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Turning The Tide Of Disapproval

March 5, 2009

It is time to get serious about our jobs. Each day now, it seems we face new challenges – or perhaps they are truly new opportunities.

Just today, there have already been three news items that have caught my eye and caused me to think “What does that mean to anyone in commercial, or legal or procurement?” And the answer is that they all mean something significnat – but of course what we actually do about it is a matter of choice!

So the first item was from Wharton School of Business and highlighted ‘freeconomics’ – the trend towards zero pricing of a product or service inorder to generate future revenues.

The second was the report that ‘caveat emptor’ has taken yet another blow, when the US Supreme Court ruled against drug approval and clear labelling being enough to eliminate manufacturer liability for its products.

And the third article was a report that the public has lost trust in business and wants far more regulation.

It won’t take long for you to recognize that each of these developments has potentially massive impacts on the world of contracting. Each of them relates to the nature of the promises we make, the commitments we undertake and how we perform on them. It also raises the importance of far better monitoring of results and oversight of outcomes.

The Supreme Court judgment has potential far beyond the pharmaceutical industry. The New York Times suggests “Producers of goods as different as antifreeze, fireworks, popcorn, cigarettes and light bulbs have sought to take refuge behind federal oversight in recent years to fend off litigation. After Wednesday’s decision, those efforts are most likely to succeed if they are based on express language in a Congressional statute or a specific regulatory action that makes compliance with state requirements impossible.”

The Wharton article raises fascinating possibilities for both buyers and sellers to re-think the commercial relationship. The traditional razor and blade approach is not new, but new technologies mean that it may be extendedinto many untried areas. However, this also raises massive questions with regarding to developing charging formulas, monitoring or auditing useage, protecting against counterfeits or ensuring IP rights.

Loss of consumer trust in big business and the integrity of corporate leadership is scarcely surprising. Many things are tied up in this and certainly the scale of remuneration – and perceived ‘rewards for failure’ – will be an area for focus. However, the global nature of the shift in public sentiment is probabaly the most fundamental issue. Business leaders have managed to alienate even the most committed enterprise societies, in particular the United States.

Just a moment in time? Emotions will change and memories move on? Probably not, i that the impacts of this recession are too broad and too severe. Far too many people have had their hopes dashed and their future plans destroyed. But we all know that regulation is not really the answer. It is a blunt instruement, takes a long time to structure and is slow to adjust and change. There must be other mechanisms to restore trust – and commercial contract policies and practices (and their fairness and enforcement) are high on the list.

Finally, innovative ideas such as ‘freenomics’ are precisely the sort of thing that might lift us out of economic malaise by invigorating markets and enabling company survival. What other areas might change the framwork for business? Certainly greater transparency in trading relationships is one example. We also need to re-think the principles of confidentiality and IP management. There are many ways that we – as a community – could add to scoail trust by avoiding confrontation adn eliminating ‘blame’ from our trading relationships.

So times are hard; and it is in those times that new leaders emerge. Those leaders can be both individuals and institutions. It seems to me that the time for those with contracting expertise – those who are skilled at forming and managing trading relationships – has truly arrived.

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