Proactive Law for Managers This page has been left blank intentionally Proactive Law for Managers A Hidden Source of Competitive Advantage GeorGe Siedel University of Michigan and Helena Haapio Lexpert Ltd © George Siedel and Helena Haapio 2011 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the publisher. Gower Applied Business Research Our programme provides leaders, practitioners, scholars and researchers with thought provoking, cutting edge books that combine conceptual insights, interdisciplinary rigour and practical relevance in key areas of business and management. Published by Gower Publishing Limited Wey Court East Union Road Farnham Surrey, GU9 7PT England Gower Publishing Company Suite 420 101 Cherry Street Burlington, VT 05401-4405 USA www.gowerpublishing.com George Siedel and Helena Haapio have asserted their moral rights under the Copyright, Designs and Patents Act, 1988, to be identified as the authors of this work. British Library Cataloguing in Publication Data Siedel, George J. Proactive law for managers : a hidden source of competitive advantage. 1. Business enterprises—Law and legislation. 2. Corporate governance. 3. Organizational change. 4. Competition. I. Title II. Haapio, Helena. 658.1'2—dc22 Library of Congress Cataloging-in-Publication Data Siedel, George J. Proactive law for managers : a hidden source of competitive advantage / George Siedel and Helena Haapio. p. cm. Includes index. ISBN 978-1-4094-0100-1 (hardback : alk. paper) — ISBN 978-1-4094-0101-8 (ebook) 1. Business law—United States. 2. Industrial management—United States. 3. Competition— United States. I. Haapio, Helena. II. Title. KF390.B84S558 2010 340.02’4658—dc22 2010025553 ISBN 9781409401001 (hbk) ISBN 9781409401018 (ebk) V Contents List of Illustrations vii Endorsements for Proactive Law for Managers ix Acknowledgments xi About the Authors xiii Foreword by Tim Cummins, President, IACCM xv Preface xvii Chapter 1 Seize Competitive Advantage: A Legal Plan for Managers 1 Chapter 2 Meet Your Customer Needs: Move from Product Liability to Product Innovation 21 Chapter 3 Create Competitive Advantage through Your Talent Pool: Secure Access to Key Talent while Avoiding Employment Pitfalls 43 Chapter 4 Use Regulation as a Source of Competitive Advantage: Transform Environmental Regulation into Value Creation 59 Chapter 5 Sustain Ongoing Success through Innovation, Intangible Assets, and Intellectual Property Rights: Leverage Collaboration to Create Value through Intellectual Property 85 Chapter 6 Use Contracts to Improve Business and Prevent Problems: Be Proactive in Contracting to Achieve Competitive Advantage 103 Chapter 7 Tools and Resources to Achieve Competitive Advantage: Benefit from Your Legal Resources and Management Tools While Creating an Ethical Culture 133 Index 163 This page has been left blank intentionally List of Illustrations Figures Figure 1.1 Conventional approach to legal problems 5 Figure 1.2 Decline of comparative advantage 6 Figure 2.1 Causes of product liability 25 Figure 2.2 Marketing defects 27 Figure 2.3 Business solutions for product liability 31 Figure 4.1 Fighting environmental regulation 66 Figure 4.2 Business strategies for addressing environmental regulations 67 Figure 4.3 Menu of best practices 73 Figure 5.1 Options to protect your intellectual property 91 Figure 6.1 Contracting and business processes 105 Figure 6.2 Contract Literacy 112 Figure 6.3 Hand tool 114 Figure 6.4 Good-quality contracts: foundation for long-term loyalty and trust 117 Figure 6.5 Functions of contracts 118 Figure 6.6 The contracting puzzle 122 Figure 7.1 Legal resources: basic concerns 134 Figure 7.2 Legal resources: new concerns 136 Figure 7.3 Decision tree diagram 144 Figure 7.4 Decision tree with endpoint values and probabilities 145 Figure 7.5 Overall probability of success and expected values 145 Figure 7.6 Dispute resolution system 149 Figure 7.7 The ethical context for business decisions 152 Figure 7.8 A values-based decision tree 153 Exhibits Exhibit 1.1 Critical drivers of long-term success 2 Exhibit 2.1 Questions considered in risk-utility analysis 26 Exhibit 2.2 Tobacco advertisements 28 Exhibit 2.3 Foreseeable uses of a hairdryer 34 Exhibit 2.4 Warning label attached to tire 35 Exhibit 6.1 ICC Incoterms® 2010 trade terms 113 Exhibit 6.2 IACCM Top Ten Terms 116 Exhibit 6.3 IACCM Top Ten Terms of the Future 124 Exhibit 7.1 The law department mission 143 Exhibit 7.2 CPR Corporate Policy Statement on Alternatives to Litigation© 148 Exhibit 7.3 Seeing the big picture and becoming more proactive 152 Exhibit 7.4 Letter from Marriott President 155 This page has been left blank intentionally Endorsements for Proactive Law for Managers Market volatility, regulatory uncertainty, the complexity of international relationships ... these are critical issues for today’s business managers and they demand innovative, flexible approaches to traditional legal solutions. This book offers unique ideas and insights that will significantly enhance the ability to compete and win. Tim Cummins, President, International Association for Contract & Commercial Management Using the frameworks provided in Proactive Law for Managers, our company has been able to seek new business advantages as we deal with a diverse range of legal—and non-legal—issues. Now, instead of waiting to confront legal issues only when we are faced with a legal problem, we take a more holistic, comprehensive approach to the law by using the Manager’s Legal Plan™, and the other practical tools outlined in this book, to develop and merge legal strategies into good business practices and focus on using them to gain a competitive advantage. It empowers our executives to address these concerns and pursue contracts and negotiations using a fresh and dynamic and absolutely essential business mindset and approach. This book challenges each of us to envision a considerably more productive state for our firm, one that requires our managers to proactively step in and take charge of business matters that have legal components or potential legal problems rather than simply delegating these issues to our legal department. Proactive Law for Managers is a fundamental book that addresses a critical component of any business and offers a comprehensive, step-by-step guide and other invaluable tools on a plethora of legal issues to gain a competitive advantage in your firm. It is a must-read for any manager and ultimately, it is essential for business success and should be incorporated into every company’s legal and business strategy.’ Alyssa R. Martina, President and Publisher, Metro Parent Publishing Group For far too long, managers have tended to look at the law as a constraint on their activities. The odd thing is that money, plant and equipment can all be constraints, but managers tend to look at them as resources too. George Siedel and Helena Haapio do a great service to managers by brilliantly demonstrating how law, too, can be a tool for competitive advantage. Timothy L. Fort, Ph.D., J.D., Executive Director, Institute for Corporate Responsibility, Lindner-Gambal Professor of Business Ethics, George Washington University, USA