S.R. (Corporate Social Responsibility) is the deliberate inclusion of public interest into corporate decision-making and the 3BL (see discussion below of Topic #3) For example , businesses are being criticized for (1) not paying employees greater wages compared to business executives, (2) not doing anything about a new immigration policy, (3) not paying their fair share of taxes, (4) not doing enough to protect the environment, (5) and for moving jobs overseas. Also, business is criticized for (6) not doing enough on diversity in the workplace, (7) not doing enough to quell the problem of gun violence in America, (8) not doing enough to address the concerns of the Black Lives Matter movement. Add to this other issues and future issues . . . Topic #3 The 3BL / Triple Bottom Line / Profits – People – Planet Not mentioned in the Roundtable statement was the influence of the sustainability movement in bringing about changes in corporate management. In June of 1992, the United Nations sponsored the first Earth Summit . This initial gathering was held in Rio de Janeiro and 172 countries participated. One of the key discussions focused on solving (1) global warming and global climate change . This conference 2

3 Subaru cars – improving the environment / zero landfill status 5 As a honest, ethical person, what are you going to do to make the world better? Think about it I believe you have the opportunity to help your business and make the world a better place by practicing business ethics. What will you do ? 7 Why do “good” people do “bad” things? 1 Holland attorney “quid pro quo” (note his background) 2 Two students steal purse 3 G.R. realtor and $61,000 4 Why do “good” people do “bad” things? On some level, they forget who they are. 5 professor Sanford believes these individuals do not practice daily doing the right thing and, on some level, “forget” the importance of good character . . . 6 These individuals do not remember that they will “reap what they sow” 7 These individuals do not have a good ethical compass that they regularly follow 8 How you can practice daily doing the right thing (consider these suggestions) 1 Each day say something nice to one person (how hard is that) Be kind . 2 Each day practice, at least once, the “Golden Rule” 3 Each day take a few minutes to think how you can contribute to helping the world become a better place 4 Listen to your inner voice that helps guide you in the right direction 5 What would you add to this list? 6 Your goal is to keep in your consciousness the importance of daily doing the right thing, so you don’t forget who you are like the people mentioned above 7 professor Sanford believes, on some level, we will “reap what we sow” 8 The goal of a “daily practice” is to develop a pattern of good choices over time that leads to “good character / good ethics / good business leadership” 9 Someday, someone will ask you to do something “wrong” 1 This is an opportunity for you to let others know who you really are & tell them that you do not engage in wrongful activity (do not report this person to the police or other law enforcement authorities). 2 Sanford example / tax return + 3 Two students and purse story 10 Final thoughts on being honest and ethical / Professor Sanford believes . . . . 1 You want to have a strong “personal” ethical compass. I believe personal ethics and business ethics are connected. 2 Studies indicate there is a selfish reason to be kind, honest, and ethical – it makes you healthier (being kind reduces depression and anxiety). 3 Professor Sanford believes you can develop good character following the discussion above, and creating in your life a pattern of making positive, good choices. The net result will be good business ethics as well . . . 4 Professor Sanford believes that honest, ethical business people have opportunities to make the world a better place since maximizing profits should 4

not be the sole reason for operating a business. Week 9: Sustainability Topic #1 What is “sustainability” Video lecture = 33:43 1 Think independently and critically about everything professor Sanford discusses “Last class” – In our video lectures, we discussed the important topic of business ethics . Business ethics is about doing “the right thing” and we discussed how you can develop good business ethics, good integrity, good character, by a daily practice of doing the right thing. We know that good integrity, etc., is built on a consistent pattern of good choices. In the video the topic of sustainability was introduced when we discussed the 3BL (profits, planet, people) “In this class” – I want to expand my discussion of sustainability since business ethics and sustainability are essentially the same thing . In general, business ethics is about doing the right thing (remember our discussion of the Business Roundtable Statement), and sustainability is about doing the right thing when it comes to the environment (the planet) and to the people of the world. If you do not want to discuss business ethics, discuss sustainability. 2 The sustainability movement grew out of the movement to solve climate change (we discussed this in the Ethics material) 3 Not everyone believes in climate change, global warming, or if this is a problem 4 Why this is important for our discussion of business organizations (answer at end) 5 There are many definitions of “sustainability” but professor Sanford defines it as a concept where we manage our life and our business in such a way to leave the world (the planet and the people of the world) a little better than we find it. 6 There is a “feeling” that the “older generation” was not doing enough to insure that the people of the world and the planet were getting “better” each year, and this is not “sustainable” in the long-term. Topic #2 An informal history of the sustainability movement 1 This is from prof. Sanford’s viewpoint and is not completely accurate / discuss (note: some of this previously mentioned in the “Ethics” material). Also, note that 30 years ago almost no one was discussing this. Now, everyone discusses it. The overall goal of sustainability practices is for everyone to leave the earth, the people of the earth, and our environment, a little better than it is today, for future generations. 2 In 1992, “X” years ago, 172 countries met in Brazil for the first “Earth Summit” to discuss the problem of global warming /sponsored by the United Nations The overall goal of the Earth Summit was to discuss ways to limit the growth of “global warming” and address issues of “climate change .” See additional discussion of the “Earth Summit” on the next page. Note : Sometimes when I (professor Sanford) use the terms “global warming” and “climate change” I use the terms interchangeably. Technically, these terms are different. Global 5

At the first Earth Summit, various ideas were advanced on how nations could reduce their “carbon footprint” and give businesses “incentives” to reduce the production of greenhouse gases (like adopting a “cap and trade system” / etc. Many ideas are suggested each year. Some of the general goals of recent COP conferences (these COP’s are sometimes referred informally as global climate summits) . These ideas are in no particular order and, I am sure, you have heard of many of these ideas. Coal : It is generally agreed that the use of coal would be “phased down” since the burning of coal is responsible for 40% of annual CO2 emissions. Stop Deforestation by 2030 : Trees are vital to absorbing vast amounts of CO2. In general, countries pledged to plant 18 million trees during the following decade and increase by 20% tree coverage in urban areas. It is unclear how this initiative will be enforced. Fossil Fuel Subsidies : Countries agreed to phase-out subsidies that artificially lower the price of coal, oil, or natural gas (no firm dates have been established). Countries are encouraged to develop “clean energy” alternatives to the burning of fossil fuels (I.E. solar power, wind power, electric cars, etc.). Methane : Methane gases are responsible for one-third of human-generated global warming. It was agreed that countries would cut methane gases by 30% by 2030. Money Support : Various financial organizations agreed to back “clean technology” for renewable energy and stop financing fossil fuel-burning projects. Overall, the purpose is to support “net zero” initiatives. Support for Developing Countries : It was agreed in principle (no firm commitments) to increase financial support to poor countries to help in the transition to clean energy. Ratchet Mechanism : Under the Paris Agreement ( COP21 ) countries submitted “nationally determined contributions” to limit their emission of greenhouse gases. Every five years each country is asked to “ratchet-up” their limit of greenhouse gases, and this will be measured by “global stocktakes” due to be reported in 2023. The overall goal is to measure the progress of countries in reducing greenhouse gas emissions. One of the goals of COP 27 (Egypt) is to track the progress countries are making toward the goal of net zero emissions by 2050. You will notice that many companies advertise they will reach this goal of “net zero” 2050 (we will see). Summary : Each year I hear more new terminology and more goals stated to mitigate the problems of global warming and climate change. For the latest, you might follow the latest COP conferences and “discover” the GVSU Office of Sustainability Practices (Yumiko Jakobcic, director) . GVSU is a leader in the sustainability area. Yumi’s GVSU phone # is 616-331-8729 and she can let you know how you could get involved with sustainability practices. Topic #3 Why you should be interested in “sustainability” 7

1 Many people believe that the future of our world depends on meeting the challenge of “global warming” (discuss “food for thought” (wheat example) 2 Sustainability is a core value at GVSU. Former GVSU president Tom Haas stated “the ultimate goal is to educate students on environmental matters and equip them to go into the community to solve real problems” 3 GVSU is one of the top 25 “green” universities (Duke, GVSU, Harvard” 4 The history of “Earth Day” in April and the goal of raising environmental awareness and implement standards to ensure sustainable development 5 Almost all businesses want to be seen as “green” (friendly to the environment) There are many “rating” systems to evaluate business on their ESG scores Environmental, social, and governance performance / check ESG stocks 6 Note concept of “environmental wacko” to the “Ford Explorer” example (this is one of many examples of how being “green” enhances business profitability). Check this on the internet – Each year, various groups rate the most “environmentally friendly cars.” Cars will receive various “green scores” including an Environmental Damage Index score. The EDX score reflects the cost to human health from air pollution associated with the vehicle manufacturing, the production and distribution of fuel or electricity, tailpipe emissions, etc. The lower the score, the better. Several years ago, one group rated the Ford Explorer as one of the worst cars to drive if you cared about the environment. Explorer sales dramatically decreased. Ford, reinvented the Explorer and came out with the “Eco-friendly” Ford Explorer and sales went back-up. (In the old days, the worse car was . . . ) One item we learn from this story is that many people care about the environment and/or don’t want to be seen as an enemy of the environment. Besides cars that get rated, businesses are also rated as mentioned above. 7 It is the right thing to do—leave the world better than we found it – Note : I believe ethics & sustainability are related —both involve “doing the right thing ” Topic #4 The rise of 3BL (triple-bottom-line) / Profits / People / Planet 1 Not long after the first Earth Summit, the concept of 3BL was published (this was, also, previously mentioned in the “Ethics” material) 2 In practical terms, 3BL reports requires companies to expand the traditional reporting framework to take into account not only (1) financial performance but also performance in the areas of (2) environment (our ecological footprint) and our (3) people impact (what we are doing to improve the condition of people) 3 TBL reporting is a way to integrate profit maximizing along with goals of sustainability so that “people” & the “planet” (the environment) are considered when the company manages its financial resources. 4 Meijer and blue-berry supplier example 5 Subaru reduces their “environmental footprint” by “zero landfill-status” policy 6 Note problem of Wolverine World Wide in Rockford / PFAS chemicals disposal 7 Corporate Social Responsibility “CSR” is the deliberate inclusion of the public interest into corporate decision-making (and usually considers the 3BL ) 8

Be aware of changing terminology : Some critics may call a business “woke” if the business is involved with some of the following terms. Think independently and critically about these ideas. Note my article on Cascade Engineering. Net zero by 2050 = Currently, the Earth is already about 1.1 degrees C warmer than it was in the past when such records were kept. To keep global warming to no more than 1.5 C, as called for at the COP 27 conference, it has been “agreed” that carbon dioxide emissions need to be reduced 45% by 2030 and reach net zero by 2050 . Some companies, to confirm their commitment to the environment, will advertise their progress toward this goal. For example, and you can check this out on the internet, Fed X, the shipping company, states on their website they will be net zero by 2040. ESG A business that promotes environmental, social, and governance issues. DEI A business that promotes diversity, equity, and inclusion initiatives. Renewable energy (“decarbonization) / fossil-fuel energy / etc 17 SDGs – Sustainable Development Goals – are a collection of 17 objectives promoted by the United Nations designed to serve as a shared blueprint for peace and prosperity for people and planet, now and into the future. Some of the SDGs are #7 affordable and clean energy, #5 gender equity, #6 clean water & sanitation, #13 climate action, etc. For more information, google 17 SDGs ( note: One easy question will be on the quiz / final exam to check if you know something about SDGs). One issue discussed by many, “How much of a societal impact is made by pursuing some or all of these 17 SDGs” . . . In November 2022, the EC (European Council) approved new mandatory sustainability reporting requirements that will apply to U.S. based companies with EU (European Union) operations. The CSRD (Corporate Sustainability Reporting Directive) rules will require companies to report how sustainability issues will affect people, the environment, and financial performance. Note : These rules are more expansive than those proposed by the U.S. SEC (Securities Exchange Commission) for “climate-related disclosure rules” (this is a political issue these days). Remember : This course is just introducing some of the issues involving business sustainability. Topic #9 Other Sustainability issues “in the news” / and miscellaneous Note #1 : If you are interested in sustainability, you will note in the news each year, there will be dramatic reports on the “terrible things” happening to our climate. For example, see the “Code Red” issued by the United Nations. On August 9, 2021, the United Nations issued a “Code Red” warning the world that the world is warming-up faster than previously expected due to humans driving-up greenhouse gas emissions causing climate change. This is leading to warmer weather which leads to extreme 10

weather becoming more frequent (more fires, more droughts, more flooding) and more problems associated with growing food. For more details on this report, check the internet for the U.N. Climate Change Report . The “bottom line” to this report is that unless we do something to stop global warming, the world is going to suffer serious consequences that eventually will affect everyone. When I see reports like this, about the terrible things happening to our environment, I believe in two things: Belief #1 I believe everyone, including business, can do something (even small things) to be better to the environment and the people of the world. Also, I believe people like to do business with companies that are “socially responsible” and people will support “environmentally friendly businesses” . . . Belief #2 I believe (because I am an optimist), people are going to solve the problem of climate change (eventually). It may not happen in my life but hopefully it will happen in your lifetime. There are many people working on this problem right now. Thus, please think how you can be part of the solution (even in some small way) . . . . Note #3 When you graduate from GVSU and are looking for employment, I encourage you to consider companies like the ones I have attached to this topic. Remember : Find a job you love and you never have to work again, and if it is a job that helps make the world better, great! Quiz and Final Exam questions will come from the following articles (please copy & paste these links in your computer browser or open the PDF files in the Weekly material. Cascade Engineering article https://publications.gvsu.edu/seidman-business-review/2023-seidman-business-review/cascade-engineering-making-a-positive-societal-impact-in-west-michigan Brewery Vivant article https://publications.gvsu.edu/seidman-business-review/2022-seidman-business-review/brewery-vivant-making-a-positive-societal-impact-on-the-west-michigan-community Herman Miller article https://publications.gvsu.edu/seidman-business-review/2022-seidman-business-review/herman-miller-inc-a-force-for-good-in-west-michigan Note: Additional future articles on West Michigan businesses will be added. Week 10: “Outline.Bus.Org.” Business Organizations Video Lecture Part 1 = 41:29 Topic #1 Business Organizations – 7 basic forms – which one should you select? Note: business advisors might not always give you the best advice – why? 1 sole proprietorship – generally, very easy to establish, owner has complete 11

3 Example of Tiger Woods restaurant in Florida – May 2019 / Jupiter, Florida 4 Example of L.A. Swim Pool company in California Topic #3 Know difference between a “public” company and a “private” company 1 A public company has stock traded on a national stock exchange – Examples Steelcase , a local office furniture company Herman Miller , a local office furniture company 2 A private company does not have stock that is publicly traded (Haworth ) 3 It is fun and rewarding to invest in stocks of publicly traded companies – Why? Topic #4 What do “SH” (shareholders) do at the annual shareholder meeting? On March 28, 2011, prof. Sanford purchased one share of Steelcase for $11. On April 13, 2011, prof. Sanford received his first dividend of 6 cents. On June 3, 2011, prof. Sanford received an invitation to attend the Steelcase annual meeting at their office on 44 th street for owners of stock as of May 16, 2011. In addition , the invitation Sanford received a proxy statement (over 60 pages long going into great detail about Steelcase financial performance and what was going to happen at the annual meeting. If I did not wish to attend the annual meeting, I was encouraged to mail my proxy so the Board of Directors could vote on my behalf. The invitation to attend the annual meeting stated, in part, the following: The annual meeting is being held to allow you (the shareholders) to vote on the following proposals and any other matter properly brought before the shareholders: 1 Election of directors 2 Amendment to the Articles of Incorporation (considered a major corporate change) 3 Advisory vote on executive compensation Topic #5 The role of corporate “by-laws” By-laws are the rules and regulations that govern a corporation’s internal management – examples – when are meetings held, how much notice must be given, how many directors will the corporation have, how long is their term of office, etc. Topic #6 Understand “socks” / Sarbanes-Oxley Act of 2002 1 This law applies to managers of information in “publicly traded companies” and imposes civil & criminal penalties for violation of this law (video lecture discuss) 2 This law was passed due to the Enron energy company scandal in Texas / Note video lecture discussion Start Business Organizations Video Lecture Part 2 22:30 Topic #7 Both Directors & Shareholders must approve “major corporate changes” 13

Certain changes in the corporate structure require majority vote of the directors and a majority vote of the shareholders. Changes include a (1) merger or (2) consolidation of the corporation, (3) dissolution of the corporation, (4) sale of a substantial part of corporate assets, and (5) amendment to the “articles of incorporation” 8 Topic #8 The role of “officers” in the corporation Officers are hired by the Board of Directors, and officers are responsible for the day-to-day management under the supervision of the board of directors 9 Topic #9 The role of “directors” (corporation is managed by a Board of Directors “Board”) (directors are responsible for the management of the corporation) 1 An individual director has no power to manage 2 When the directors meet as a Board , directors use their “collective judgement” Directors who do not attend meeting may not vote by proxy (even if allowed in the corporate by-laws). 3 Typically, the “Board” will meet once a month to manage, and the Board will hire Officers to carry out Board management policies on a day-to-day basis. Officers will report to the Board. An officer, who is also a Board member, will be known as an “inside director” (ideally, the majority of directors will be “outside directors” . Thus, Officers are executive managers whom the Board of Directors hires to run the organization (at the direction of the Board). 4 The Board may declare dividends but are not required to do so. Some companies do not pay dividends. Why? 5 Major corporate changes, see paragraph #14 above, require majority approval of both directors and shareholders 6 For an official board meeting, there must be a “quorum . ” Unless otherwise stated in the corporate “by-laws” / a quorum is a majority of the directors if 7 directors, there must be 4 directors present to have a meeting if 6 directors, if only 3 present, there is no quorum Thus, the term “quorum” is a requirement that a minimum number of directors be present at a meeting for decisions made at the meeting to be valid. (this is true, also, for meetings of shareholders). 7 Directors decide how much stock should be issued for how much consideration, if stock should be repurchased, etc., etc., etc. / Explain 8 Typically, directors are chosen by a majority vote of the shareholders. Topic #10 When the Board manages, an “enlighten” Board will use a 3BL strategy It is the Board of Directors for a corporation that is responsible for the overall management of the business. For approximately the last one hundred years, until recently, the Board of Directors would manage to "maximize the profits" of the corporation. This management style was advocated by almost everyone including the famous economist, Milton Friedman, who won 14

agents. A principal can multiple the amount of business it can do by hiring agents to represent the principal. 2 Note that all business law textbooks will have a chapter about agency. Our text will provide good background reading on the topics discussed in this outline. Topic #2 Employee v Independent Contractor / I.C. 1 When a business hires someone to represent the business, the agent will be considered either an employee or an independent contractor . According to the “employment at will” doctrine, an employee can be fired for almost any reason. 2 The difference involves how much management and control the principal has in guiding the activities of the person hired. If the employer has substantial control over day-to-day operations of the worker, the worker is considered an employee. 1 Example of hiring someone to put a new roof on your house 3 The new hire will know which category the employer selects when they receive their compensation. An I.C. receives a gross amount of money with no deductions for payroll taxes, whereas, an employee would have various deductions removed from their gross pay. 4 From a legal liability viewpoint, there can be significant differences. For example, principals are liable, generally, for the torts committed by employee but not by an I.C. (discussed later). 1 The I.R.S. is very concerned about this issue involving payroll taxes Topic #3 Power of Attorney / POA 1 Someday, you will use a POA. It can be either a general POA or a specific POA. 2 It is a written authorization to represent someone else. It must be signed by the principal (agent does not need to sign), it ends with the death of the principal, if not indicated sooner, and it has nothing to do with being an attorney. Know : A POA is a specific form of expressed authority that grants an agent specific powers (either general or specific) No special form is necessary but many organizations will have their own form that will be strongly suggested. Examples include: 1 Military / deliver car 2 Health care / hospital / “advance directive” (various names) 3 Could not go to real estate closing 4 IRS 5 Example of “general” POA / study abroad 6 Be careful who you give a POA – Do you really trust this person? Topic #4 Know difference between Express, Implied, & Apparent Authority 1 When an agent is hired, the principal will give certain “express instructions” as to what the agent is authorized to do (called the agent’s express authority ) 2 The agent will have the implied authority deemed reasonably necessary to carry-out the express authority. An agent’s implied authority is derived from an 16

agent’s express authority and consists of what is reasonably necessary for carrying out the agent’s grant of express authority. 3 Principal “P” hires Agent “A” to manage a B.K. franchise restaurant. P tells A “Manage my restaurant and send me monthly financial reports” (express authority). In this situation, the Agent / manager will have the implied authority to reasonably carry-out the express authority. In these situations, the P will be liable but not the Agent. Note : Example of buying paint supplies. 4 Apparent authority is where the agent does not have authority but it is reasonable for third parties to believe the agent does have such authority. Note this example. Principal tells agent / manager “do not order food for three months.” If agent disobeys the principal, orders food when the agent does not have actual authority, the principal will be liable anyway because the agent has apparent authority (it was reasonable for 3 rd parties to believe the agent had such authority). 5 Principals must be careful when hiring agents since the P will be liable for the actions of the agent, whenever the A has implied or apparent authority. Topic #5 Know the Agent’s duty to the Principal—two key duties 1 Duty of loyalty / “fiduciary duty” / Agent should always act in the best interest of the principal (not in the best interest of the agent) 2 Duty to account – Agent must always make a complete accounting to the P and anything the agent receives from a 3 rd party must be turned-over to the P. 3 Note example of “kickbacks” or “incentive payments” with pet store manager (note how manager has a duty to give these payments to principal) 4 Note example of G.R. police officer “cheating” on his expenses 1 Crime of embezzlement – serious 5 Note mother of former student & credit union / 15-years in jail Start Agency Lecture Part 2 : 20:32 Topic #6 Understand the issue of the undisclosed principal / “liability” of P & A Understand the Mr. Rich car example discussed in the lecture. A car is for sale for $25,000 O.B.O. Mr. Rich, the P, wishes to buy it, and hires an A. The A is told to buy the car for $23,000 or less, and not tell the 3 rd party who the real buyer is (this situation is “an undisclosed principal situation” and why this happens). Rule #1 P is always liable when A does exactly what A was told to do, and A is always liable when A does not reveal the P’s name. Rule #2 P is not liable when A does not follow instructions, however, A is liable. Topic #7 Understand the tort liability of the Principal and Agent The doctrine of “respondent superior” (let the principal answer, in general, for the negligence and intentional torts of the agent committed within the scope of the employment – within the limitations noted below) 17

Topic #2 “at will employment” v “good cause employment” 1 “at will employment” – most employees fall into this category. When an employee is hired, unless the employee is hired for a (1) definite period of time or unless the employee is told their termination would only be for (2) “good cause,” either party can terminate the relationship at any time, even if morally wrong (with certain exceptions). 1 “public policy” exception (often hard to prove) / Example your employer demands that you do something illegal as a condition of your employment, and you refuse. Note case of Mrs. Wagonseller / lecture. Note : Even if you are an employee-at-will, you can sue your employer for wrongful discharge if you believe your termination was against public policy 2 The employee’s termination is against the law. Employee was fired and told “you are just too old for the job.” The employee sued for a violation of the age discrimination in employment act, and won their lawsuit. Note that most employers do not give reasons for your termination. 2 “good cause employment” – employee is hired for a definite period of time or told their termination would only be for “good cause.” Examples of good cause (Note: On the Employment Law Video-Part 1, I start discussing “good cause” employment at the 14:05 minute time) 1 not doing the job 2 sexual harassment 3 stealing from employer 3 Lane Kiffin signed a 5-year contract to be the football coach of the Oakland Raiders NFL football team (now the Las Vegas Raiders ). Note video lecture and discussion. 1 Al Davis, owner, can always terminate coach but must pay 2 Owner not required to pay if owner has “good cause” Note: On the Video at 17:30 minutes, I start to talk about the basketball coach, Rick Pitino and his situation at the University of Louisville—for more details, please see www.Wikipedia.com 4 Rick Pitino signed a 5-year contract to be the basketball coach at the University of Louisville. Note video lecture and discussion. 1 Did University have “good cause” to terminate? 5 Note what most employers do when you are hired - see employment application Note: The Rick Pitino situation is a good background to understand what is happening at MSU with football coach, Mel Tucker. Tucker signed a 10-year, $95 million contract extension that goes through 2031. It has been reported that this money is fully guaranteed unless Tucker is fired for specific causes that include “any conduct which constitutes moral turpitude or, which in the university’s reasonable judgment, would bring public disrespect, contempt or ridicule.” According to reports in the news, MSU is firing Tucker “for good cause” and will not pay him for the $80 million balance on his contract. The indication is that MSU has “good cause” since Mel Tucker engaged in sexual harassment activities and lied to MSU investigators about the events surrounding this case. Please “google” for additional 19

information. Note: If MSU cannot prove “good cause” MSU will be required to pay the balance of the contract. Topic #3 “injured on the job” / knowing about “ workers compensation” 1 Employees get “hurt” on the job for all kinds of reasons. According to statistics 300,000 people annually get “injured on the job” in Michigan. Approximately. 125-175 get killed each year. The following are some general rules that apply (keep in mind there will be a few minor exceptions to the rules we discuss) 2 When an employee is hurt, the employee cannot sue their employer. The employee’s only recourse is to file for workers compensation. The employer will be liable and workers compensation will pay the following: (1) medical bills, (2) lost wages (portion), and (3) disability or death benefits. 1 Note case of E.G.R. policeman / video lecture / You can sue 3 rd parties . 3 Even if an employee is “negligent” the employee can collect (no reduction of benefits) 1 Note Darco Train case / video lecture / also, note Fed-X driver case. 4 Only employees entitled to workers’ compensation, not independent contractors 5 Injury must be “work related” meaning that you must be “on-the-job” / 1 When you are out-of-town on business, you are considered on the job 24-hours a day. Note: Ford case / video lecture 6 In certain “rare” situations, the employee could sue the employer if the employee could prove the employer intentionally harmed the employee. 7 Workers compensation does not cover “self-inflicted” injuries where employee intentionally harms themselves (rare) . . . 8 Sometimes an employer may attempt to deny a workers compensation claim and the employee may need to seek the help of an attorney who specializes in this area. Note : Normally, an employee injured on the job can receive financial compensation (workers comp.) without suing their employer. Start Employment Law Video Lecture Part 2: 35:20 Topic #4 “Stupid Remarks” will get you fired or suspended from your job 1 You can be fired from your job for making stupid, insensitive, discriminatory, racist comments, or by participating in insensitive activities / See Outline p. 2-3 2 Never refer to someone’s race, gender, ethnic, etc. background, or stereotypes of individuals. Comments like these feed a climate of intolerance toward various groups in individuals and may lead to these individuals being assaulted or bullied. 3 If you make comments like these, at work or at home, you may be suspended from your job or terminated for being “insensitive,” “uneducated,” “racist” Yes, your remarks may be protected under the 1 st Amendment of the Constitution, however, your remarks are wrong and you can have employment terminated. Question on Quiz : see Topic #7 on pages 5-6 for a good example of this 20