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Commercial Management: Points to Ponder

May 15, 2011

Three news items caught my eye this week, raising issues that I consider important points for thought and discussion by the commercial community. Although all focus on US-based stories, I think the points they cover are of universal relevance.

The first was in the New York Times and dealt with regulation. It highlighted the loosening of insurance rules  by a growing number of US states. The article makes the point that they are ‘aggressively remaking themselves as destinations of choice’ in order to attract business. This is an interesting counter-trend to the drive by many governmental bodies to increase regulation, especially at an international or regional level. Of course there have always been ‘business friendly’ regimes that try to attract business through a lower regulatory hurdle, but how far will this now go? Might we see US states (and others) introduce more favorable jurisdictional systems, for example, perhaps capping liability pay-outs? To what extent will the commercial community need to be come far more expert in determining the relative merits of different reguatory environments in their calculation and management of risk?

The remaining two articles both came from The Economist. In ‘Patently Absurd’, an editorial criticizes the failure of Congress and the White House to better understand the link between the patent and trademark system and the momentum for innovation and job creation. It calls for a reversal of recent decisions to cut the budget of the US Patent Office and to speed the progress of other legislative initiatives. The article argues that ‘America’s system of intellectual property has played a crucial role in generating economic growth’ and that the failure to adequately staff the office (resulting in massive delays to patent issue) is creating lost opportunities and competitive exposures.

This argument may be correct, though there may also be alternative ways to protect inventions and there are counter-arguments that the obsession with patents actually undermines innovation. Either way, this is also an important area for commercial professionals to understand and discuss.

The final article tackles the question of legal costs – and the extent to which the dominance of lawyers in government has become self-serving and contrary to the public interest.Many of the points that are raised apply to the consequences and challenges within business – and the need to ensure that growing concerns about risk do not result in commercial decisions becoming hijacked by any particular professional group.

“The American legal system is the most lawyer-friendly on earth. It is head-thumpingly complex”, observes the article. “Companies must hire costly lawyers to guide them through a maze created by other lawyers to defend themselves against attacks by other lawyers on a playing field built by lawyers.” The cost of this system, according to The Economist, is roughly $800 a year for every American, passed on in consumer prices.

Is there an alternative? Clearly, while ‘the maze’ exists, we must find our way through it, but the article suggests the importance of internal checks and balances regarding need and value. Strong commercial functions provide balance by subjecting all stakeholders to scrutiny and ensuring that no one of them gains excessive power or control within the business. And this issue of regulation and the lawyer’s role in business is increasingly a universal debate.

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