Expert answer:What is the government’s role in building business
Expert answer:During a campaign speech in 2012, President Obama stated “If you’ve a business, you didn’t build that. Somebody else made that happen.” (Jacobson, 2012, Para. 4). You can watch the excerpt from the speech here: https://www.youtube.com/watch?v=YKjPI6no5ng Contrast this with President Trump’s pro-business policies: http://nypost.com/2017/01/25/stock-market-soars-am…What is the government’s role in building businesses and creating jobs? Incorporate the material from the required readings along with scholarly outside research. All sources must be sited.
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Appendix B – The ABCs of Legal Literacy
The Business Guide to Legal Literacy: What Every Manager Should Know About the Law
by Hanna Hasl-Kelchner
Jossey-Bass © 2006 Citation
Appendix B: The ABCs of Legal Literacy
Overview
This legal primer is intended as a quick reference guide to assist you in connecting the dots between core
legal concepts and their business applications. It is not intended to be legal advice or a substitute for
competent counsel who represents you or your business. It is offered instead to provide a baseline of
information to help you develop awareness of the most common legal issues to cross a manager’s desk.
Industry-specific regulations are not addressed.
The pages that follow introduce six core legal disciplines. Each section surveys and highlights important
concepts in one legal discipline, explains their business relevance in general terms, and offers a list of
questions for you to think about that will help you translate the legal concepts to your own work environment.
Please note that what follows are only the ABCs. To do the whole topic justice would require an encyclopedia.
The law is a nuanced endeavor. What follows is intended as a quick acid test to help you see if you are
heading in the right direction and to provide a good starting point for gathering your thoughts before seeking
expert counsel. Together with your counsel you can develop the foresight and peripheral vision necessary to
manage your organization’s legal risk effectively.
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Appendix B – The ABCs of Legal Literacy
The Business Guide to Legal Literacy: What Every Manager Should Know About the Law
by Hanna Hasl-Kelchner
Jossey-Bass © 2006 Citation
1. International Law
When we refer to international law we are loosely referring to four things:
International treaties and conventions
The law of sovereign foreign countries
Foreign custom and religious law
Private contracts between parties in different countries
This collection of rules and agreements establishes the norms of acceptable behavior, providing the certainty
and stability necessary for commerce and healthy economic development. A weak or volatile rule of law
increases the level of risk of doing business in a particular country. Such risk is often referred to as political
risk, as distinguished from the more routine cost or difficulty associated with enforcing or defending legal rights
abroad that can be attributed to unfamiliarity with the forum or sheer distance.
Cultures throughout the world recognize the legal concept of justice as a combination of integrity, fairness,
honesty, trust, and transparency. If we look at the rule of law country by country we see that there is a degree
of consistency regarding what kinds of issues are recognized. What can vary significantly from country to
country is how the issues are dealt with.
At first glance it may look like treaties have very little to do with private business enterprise. After all,
international treaties and conventions are international agreements entered into by recognized governments of
sovereign nations. Their purpose is to harmonize substantive differences between jurisdictions and articulate a
common set of rules and standards on subject matter that is of greatest common concern. These agreements
lend consistency and certainty to world affairs. As a result, we typically associate such laws with public policy
concerns such as the Geneva Conventions, a set of public international laws that limit the barbarity of war.
Yet a great many treaties do affect trade and commerce. The Hague Convention, for example, deals with
private international law and issues of commerce such as the international sale of goods, product liability, and
procedural issues for the filing of suit, among others. The World Trade Organization is itself a creation of the
treaty and convention process. It was established after World War II to spell out rules of trade between nations
that govern goods, services, and intellectual property.
When domestic legislatures ratify treaties and conventions signed by their diplomats, the countries are
agreeing to conform their domestic law to the treaty standard. It is in this way that international law trickles
down and has an effect on private domestic commerce—even businesses that may not be selling their goods
or services in international markets.
Each sovereign nation state determines the law within its territory. Treaties and conventions play a role in
harmonizing laws from jurisdiction to jurisdiction, but such harmonization is not comprehensive or complete. It
still leaves room for a substantial amount of nationalism.
What is significant to note when dealing with foreign law is that various levels and subdivisions of government
may have simultaneous jurisdiction over your business operations or transactions. These political subdivisions
go by different names in different countries. They may be called states, provinces, cantons, or shires, to name
a few. Certain countries may also include territories that are subject to tribal laws as well.
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To calculate your legal risk exposure, you need to find out how many sets of rules govern your activities and
know what those rules are. This effort can also help you prioritize compliance risks. If, for example, a chemical
spill triggers federal law subjecting a company to fines and remediation, and the same event can trigger
separate state and municipal fines, the trebling effect of fines increases the cost of noncompliance and
simultaneously creates the opportunity for an increased return on investment of spill prevention or spill
containment practices.
Identifying the legal risk exposure associated with your international business operations sounds
straightforward, but sometimes it’s not so simple. Events touching multiple jurisdictions invites forum shopping.
Chapter Three discussed a case that involved a volatile compound shipped from Belgium to a distributor in the
U.S. who repackaged it and resold it to a customer in The Netherlands who blew himself up while repackaging
it on his kitchen table. Even though the product was just passing through the United States on its way back to
Europe, it had sufficient contact with the forum to allow a U.S. court to exercise jurisdiction. Managing
distribution channels and operations can therefore help minimize the risk associated with multiple jurisdictions,
particularly unfavorable jurisdictions.
Where transactions make it impossible to avoid a foreign jurisdiction, doing your homework in advance helps
avoid ugly surprises. In Europe, for example, antitrust laws have been interpreted to protect competitors, not
just the concept of competition per se as in the United States. That distinction allowed the proposed merger of
General Electric and Honeywell to sail through U.S. pre-merger approval, only to run aground in Europe.
With respect to product development and intellectual property, some countries do not allow inventors to assign
their rights to companies, while others allow it but require compensation to the inventor, and still others peg the
amount of compensation to the commercial success of the invention. If you don’t find out about these quirks
ahead of time, you might suddenly find yourself with a business partner you hadn’t planned on.
Part of the problem is that it is so easy to assume that foreign commercial law is like your own. Such
assumptions are decision-making blind spots and can be costly. In one deal, for example, a U.S. company
acquiring Canadian operations planned on consolidating the two and terminating Canadian employees. After
the deal closed, the U.S. executives learned that Canadian employment laws operate differently from those in
the United States and that their proposed shutdown needed to meet certain regulatory requirements. The
prospective cost savings wound up being significantly delayed.
A maze of regulatory requirements can create some counterintuitive results. When the discount store Wal-Mart
entered the German market the German antitrust authorities ordered the company to raise its prices, alleging
that Wal-Mart exploited its market power to sell products below cost on a continuous basis in violation of
German trade laws. While such underselling benefits consumers in the short term, the government reasoned,
the price squeeze forces medium and smaller competitors that can’t match the low prices out of business and
therefore concentrates market power in the long term.
Jurisdiction management is both a substantive issue and an operational issue, and the failure to be sensitive
to such issues can have dire personal consequences. Take, for example, the case involving a U.S. executive
attending a trade show in India. Unrelated to the trade show, the company was in the middle of a civil lawsuit
in India, and in connection with that case the executive was arrested and detained to answer questions upon
his arrival in India. Had he known about the welcoming committee he might have thought twice before
boarding a plane and subjecting himself to personal jurisdiction on Indian soil.
Differences in Legal Tradition
Domestic legal systems are a product of different legal traditions, culture, and sometimes religion. How they
developed and spread throughout the world is largely an accident of history and economic development, but
there are some common traditions that help make sense of the tangled maze. Every substantive area of law,
from tax to employment to intellectual property to real estate, takes on different legal dimensions once you
cross a national border. Why are the legal practices so different from country to country?
The basic concepts and institutions of modern Western commercial law, for example, were formed in the
eleventh and twelfth centuries and are rooted in Roman law, specifically the Texts of Justinian. They are
manifest in the civil code tradition represented by countries such as France, Spain, and Portugal and the
common law tradition represented by countries such as England. These European legal traditions were then
exported to the New World through colonial conquests. Most of the United States, for example, was originally
colonized by England. But the state of Louisiana, which has French roots, still retains traces of its civil code
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heritage.
Most of the world follows a civil law model. It is based primarily on a systematic compendium of laws, rules,
and regulations—“the code.” In comparison, the common law tradition also relies on code, or statute, but
supplements it with a large body of case law that has significant precedent value. The role of case law is what
makes the common law highly contextual and fact-specific.
As a practical matter, the globalization of world commerce and the Internet’s acceleration of globalization have
quickened the pace of harmonization between the civil law and common law legal traditions. Yet important
procedural differences remain with respect to the amount of discovery that may be conducted before trial, the
type of evidence that is admissible at trial, the role of witnesses, and the role of juries.
In contrast, Asia has no single unifying legal tradition. East Asia is geographically and culturally very diverse.
Before the expansion of Islam into central, south, and southeast Asia between the eleventh and fifteenth
centuries and the arrival of the Portuguese in the late fifteenth century, east Asia was generally dominated by
two traditions: the Indian Hindu Buddhist tradition and the Chinese Confucian tradition. These traditions differ
fundamentally from their Western counterparts by the lack of private rights and duties typically associated with
democratic forms of government. Rules relating to property, contracts, commercial transactions, and familial
relations are addressed by these traditions only to the extent necessary to protect or promote state interests. It
is essentially a penal law designed to perpetuate the existing political and social order.
The United States as Litigation Lightning Rod
The United States is an attractive forum for lawsuits because of its super-sized damage awards, including
punitive damages and the general lack of liability caps. Civil law countries generally do not recognize the
concept of punitive damages and often cap product liability awards, resulting in lower damage awards. As a
result, lawsuits offer less financial gain, so fewer are filed.
The fee structure for attorneys in the United States and the use of contingency fee arrangements is
another reason the United States is more litigious than other countries. The theory behind contingency
fees is to provide injured parties who have legitimate legal claims access to counsel if they can’t afford
one. A contingency fee is dependent on the outcome of the case. If the plaintiff wins, counsel receives a
percentage of the proceeds. If the plaintiff loses, counsel receives nothing. In some countries, a lawyer’s
receiving a percentage of the client’s recovery is viewed as an unethical conflict of interest. These
countries prefer to address the fee issue by requiring the losing party to pay the winner’s attorney’s fees.
The prospect of paying the winner’s fee increases the cost of losing. With more to lose, plaintiffs evaluate
their cases more carefully, and fewer suits of marginal merit are filed.
Notes
Contingency fees, typically offered by the plaintiff’s bar in product liability cases, can lead to extremely high
awards in class action suits. The concept behind class actions is that the amount of damage sustained by an
individual is too small to merit the filing of the case on its own. But there is strength in numbers and if enough
people are similarly situated and can be certified as a “class,” then the cost-benefit analysis weighs in favor of
proceeding.
Although class action suits and the debate about legislative steps to rein them in are largely a U.S.
phenomenon, the class action suit concept seems to have migrated overseas. International business is
therefore not immune. Great Britain and Sweden have recently permitted limited forms of class actions and
Italy and France are considering them.
Favorable procedural practices are another factor that contributes to the U.S. legal system’s reputation as a
litigation lightning rod. Smoking gun documents, for example, are bad in any language. But in the United
States, generous pretrial discovery rules provide the opportunity to find more smoking guns and other
damaging evidence. Civil law jurisdictions often decide the merits of the case based on the pleadings and the
plaintiff’s existing files. They sharply curtail pretrial discovery or even the use of witnesses during trial.
Furthermore, a judge, not a jury, may often decide the case.
Different Latitude, Different Attitude
Ethnic cultures, religion, and legal traditions combine to create differing frames of reference and perceptions
that influence business conduct. Understanding these nuances is important because they play a significant
role in our ability to manage expectations and legal risk. As summarized in Table B.1, those of us steeped in
the traditions of Western countries tend to view relationships more legalistically and approach negotiations as
equals with mutual rights. Those of us steeped in Eastern traditions tend to view relationships more
paternalistically and approach negotiations hierarchically, expecting decisions to be guided by more unilateral
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duty than by legal rights.
Table B.1: Comparison of Eastern and Western Legal Systems.
Open table as spreadsheet
Adjudicative (“Legal”)
Disciplinary (“Parental”)
Essential character
Confrontation between parties
on equal footing
Confrontation between unequals
Role of rules
Central and indispensable
Peripheral, dispensable
Most commonly observed
Western countries and sports
Asian and Middle Eastern
countries and military
Society classifications
Individualistic and egalitarian
(“contract oriented”)
Hierarchical (“status oriented”)
Societal links
Mutual rights
Unilateral duty
Behavioral guides
Please yourself but don’t break
rules. Laws set standards.
Please your group leaders at
any cost. Leaders set standards.
Essential theory
Jurisprudence
Unsystematic
Source: Reprinted by permission of the University of Washington Press. T. Stephens, Order and
Discipline in China: The Shanghi Mixed Court (1992).
These differing worldviews affect perceptions and the ability to manage expectations. If they are not managed
appropriately they can also set the stage for a culture clash. Understanding these nuances thereby helps you
develop more effective communication strategies that build good business relationships and lead to more
mutually satisfactory solutions.
When operating in a foreign country it is essential to respect the local laws. However, where local business
practices are rife with bribery, do you go along to get along?
Extraterritorial Laws
Even if local custom condones corruption and bribery, engaging in such practices while you’re away from
home does not necessarily make them legal. Under U.S. law, for example, the Foreign Corrupt Practices Act
(FCPA) makes it a criminal offense for U.S. businesses to bribe foreign officials to obtain a favorable
advantage when bidding on government contracts. It is one of several laws that governs the conduct of U.S.
companies abroad and has extraterritorial effect.
Pressure to remove any hint of impropriety involving international business dealings has been further
increased with the post-9/11 adoption of USA Patriot Act that mandates tighter scrutiny of cross-border
dealings. As a result FCPA enforcement has been rising.
Bribes are distinguishable from “facilitating payments,” which are legal under the Act. But before you conclude
that such definitions are nothing more than buzzword bingo, it is wise to seek expert counsel regarding the
activities or payments your company may be contemplating. The price of erring is high.
In the early 1990s, for example, General Electric ultimately paid an $8 million fine and another $52 million in
restitution for its involvement in bribing Israeli military officials to obtain a defense contract. Similarly, the
Baxter International health care group paid $6.5 million in civil and criminal fines after it admitted to bribing
Arab officials in an effort to have Baxter’s name removed from a blacklist of companies doing business with
Israel. But the pain for Baxter did not stop there. When New York City Comptroller Elizabeth Holtzman heard
the news, she banned Baxter from bidding on the City’s contracts.
The FCPA, enacted in 1977, finds its origins in the 1974 post-Watergate era of heightened scrutiny and
suspicion and the SEC’s discovery of numerous questionable payme …
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