(This article first appeared in Triangle Business Journal on September 6, 2019
It used to be easy to answer the question who’s in charge of your business? U are, because U:
- started it
- built it
- own it
Think again. It’s becoming more complicated to answer who’s in charge. Let’s talk about a take charge guy. President Harry Truman kept a sign on his desk: “the Buck Stops Here.” Harry wasn’t a big fan of collective decision-making and made decisions quickly. The first atom bomb test was July 16, 1945. Within a month, Truman dropped two atomic bombs on Japan and World War II was over. Truman saw his goal as ending the war quickly and he achieved that goal. Then, he moved on to his next goal. He left it to other people to debate other impacts.
Now, multiple groups want a piece of the decision process. Let’s look at the current debate about who should be in charge of your business in terms of rights, obligations and accountability. Here are the contenders, we broadly call “stakeholders.”
- Stockholders, management teams and boards of directors all have rights and obligations that are well defined in corporate law and in your business’ organization documents. They can be fired or have personal liability when they don’t meet these obligations.
- Customers, vendors and contractors have rights and obligations that are defined in contracts with each of these “stakeholders.” Contract terms determine how stakeholders affect your business and how your business affects each stakeholder.
- Employees used to be in the same category as contractors and vendors, where contracts defined rights and obligations, but employment laws have added layers of rights and obligations that are outside the control of both employers and employees.
- “Society” and “public opinion” are stakeholders whose powers are growing without any increase in obligations. Modern communications (Facebook, Twitter, Google etc.) give the public (even those who are not customers) greater power to affect the opinions of your customers and the Government about your business. Everyone has the right to talk about you and your business, but no one has any obligations. The public can’t be fired.
- Opinion shapers. University faculty and students, media, think tanks, foundations and public interest “watch dogs” are all in the business of sharing their views about your business. These opinions include what products you should and should not make, acceptable materials and vendors, who you should employ, how much you should charge and pay and who should be making decisions in your business. None are accountable for their opinions.
- Finally, there is Government. Towns, counties, cities, states and Federal agencies, legislators and attorneys general are all watching your business closely. Of course, the government can pass and enforce laws, but these government stakeholders also often mobilize public opinion over issues that are not covered by laws.
Groups without obligations to your business or to other stakeholders are growing in power. They react quickly based on how they think your business affects them and their values.
So, whether you believe in the cause of the day or not, it’s wise to develop defendable positions on diversity, sustainability, inclusion, social justice and whatever other cause becomes popular with stakeholders.
Many of these issues are controversial. Large groups either support or oppose them. Some businesses want to please one side and don’t care about alienating the other side. Great if you are one of these businesses. Just recognize that taking a clear stand is likely to alienate some people.
If you want to avoid controversy and just run your business to appeal to the largest number of people, ambiguity is your friend. Ambiguity will help you alienate the fewest number of people.
Pretending you are in charge if you are not is a risk for your business.
So, I’ll ask the question again.
Who’s in charge of your business?
Building and maintaining a great business requires both strategy and execution. Both have to be flexible enough to adapt to changing circumstances. That’s where Innovate Capital likes to be – in the middle of advising clients about how to plan and adapt.
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|Jim Verdonik||Benji Jones|
© 2019 Innovate Capital Law (Verdonik & Jones, PLLC) For further information regarding the issues described above, please contact us.
This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.