The problem of effectively integrating sound decisions in a business environment is a reality many corporate managers have to live with. Often, the media reports persistently on uninformed decisions made by business executives which end up haunting the organization for a period. Besides the business laws in operation, the complexity of the business environment makes business executives opt for decisions that sometimes incriminate them especially when the self-defense is speculative and uninformed. Business law outlines the nature of cooperating structure in decision-making. Changes in conditions and dynamics of businesses are associated with the prevalence of controversial business decisions surrounded by an ethical dilemma.
Many businesses today operate on the agency arrangement in decision-making. These agents include management accountant who is entrusted with the responsibility of delineating powers of financial decision for a firm. Decision-making is the outcome of a mental process influencing the choice of action to take. A management accountant has unrestricted financial data access and is expected to provide objective figures and facts behind the financial arm of the company (Richard & Barry, 2002). For instance, in deciding on differential cost in a circumstance when the company sells its product through a sole distributor in a binding contractual relationship with a specified time period. Consider an existing contract with a distributor, who earns a commission of 10% for every unit sold in the market. The contract awarded to this company is renewable after every three years. At present, they have operated for only six months. However, the cost-benefit analysis reveals that the company could save 6% of the amount given to this distributor if it opts for establishing its own chain of distribution. Unfortunately, the balanced distributor agreement is binding, and violation of the same can make the sole distributor go to the court of law as the contract was inclusive of the sole distribution right. The company intends to recruit its salespersons and cancel the contract as a strategy for cost-cutting. Are there laws to protect this decision?
Contracts on the sale of products are governed by Article two of the Uniform Commercial Code, section 106. This section permits a company to cancel a contract with a distributor or sales agent when the good faith, warranties, and viability of the contract are questionable (Richard & Barry, 2002). However, the company may be forced to compensate this distributor in line with the specifications of the contract if the condition precedent is of litigation. Although it would be an expensive affair for the company to cancel the contract, the middle term and long term effects are justifiable. Under the common law, the company may base its argument for cancelation on the freedom of contract provision. Besides, the unilateral contract was a result of mutual assent and the company may request the distributor to sign the “implied of fact” as part of the liability.
The decision to cancel the contract with the distributor is important in monitoring relevant costs. For instance, differential cost of establishing own distribution network is beneficial in the middle and long term. Besides, the opportunity cost of this option would lead to balanced incremental costs and reduced irrelevant costs (Richard & Barry, 2002). To integrate Pareto efficiency and optimize profits, it is important for the business to revolve on the ethical mechanism of cost and benefit of a decision. Thus, normative decision-making should be the rationale for evaluating the cons and pros of a decision as it accommodates the discretion of company values. The company operating on a contractual model would put into consideration the laws in enforcing judgment on an individual’s decision.
In decision-making making in a business environment should be in accordance with the legal detriment and ethical mechanisms established by the government. An informed and legal decision forms the basis of reasoning, ethical profit making, and pareto efficiency. Though this task is often challenging, the primary lesson is commitment to responsibility, effectively, and practicality in management. Thus, a successful decision making criteria should be blended with philosophical experiences and effective solutions as component of the legal requirements of operating business.
Richard, A, M,. & Barry S. R. (2002). Business law and the regulation of business, 10thEd, Alabama: West/Thomson Learning.