Six forces and the legal environment of business: the relative value of business law among business school core courses

Six forces and the legal environment of business: the relative value of business law among business school core courses

Regular review and revision of the core curriculum has become commonplace within business schools.

This article presents and analyzes data from 902 senior managers attending executive programs at the University of Michigan. The data indicates that, among ten core business school subjects, law ranks third in value to these senior managers. The paper includes commentary on six forces that account for this high ranking. Two forces that were dominant in the 1970s and 1980s, regulation and litigation, are perceived by many managers as obstacles to business success. The four forces that have emerged in recent years–globalization, entrepreneurship, technology, and compliance–are more positive in that they enable firms to compete successfully in the global world of business.


Continuous review and revision of the core curriculum has become commonplace in recent years at business schools concerned with the rapidly-changing business environment. In conducting their reviews, some business schools survey members of the business community,(1) presumably to determine the elements of the curriculum that are of greatest value to senior managers. At many schools, however, time and resource constraints may not permit surveys and analyses of the opinions of senior managers.

The purpose of this commentary is to fill this gap by presenting and discussing data provided by senior managers attending executive programs at the University of Michigan Business School (Michigan). These managers attended one of the three interdisciplinary, general management programs offered by Michigan at its Executive Education Center: (1) The Executive Program, the school’s flagship program for senior managers

Managers who attended these programs completed detailed evaluations. In two of the programs (The Executive Program and Energy Services Executive Program) evaluations were completed after the participants returned home from the program, thus giving them time to reflect on the value of program topics in their work environment. Participants in the Manufacturing Executive Program completed evaluations at the conclusion of each session during the program.

The evaluations contain statements about the quality of teaching in the programs and, in addition, one statement about the value of each topic: “The topic was of value to me personally.” The senior managers’ evaluation of this statement will be presented in Part II. This data provides insights into the topics considered valuable by senior managers from a mixture of functions and industries (The Executive Program), from one industry (Energy Services Executive Program), and from one function (Manufacturing Executive Program). One of the most striking results is that these managers conclude that law is an especially valuable topic. The commentary, in Part III will focus on six forces that have increased the relative importance of law among business school degree courses in the core curriculum. Before turning to the data and commentary, the three programs are described in Part I.


The University of Michigan Business School first offered executive education programs in 1936. During the time period when the data presented here was gathered, the school’s Executive Education Center was the market share leader for public executive programs, according to data in Bricker’s International Directory(2) of university-based programs.

The school also receives high rankings for the quality of its programs. In 1991, in the first comprehensive survey of both participants and corporations, Business Week gave Michigan its top ranking.(3) In 1997 and 1999, when Business Week repeated its survey of companies (but did not survey participants), Michigan ranked second to the Harvard Business School.(4)

Michigan’s three interdisciplinary, general management programs offered at its Executive Education Center are described below. These programs require applications from participants, who are admitted on the basis of proven maturity, intellectual ability, and an ability to contribute to the learning of others. Following each program description, the role of law in the program is discussed.

The Executive Program

The Program and Participants

The Executive Program, inaugurated in 1954, is a four-week program designed to enhance the participants’ ability to make strategic decisions and to provide them with a global, interdisciplinary perspective on the issues facing senior managers. The program includes eight subjects: (1) corporate strategy

According to data from the 1999 edition of Bricker’s International Directory,(5) the participant profile is:

Gender 89% men, 11% women

Age Range 36-62 (average 46)

Salary Range $65,000-$400,000 (average $149,760)

Organizational Size 53% (10,000 or more employees)

28% (1,000 – 9,999 employees)

19% (less than 1,000 employees)

Almost half (49%) of the participants are from manufacturing firms, 32% from the service sector, and the remainder from governmental and other organizations. The participants are geographically diverse, with 60% from North America, 19% from the Pacific Region, and 16% from Europe. But in a global economy, it is increasingly difficult to classify managers by country. It is not unusual to find managers who match the profile of this recent participant: a citizen of Belgium who works for a U.S. company in Germany and is awaiting transfer to Singapore. Several functions are represented in the program:

General Management/Administration 57%

Technical 15%

Finance/Accounting 9%

Operations/Production 8%

Marketing/Sales 8%

Human Resources 3%

In addition, the program often includes one or two corporate attorneys or participants who hold a law degree but are currently in senior management positions.

Outside of class the participants work in rotating study groups to analyze cases, complete computer-based simulations, and prepare presentations for class. In creating the study groups, diversity is emphasized, and group members typically represent a mixture of nationalities, functions, industries, and companies.

The Legal Environment

Sessions on the legal environment in The Executive Program are designed to provide participants with an overview of substantive law (both public and private) and procedural law. Specific topics include: law and ethics, contracts, torts, product liability, securities regulation (emphasizing the impact on decision-making and corporate communications), employee rights (including wrongful discharge, sexual harassment, and workers’ compensation), and dispute prevention, management, and resolution (including the use of decision tree analysis to make legal decisions(6)).

Two themes are emphasized in covering each topic: (1) the necessity for managers in today’s global economy to think globally about the law and (2) the importance of using the law for competitive advantage.

For example, the coverage of product liability begins with a briefing on the contract (express and implied warranty) and tort (negligence and strict liability) theories that arise in product liability litigation. The globalization of product liability law is then emphasized–so that participants realize that, even if strict liability for product defects has not yet reached their countries, it is likely that their products will be sold and used in strict liability jurisdictions.(7)

Opportunities for competitive advantage resulting from product liability include strategic, organizational, and operational approaches. A strategic decision to add new product lines should be based on an analysis that incorporates the rationale for strict liability–i.e., an analysis of whether the company is in a position to pass on liability costs to customers by raising prices.(8)

Organizational issues include the possibility of isolating product liability risks through the formation of independent subsidiaries to manufacture and market the product. This topic is of great interest to participants, many of whom manage subsidiaries, and discussion inevitably leads to the criteria for piercing the corporate veil.(9)

Coverage of operational issues focuses on the possible elimination of contract liability through warranty disclaimers (with emphasis on the resulting tension between law and marketing) and on the mitigation of negligence liability through a product review process that includes a rigorous analysis of a product’s foreseeable uses, redesign of the product if necessary, and the development of warnings.(10) The ability of consumers to recover for injuries resulting from their use of a product beyond its intended purpose causes considerable unrest among participants. But this unrest also creates an opportunity to challenge the participants’ attitude toward the law by emphasizing that, through their “misuse” of products, consumers are providing information that customer-focused, market-oriented companies should find valuable in developing new products that meet customer needs. Companies that incorporate this information into their new product development processes create an opportunity for competitive advantage over firms that deride the ignorance of consumers who use products in an unintended manner.

Energy Services Executive Program

The Program and Participants

The Energy Services Executive Program originated in 1951, when it was called the Public Utility Executive Program. The program was a four-week executive program until 1997, when it was shortened, redesigned and renamed Competing in Energy Services. The data in Part II is drawn from the last five years (1992-96) that the program was offered as a four-week executive program.

The design of the Energy Services Executive Program was similar to The Executive Program, except that the focus was on unique challenges facing the utility industry in an era of deregulation and competition.(11) The core subjects in the program were strategy, strategic marketing (a core subject since 1994), leadership and change, the legal environment, accounting, financial management, information technology, and communication. The program also included a computer-based management simulation that required participants to implement strategic decisions within the context of the utility industry.

Bricker’s International Directory(12) does not provide information regarding the Energy Services Executive Program. However, a participant profile for the 1992 program can be constructed using data from an article in Public Utilities Fortnightly:(13)

Gender 89% men, 11% women

Average Age 40

Average Salary $86,452


Production/Operations 33.0%

General Management/Administration 31.4%

Finance/Accounting/Tax 7.8%

Law 3.9%

Marketing/Sales 3.9%

Research and Development 2.0%

Other 17.6%

In a typical program only one or two participants were from outside the United States.

The Legal Environment

The structure and sequence of legal environment topics in the Energy Services Executive Program were similar to the Executive Program, except that utility industry cases and examples were used and certain topics (such as crisis management(14)) were covered in greater depth. The program also included a module on negotiation strategies and a simulation entitled “Law and Ethics Challenge,” based on a game called The Work Ethic that was developed by Citicorp for in-house ethics training.(15)

The coverage of product liability illustrates the use of utility industry examples in the Energy Services Executive Program. As in the Executive Program, the program included a legal briefing on the contract and tort theories that arise in product liability litigation. Globalization of product liability law and opportunities for competitive advantage were also covered.(16) These topics have come to the forefront in the wake of deregulation, as utility companies move aggressively into other countries(17) and develop new product lines with high product liability risk, such as air traffic control equipment, appliance parts, farm equipment, and compressors.(18) Beyond these general topics, discussion focused on product liability issues that are unique to the utility industry, such as the legal liability–and resulting corporate strategy–associated with electromagnetic fields.(19)

Manufacturing Executive Program

The Program and Participants

The Manufacturing Executive Program, which has been offered since 1987, is a two-week program designed for senior line managers in manufacturing. The program emphasizes both day-to-day manufacturing issues and linkages between manufacturing and various functions within the firm.

The main subjects covered in the program are strategy (general and manufacturing), accounting, the legal environment, marketing, and human resources. The program also includes topics that integrate several areas, such as manufacturing and the environment, and new product development.

The participant profile from the 1999 edition of Bricker’s International Directory(20) is:

Gender 97% men, 3% women

Age Range 37-49 (average 43)

Salary Range $49,999-$150,000 (average $125,000)

Organization Size 45% (10,000 or more employees)

55% (1,000-9,999 employees)

Most (86%) of the participants are from North America and the rest are from Europe (8%), Latin America (4%) and Asia (2%). As might be expected, 92% of the participants are from manufacturing firms, and 100% are from the operations/production function.

The Legal Environment

The structure and sequence of legal environment topics are similar to the Executive Program, except that two topics especially important in manufacturing–product liability and workers’ compensation–are covered in greater depth. To make room for this coverage, other topics (for example, securities regulation) are reduced or eliminated.


As described in Part I, participants in the three programs have the following characteristics:

International Function- Industry-

Participant Specific? Specific?


The Executive Program Yes No No

Energy Services No (mainly No Yes

Executive Program U.S.)

Manufacturing Executive No (mainly Yes No

Program U.S.)

The senior executives in these three programs evaluated the statement “The topic was of value to me personally” for each topic on a range from “strongly agree” (5) to “strongly disagree” (1). As noted previously, participants in The Executive Program and the Energy Services Executive Program completed their evaluations after returning to work. Of the 823 senior managers who attended these two programs during the five-year periods included in the data analysis,(21) 573 returned evaluations, for a response rate of 70%. During the five-year period from which data is drawn from the Manufacturing Executive Program,(22) 329 senior managers attended the program. Because the evaluations in this program are completed at the conclusion of each session during the program, evaluations are received from close to 100% of the participants.

The “value” statement calls for an evaluation of the topic, not the quality of instruction. One would expect the quality of instruction to influence the value of a topic. However, out of a total of twenty-two topic evaluations listed below for the three programs, the value of a topic had the same ranking as the “overall excellence” of the instructor only five times. In an extreme example from one of the program offerings, the topic with the lowest value score was taught by an instructor with the best “overall excellence” score.

The lack of greater direct correlation between topic value and instructor excellence might be explained by the fact that the quality of instruction in the three programs is uniformly high. For instance, instructors teaching accounting, corporate strategy, finance, information technology, and operations management in these programs have been selected by degree program students for “best teacher” awards and several of the instructors have been selected by national publications as “top ten” professors in the country.(23)

The average “value” scores for the Executive Program for the years 1994-98 are listed below. During this time period, the program was offered either two or three times a year, for a total of twelve programs.

1. Corporate Strategy 4.88

2. OB/HRM(24) 4.75

3. Information Technology 4.67

4. Finance 4.59

5. Law 4.53

6. Marketing 4.31

7. International Business 4.22

8. Accounting 4.11

The Energy Services Executive Program “value” scores below are for the years 1992-1996, the last five years that the four-week program was offered on an annual basis. Following 1996, the program was renamed, redesigned, and shortened.

1. Law 4.83

2. OB/HRM 4.81

3. Finance 4.81

4. Accounting 4.41

5. Information Technology 4.36

6. Corporate Strategy 4.27

7. Communication 4.20

8. Marketing 3.75

The Manufacturing Executive Program “value” scores below cover the years 1994-98, when the program was offered two times a year, for a total of ten programs.

1. Law 4.65

2. Operations Management 4.61

3. OB/HRM 4.56

4. Corporate Strategy 4.45

5. Accounting 4.43

6. Marketing 4.27

An OB/HRM faculty member in the Manufacturing Executive Program conducted a separate survey that asked participants in four offerings (from Fall, 1996 through Spring, 1998) to rate the importance of four sets of issues “to the success and survival of your organization” on a range from “absolutely important” (10) to “not important” (0).(25) The averages for these issues over the four programs are:

1. Quality 8.48

2. Financial and Legal 8.29

3. People 8.0

4. Process 7.6

The average evaluations of “value” by senior managers attending the three programs are as follows. Five subjects–OB/HRM, law, corporate strategy, accounting, and marketing–were taught in all three programs. The source of scores for the other topics is indicated in parentheses: The Executive Program (EP), Energy Services Executive Programs (ESEP), and Manufacturing Executive Program (MEP).

1. OB/HRM 4.71

2. Finance (EP & ESEP) 4.70

3. Law 4.67

4. Operations Management (MEP) 4.61

5. Corporate Strategy 4.53

6. Information Technology (EP & ESEP) 4.52

7. Accounting 4.32

8. International Business (EP) 4.22

9. Communication (ESEP) 4.20

10. Marketing 4.11


Because managers are often perceived as having negative attitudes toward the law, one of the most striking results in the data presented in Part II is the high ranking given to law by the 902 senior managers (out of a total 1152 participants) who completed evaluations of the three programs. This ranking begs the question: Why is learning about the legal environment of business of such great value to experienced managers in today’s business world?

The answer to this question might be embedded in a fundamental insight attributed to John Seeley Brown, the Chief Scientist at Xerox Corporation: “Managers don’t make products

The significance of law accelerates when managers move to senior positions, where their policy decisions carry important legal implications and they must “make sense” of the law in communications to the media and to a variety of stakeholders–such as stockholders, the board of directors, employees, regulators, customers, and creditors.(29) As noted in an evaluation by a participant in the Energy Services Executive Program: “The legal area is so important … as we move up in our respective companies

The importance of law to business was noted in two landmark studies, both published in 1959, that have shaped business education over much of the second half of the 20th century. One study, The Education of American Businessmen, divides required MBA courses into two broad categories: (1) the foundation areas and tools of analysis and (2) functional areas of decision-making and managerial policy.(31) (See Figure 1.) The study recommends placing “heavy weight on preparation in the four foundation areas–quantitative methods, economics, law and public policy, and psychology-sociology,” including two required three-credit courses on law and regulation.(32) The study also concludes that, beyond technical details of the law, the study of business law at the undergraduate level “would be particularly useful in developing the student’s capacity for analytical investigation and for responsible action in a social setting.”(33)


The other study, Higher Education for Business, also includes recommendations for MBA and undergraduate courses. At the MBA level, the study emphasizes that “[w]hat is needed is a broad treatment of the kinds of legal institutions that help shape the environment of business.”(34) The study suggests that required undergraduate law courses “might seek to familiarize the student with the fact that all business must be conducted within the framework of the law, that such a legal environment forms the basis for rules of conduct, … and that a broad comprehension of the law is essential in setting business policy…. Such a course might include topics such as the following: the background, importance, and role of law in our society … [and] private property and contract as basic concepts of a free enterprise system….”(35)

In the years following publication of these two major studies, the role of law in business has accelerated. As Chayes, Greenwald and Wing conclude in an article published in the Harvard Business Review:

A decade of growth in the scope, nature, and complexity of government

regulation has catapulted attorneys into daily business operations to an

unprecedented degree. The equally rapid rise in consumer, shareholder,

employee, and competitor litigation has forced prudent managers to include

legal advice as an essential element of business planning and decision


As the authors observe, government regulation plays an important role in business operations According to William Seidman, former chair of the Federal Deposit Insurance Corporation: “Like it or not, the private sector executive may spend one third or more of his time dealing with the government. In large part, the executive has had to learn this part of his duties by experience, olden painful.”(37)

The authors are also correct in emphasizing the rise in litigation as a factor necessitating legal advice in business planning and decision making.(38) The increase in litigation has been especially prominent in employment law, an area of the law that touches every business school alumni from the moment of graduation.

As indicated by the following analysis from a federal report, the number of employment law cases filed in federal district courts has increased dramatically in recent years when compared with business and personal injury litigation:(39)

Business Litigation Personal Employment

(Fortune 1000 Injury Law


1971 3,153 20,517 4,331

1991 6,954 23,959 22,968

Increase 121% 17% 430%

Given the importance and complexity of personnel issues, it is not surprising that both Organizational Behavior/Human Resource Management and Law are ranked among the top three most valued subjects by senior managers.

Although regulation and litigation are permanent and important fixtures on the legal landscape, there are actually six forces that have propelled legal issues to the forefront of management concerns. The four forces beyond litigation and regulation–globalization, entrepreneurship, technology and compliance–gained momentum in the closing decades of the 20th century and are accelerating in the 21st century. (See Figure 2.(40))


The first of these forces, globalization, accentuates the importance of law on three dimensions. First, law provides a framework for addressing the layers of cultural, economic, and regulatory complexity inherent in international business transactions. For instance, with funding from the Department of Education, the University of Colorado at Denver surveyed 1,500 managers to determine what they wanted to learn about international business topics. The survey results indicated that “Legal Considerations in International Trade” was the topic most relevant to their firms.(41)

Second, law plays an important role in globalization because the law itself is being globalized–thus creating an increasingly level playing field for business and new opportunities to use the law for competitive advantage. Contract law (Convention on Contracts for the International Sale of Goods(42)), product liability,(43) securities regulation,(44) environmental law,(45) the law of sexual harassment(46) and antibribery law(47) are examples of substantive areas of the law that have been globalized in recent years.

Beyond substantive law, six features of the legal system at one time differentiated the United States from the rest of the world: (1) the use of juries in civil suits, (2) the “American rule” governing allocation of attorney fees and court costs, (3) punitive damages, (4) discovery, (5) contingency fees, and (6) class actions. Class actions,(48) discovery(49) and contingency fees(50) are now being exported to other countries, while punitive damages(51) and the “American rule”(52) have been subject to significant statutory reform in the United States, thus closing the legal gap between the United States and other countries.

A final dimension of globalization, the emergence of market economies in former Communist countries, has created the realization that legal institutions are critically important to the success of market systems. As noted in a Wall Street Journal editorial:

[In] setting up `market systems’ in former Communist lands, one thing

should be kept in mind: It cannot be done without first creating a legal

system that protects the right of all individuals to hold, buy or sell

property and without corresponding legal protections for the contracts

through which those transactions are conducted.(53)

Entrepreneurship, the second relatively new force that has increased the importance of law, has a variety of meanings. To some it is associated with starting a business, while to others the term is much broader. The Harvard Business School, for instance, “emphasizes a behavioral model of entrepreneurship, defining it as the pursuit of opportunity beyond the resources currently controlled and, further, as a way of managing.”(54)

Regardless of its precise meaning, it is clear that, after years of restructuring and downsizing in large corporations, there is increasing interest among business school graduates in operating their own businesses. An understanding of the law is especially important to entrepreneurs because the law touches every aspect of a new venture, from legal issues that arise in leaving a current employer to going public.(55) It is not surprising that an interview with David Packard, co-founder of Hewlett-Packard and one of the world’s most successful entrepreneurs, revealed that “Mr. Packard took courses on management accounting and business law at Stanford’s Graduate School of Business — the two most valuable courses he took in his academic career, he says.”(56)

It is likely that interest in the study of entrepreneurship will affect the content of business law courses. In their 1959 report, Higher Education for Business, Gordon and Howell emphasized that “[t]his is the age of the large firm, of specialized staff services, of a growing emphasis on administration.”(57) This report led to the development of courses on the legal environment of business that emphasized the broad legal framework in which business operates instead of traditional “tools” found in specific areas of law, such as intellectual property and contracts.(58) In today’s entrepreneurial environment, there is increasing emphasis on downsized administrative staff, decentralization, speedy decision-making, the breakdown of silos that once separated staff, and the pursuit of opportunities with limited legal resources. Even corporate lawyers have come to the realization that most of their traditional responsibilities can be performed more efficiently by non-lawyers.(59) As a result, successful managers need legal tools to complement their general understanding of the legal environment of business. Students who acquire these tools — and an understanding of the theories on which these tools are based — in business law courses will be better equipped to achieve success in entrepreneurial ventures.

Technology, yet another emerging force that has given law greater visibility, has ignited an explosion of legal issues that lie at the heart of a dramatic transformation of the global economy. Technology brings into play a wide variety of legal topics in unique and innovative settings. A review of syllabi for courses on cyberspace/internet law(60) illustrates the range of legal concerns relating to technology: communications (e.g., electronic records, information security, and transborder data flows), competition law, consumer protection, criminal law, employment law (e.g., harassment and privacy), financing (e.g., electronic payments, off-shore banking, secured transactions, and securities regulation), government regulation, intellectual property (copyrights, digital property rights, domain name usage, licensing, patents, trade secrets, and trademarks), litigation and alternative dispute resolution (e.g., dispute resolution in cyberspace, conflicts of law, and jurisdiction), marketing law, on-line contracts, and tort law (e.g., defamation and product liability). Just as technology touches every aspect of commerce, these ubiquitous legal issues envelop technology with a seamless web that requires the attention and understanding of every business school graduate.

Compliance, the final force that has propelled law to the forefront of management concerns, reflects the other five forces but also has a life of its own. Although many companies historically have had compliance programs in one form or another, the enactment of the Federal Sentencing Guidelines in 1991 accelerated interest in these programs. For example, a company that illegally overcharged customers, and had already repaid $13.7 million in restitution, was fined $6.85 million before the sentencing guidelines were enacted. Had the sentencing guidelines been in effect, the fine could have been as high as $54.8 million, depending on the degree of compliance.(61)

Compliance programs have clearly raised the visibility of law in U.S. companies and there is evidence that compliance is becoming a global concern. U.S. guidelines can be used in sentencing global companies, as Daiwa Bank learned when it was fined $340 million for failing to make immediate disclosure of $1.1 billion in losses incurred through unauthorized trading by one of its employees.(62) And there is evidence that the U.S. law is migrating to other countries.(63)

The net result of the six forces (regulation, litigation, globalization, entrepreneurship, technology, and compliance) is that the legal environment plays an increasingly important role in the success of the firm. As noted in the Porter-McKibbin report, the most recent comprehensive study of management education, MBA programs should give greater “attention to the external environment–government relations, societal trends, legal climate, international developments, among other areas–for the obvious reason that these events `outside’ the organization are increasingly penetrating into the internal operations of the firm and affecting its core efficiency and effectiveness.”(64)

In addition to elevating the visibility and importance of law, the four forces that have gained momentum in recent years–globalization, entrepreneurship, technology and compliance–have undoubtedly altered managerial attitudes, leading to a greater appreciation of the value of law. The forces that dominated the 1970s and 1980s, regulation and litigation, were perceived by many managers as obstacles to business success. While these two forces are still potent, the four emerging forces emphasize the importance of law as an enabler that allows firms to globalize, to develop entrepreneurial ventures, and to transform commerce through technology advances. Even compliance has positive connotations for firms that have adopted an integrity strategy that encourages values creation as a complement to value creation.(65) Firms that understand and marshal these forces have the greatest opportunity to achieve the operational effectiveness that is essential to competitive advantage.(66)

Given the high value of law, business schools attempting to develop successful managers in today’s global business world should offer at least one core course that enables students to recognize and analyze the legal implications of business decisions–and to understand and implement the advice of legal counsel in situations where the issues are significant enough to justify the costs (both time and financial) associated with seeking professional advice. Unfortunately — for both individuals and their companies — many managers lack even the most rudimentary understanding of law and the law function. For instance, a survey by Paul Rice of American University’s Washington College of Law revealed that over fifty-five percent of responding corporate executives from Fortune 100 companies “erroneously believe that corporate counsel personally represent them on matters relating to their corporate responsibilities that could give rise to personal liability.”(67)

In teaching the core course, business law professors must be prepared to address the legal issues that their students will confront in the technology-driven, global world of business. Some business schools have attempted to supplement their regular business law faculty with part-time faculty from the local legal community. In today’s world, a law course taught by a local practitioner from the perspective of a local jurisdiction is inadequate–and possibly detrimental–to the careers of students intent on creating shareholder value in a global economy where e-commerce is dramatically changing the business and legal landscape.(68)

Development of the business law core course requires full-time business law professors to be increasingly diligent in generating research on the legal issues that shape entrepreneurship and technological innovation and that increase understanding of the global legal environment of business.(69) And the sixth force, compliance, should compel business law professors to link legal and ethical analyses. In fact, as a result of the natural affinity between law and ethics,(70) at many schools business law faculty have responsibility for teaching business ethics courses.(71)

Professor Lorie of the University of Chicago once observed that, when compared with business, business schools have the greatest comparative advantage in teaching basic disciplines, including law.(72) While business students rarely major in legal studies,(73) law effectively is a minor for every future manager because it pervades business decision-making and operations. Law courses are universally required in undergraduate business programs and, according to a study by Boren, they are also required in most MBA programs.(74) However, the design of a business school core curriculum is a complex processes fraught with the risk that political concerns will outweigh student needs. In addition, because law brings a different voice to the business school, faculty trained in other disciplines may not entirely appreciate the role of law in enabling firms to achieve competitive advantage. For business schools that choose to rise above political concerns and misunderstandings about the significance of law, the message from the data presented in this commentary is clear. Senior managers from a variety of industries, companies, functions and countries conclude that law ranks among the three most valuable subjects in the core curriculum.

(1) Debra E. Blum, Business Schools Rush to Revise Curriculum in Response to Critics and Competition, CHRON. HIGHER EDUC., Dec. 4, 1991, at A23, A29.

(2) BRICKER’S INTERNATIONAL DIRECTORY is published annually by Peterson’s, an educational information/communication company. Data from Bricker’s is available to subscribers on-line at Bricker’s International Directory (visited July 29, 1999) <>.

(3) John A. Byrne, Back to School, BUS. WK., Oct. 28, 1991, at 102, 104-5.

(4) Jennifer Reingold, Corporate America Goes to School: B-Schools are Hustling to Meet the Demand for Executive Education, BUS. WK., Oct. 20, 1997, at 66, 72

(5) Supra note 2. Because of a lag between data collection and publication, the 1999 edition summarizes data from 1997 programs.

(6) See George J. Siedel, Interdisciplinary Approaches to Alternative Dispute Resolution, J. LEGAL STUD. EDUC., 141, 154-61 (1992).

(7) In 1998, France became the final Member State to implement a 1985 Commercial Directive (85/374) on liability for defective products. For a summary of the French product liability law, see The Law of May 19, 1998 on Liability for Defective Products (visited July 29, 1999) <>. A number of Pacific Rim countries have enacted product liability legislation, including Australia, China, Japan, and Taiwan. George Menzies, Variations in Damages, INT’L. BUS. LAW., Feb. 1998, at 75.

(8) “It [product liability] is not a `deep pocket’ theory but rather a `risk-bearing economic’ theory. The assumption is that the manufacturer can shift the costs of accidents to purchasers for use by charging higher prices for the costs of products.” W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS [sections] 98, at 693 (5th ed. 1984).

(9) For example, in Arch v. American Tobacco Co., Inc., 984 F. Supp. 830 (E.D. Pa. 1997), the plaintiffs “impliedly suggest that BAT [the defendant parent corporation] created B&W [its subsidiary] to shield itself from potential tobacco litigation liability and yet still benefit from the enormous profits that cigarette sales have generated in Pennsylvania.” Id. at 839. The court decided that BAT was protected from liability because, among other reasons, “the possibility that a plaintiff may have difficulty enforcing a judgment against a defendant is not enough to justify piercing the corporate veil.” Id. at 840 (citing Skidmore, Owings & Merrill v. Canada Life Assurance Co., 907 F.2d 1026, 1028 (10th Cir. 1990)). For discussion of veil piercing theory as it relates to employee benefits and environmental law, see Dana M. Muir & Cindy A. Schipani, The Intersection of State Corporation Law and Employee Compensation: Is It Curtains for Veil Piercing?, 1996 U. ILL. L. REV. 1059

(10) For a discussion of recommended procedures, see Principles of Safety Management, OUTSIDE COUNS., Winter, 1997, at 7.

(11) See, e.g., The Electricity Business: Power to the People, ECONOMIST, Mar. 28, 1998, at 61

(12) Supra note 2.

(13) Herbert W. Hildebrandt, Class of `92, PUB. UTIL. FORT., Feb. 1, 1994, at 27-30. The data is drawn from questionnaires completed by 57 executives who attended the 1992 program.

(14) Utility companies became especially concerned about crisis management after the accident at Three Mile Island. See Kenneth C. McKee, The Lessons of Three Mile Island, PUB. UTIL. FORT., Nov. 22, 1990, at 15.

(15) Citicorp enlisted the assistance of several professors in an attempt to create a generic version of The Work Ethic. Letter from Katherine A. Nelson, Vice-President of Citibank, to George Siedel (Feb. 6, 1990). In the Energy Services Executive Program, banking scenarios used in the original game were replaced with utility company scenarios. These scenarios are based in part on Sally Seymour, The Case of the Willful Whistle-Blower, HARV. BUS. REV., Jan.-Feb. 1988, at 103.

(16) Supra text at notes 7-10.

(17) See, e.g., Richard J. Pershing, Expanding Abroad, PUB. UTIL. FORT., July 1, 1993, at 22

(18) Elizabeth A. C. Murray & Malcolm J. Closterman, How Utilities Are Becoming New Conglomerates, PUB. UTIL. FORT., Aug. 7, 1986, at 11, 13-14.

(19) For example, many courts hold utility companies liable when the fear of electromagnetic fields (EMFs) diminishes property values, even when the fear is unreasonable. Elizabeth Thomas & Jill Hanson Reinmith, EMFs: The Newest Real Estate Hobgoblin, PROB. & PROP., Nov.-Dec. 1993, at 19. In 1996, a jury for the first time awarded damages in an EMF personal injury lawsuit. Lori A. Burkhart, Jury Awards EMF Damages, PUB. UTIL. FORT., Jul. 1, 1996 at 13.

(20) Supra notes 2, 5.

(21) These periods are 1994-98 for The Executive Program and 1992-96 for the Energy Services Executive Program.

(22) The years are 1994-98.

(23) See, e.g., Lori Bongiorno, The Professor Is In, BUS. WK., Oct. 25, 1993, at 105.

(24) Organizational Behavior and Human Resource Management.

(25) This data was provided by Jeffrey R. Edwards, currently a Professor of Management at the Kenan-Flagler Business School, University of North Carolina–Chapel Hill.

(26) John Seeley Brown has authenticated the quotation. E-mail message from Janice Heiler, Assistant to John Seeley Brown at Xerox Corporation, to George J. Siedel (June 8, 1999) (on file with author).

(27) A survey of senior business executives by Opinion Research Corporation concluded that the impact of law and regulation led the list of their concerns for the 1980s. O. Lee Reed, Editorial, 23 AM. BUS. L.J. xi (1985).

(28) O. Lee Reed et al., The Status of Law in Academic Business Study: 1998 Report of the President’s Task Force (visited July 22, 1999) <>.

(29) According to Benjamin W. Heineman Jr., Senior Vice President of General Electric:

More and more managers are being asked to be sensitive to compliance and

the political and public dimensions of everything that they do…. People

who lead corporations need to have an appreciation for the whole public

side of their jobs as they go higher and higher up the ladder. Law and

politics … [are] a significant part of any corporate entity’s life.

Interview with Benjamin W. Heineman Jr., ACCA DOCKET, Fall 1994, at 20, 26.

(30) Paul A. Allen, Introduction to HOW TO KEEP YOUR COMPANY OUT OF COURT 12 (Paul A. Allen ed., 1984).

(31) FRANK C. PIERSON ET AL., THE EDUCATION OF AMERICAN BUSINESSMEN: A STUDY OF UNIVERSITY-COLLEGE PROGRAMS IN BUSINESS ADMINISTRATION 266-67 (1959). The functional areas are production, finance, marketing, and personnel. Accounting is included with quantitative methods.

(32) Id. In 1956, Professor James Lorie of the University of Chicago Graduate School of Business wrote an essay that became the major statement of the educational philosophy known as the Chicago model. Professor Lane emphasizes the foundation areas:

A university has its greatest comparative advantage in teaching underlying

scientific knowledge and procedures…. It has its greatest advantage in

teaching such basic disciplines as mathematics, statistics, accounting,

economics, law, psychology, and sociology

teaching the current practice, techniques, and language of business.

Conversely, business itself is relatively poorly equipped to teach

underlying scientific knowledge and is relatively well equipped to teach

the current practices in the business community.

The 190/MBA Program, Graduate School of Business, The University of Chicago (unpaginated, undated catalog). See also A Revolutionary Philosophy: The Chicago Approach to Business Education (visited July 22, 1999) <>.

(33) Pierson, supra note 31, at 213.


(35) Id. at 205. Twenty years earlier, William H. Spencer, the dean of the University of Chicago Business School, expressed a similar philosophy. He noted that the study of business law helps students visualize “the structure of modern society,” and provides an understanding of the legal concepts that are critical to the formulation of policy and the administration of business. WILLIAM H. SPENCER, CASEBOOK OF LAW AND BUSINESS viii (1939). See also Larry Di Matteo, Managing the Legal Factor: The Legal Implications of Business Decision Making, 4 J. LEG. STUD. BUS. 165, 175 (1995).

(36) Antonia Handler Chayes et al., Managing Your Lawyers, HARV. BUS. REV., Jan.-Feb. 1983, at 84.

(37) The Washington Campus, History and Mission (visited July 22, 1999) <>). The Washington Campus is a consortium of 17 business schools that offers programs on the public policy process to MBA students. Twenty-five years after publication of the book he co-authored in 1959, HIGHER EDUCATION FOR BUSINESS, supra note 34, James E. Howell observed that business schools now “know how to train young people to `read the dials’…. [But internal problems] are no longer the only focus of management training…. American management is now turning its focus to affairs that lie outside the firm.” J. Clayburn La Force & Rebecca J. Novelli, Reconciling Management Research and Practice, CAL. MGMT. REV., Spring 1985, at 74, 77-78 (quoting James E. Howell). La Force and Novelli conclude that “[a] complex convergence of political, legal, technological, and organizational issues represent a rapidly emerging and formidable set of problems which will continue to modify the external environment of most business enterprises and will create the need for concurrent internal modifications in management practices and training.” Id at 79.

(38) “Just like employees, employers face hazards in the workplace. Many of these are legal risks. If ignored, they can lead to a manager’s worst nightmare — lawsuits and payment of damages, ill will, government fines, even a prison term or company collapse.” Barbara Buell, A Manager’s Worst Nightmare, STAN. BUS., June 1999, at 12. Firms, of course, also use litigation for competitive advantage. Litigation has been called the fifth “P” of marketing (for plaintiff) — to go with product, price, promotion, and placement. Dennis Kneale, Tylenol, the Painkiller, Gives Rivals Headaches in Stores and in Court, WALL ST. J., Sept. 2, 1982, at 1.

(39) Commission on the Future of Worker-Management Relations, Fact Finding Report 134 (1994).

(40) This figure is derived from a diagram provided by Professor Ross D. Petty, who holds the Roger A. Enrico Term Chair at Babson College.

(41) Letter from John C. Ruhnka, Professor of Management, University of Colorado at Denver, to George J. Siedel (July 11, 1990), with enclosure of survey results (on file with author).

(42) For a list of the contracting states, see Albert H. Kritzer, CISG Table of Contracting States (visited April 25, 2000) <>. Contract law is especially important in the new global order. “The defining document of the cold-war system was the Treaty. The defining document of the globalization system is the Deal.” Thomas L. Friedman, A Manifesto for the Fast World, N.Y. TIMES, Mar. 28, 1999, at [sections] 6 (Magazine) at 40, 42.

(43) See supra note 7.

(44) See, e.g., Richard S. Biegen et al., Countries Strengthen Insider Trading Laws, NAT’L. L.J., Nov. 13, 1995, at C19.

(45) See, e.g., James O. Pagliaro & Brody L. Green, E.C. Directive: Proposal Is Based on CERCLA, NAT’L. L.J., Feb. 10, 1992, at 27

(46) Lynn Sharp Paine & Samantha K. Graff, Note on the Law of Sexual Harassment (Harvard Business School, 1998). Company policies also contribute to uniformity. For instance, at Colgate, “… there are two company-wide policies that won’t be adapted to individual culture: sexual harassment and apartheid.” Charlene Marmer Solomon, Global Operations Demand that HR Rethink Diversity, PERSONNEL J., July 1994, at 40, 42.

(47) See, e.g., Lucinda A. Low & Timothy P. Trenkle, U.S. Antibribery Law Goes Global, BUS. L. TODAY, July-Aug. 1999, at 14.

(48) “Class Actions, or multi-party cases, are now fast becoming part of the legal landscape around the world.” Colin Loveday, Multi-Party Rulings: U.S., Canada, Australia and the UK, INT’L. BUS. LAW., Feb. 1998, at 77, 77.

(49) See, e.g., Karen L. Hagberg et al., New Japanese Procedure Code Expands Discovery, NAT’L. L. J., Sept. 14, 1998, at C7. In countries that are expanding their discovery systems, issues relating to attorney-client privilege become more visible. Josephine Carr, Are Your Internal Communications Protected?, ACCA DOCKET, Nov.-Dec. 1996, at 32.

(50) Contingency fee systems are not uniform. For instance, contingency fees in the United Kingdom, are limited to certain actions and there are caps on the amount of the fee. Lisa Stansky, The Changing of the Guard, A.B.A. J., June 1996, at 72. In Japan, a plaintiff pays the attorney a retainer in addition to the contingency fee, pursuant to schedules established by the Japan Federation of Bar Associations. Mark A. Behrens & Daniel Raddock, Japan’s New Product Liability Laws: The Citadel of Strict Liability Falls, but Access to Recovery Is Limited by Formidable Barriers, 16 U. PA. INT’L. BUS. L. 669, 709 (1995).

(51) See, e.g., Martha Middleton, A Changing Landscape: As Congress Struggles to Rewrite the Nation’s Tort Laws, the States May Have Already Done the Job, A.B.A. J., Aug. 1995, at 56

(52) The English “loser pays” rule has been incorporated into a large number of federal and state statutes. David K. Voight, Remove Incentives to Litigate, A.B.A. J., May 1994, at 81. Not surprisingly, Americans are ambivalent about the English rule. According to a U.S. News & World Report poll, 85% of Americans think that if someone sues you and loses, the loser should pay your legal costs, while only 44% think that if you sue someone and lose you should pay the winner’s legal costs. Stephen Budiansky et al., How Lawyers Abuse the Law, U.S. NEWS & WORLD REP., Jan. 30, 1995, at 50, 52.

(53) George Melloan, Coase Was Clear: Laws Can Cure or Kill, WALL ST. J., Oct. 21, 1991, at A21. See also Barry Metzger, Law and Development: An Essential Dimension of Governance, INT’L. BUS. L., July-Aug. 1998, at 294.

(54) This quotation is from the Harvard Business School web site Entrepreneurship (visited July 22, 1999) <>.

(55) See, e.g., Table of Contents in CONSTANCE F. BAGLEY & CRAIG E. DAUCHY, THE ENTREPRENEUR’S GUIDE TO BUSINESS LAW iii-vi (1998).

(56) Hewlett-Packard Chairman Built Company by Design, Calculator by Chance, The AMBA EXEC., Sept. 1997, at 1.

(57) Supra note 34, at 205.

(58) In topic preference surveys of corporate executives, contract law is usually one of the top two preferred topics. See Michael W. Little & William H. Daughtrey, Jr., Survey of Virginia Executives on the Role of Law in Business Curricula, 13 J. LEGAL STUD. EDUC. 147 (1995) and the studies cited therein: John Donnell, The Businessman and the Business Law Curriculum, 6 AM. BUS. L. J. 451 (1968)

(59) As noted by the General Counsel of Motorola, Inc., “Seventy-five percent of what lawyers have traditionally done is not lawyer’s work.” An Interview with Richard H. Weise, ACCA DOCKET, July-Aug. 1995, at 26, 30. It is likely that the use of expert systems will increase the role of non-lawyers in handling traditional legal matters. For instance, at Rouse Corporation non-lawyers can use an expert system to produce a lengthy lease in one-fifth the time lawyers once needed to prepare similar leases. Reengineering in Perspective, ACCA DOCKET, Sept.-Oct. 1995, at 8, 10.

(60) See Cyberspace/Internet Law and Policy Courses (visited April 25, 2000) <>.

(61) Lynn Sharp Paine, Managing for Organizational Integrity, HARV. BUS. REV., Mar.-Apr. 1994, at 106. In this article, Professor Paine compares a compliance strategy, which often focuses on preventing legal sanctions, with an integrity strategy that encourages responsible conduct extending beyond compliance with the law. Concern about their legal and ethical responsibilities has led companies to adopt web-based compliance programs. “The payoff is a work force better educated in the law. Trained employees can be cost-effective.” Mark Voorhees, All Training, All the Time, NAT’L L.J., Jan. 24, 2000, at B8. The convergence of compliance concerns with technological capability has led Lucent Technologies to create an on-line law school, the Lucent Law School, which enables employees to meet their growing legal needs “24 hours a day, 7 days a week … from anywhere in the world.” W. Preston Granberry, The Creation of the Lucent Law School, LRN KNOWLEDGE VIEWS, October 1999, at 7.

(62) Jeffrey M. Kaplan, Why Daiwa Bank Will Pay $340 Million under the Sentencing Guidelines, ETHIKOS, May-June 1996, at 1.

(63) Corporate Sentencing Guidelines Are Working, Conference Speakers Say, 66 U.S. L. WK. 2287 (1997).

(64) LYMAN W. PORTER & LAWRENCE E. MCKIBBIN, MANAGEMENT EDUCATION AND DEVELOPMENT: DRIFT OR THRUST INTO THE 21ST CENTURY? 318 (1988). The mixture of subjects suggested by the Porter-McKibbin report is illustrated in an article on the appointment of Robert Jones as Dean of the Stanford Business School in 1999: “His responsibilities [at Wells Fargo] read remarkably like a model for an MBA core curriculum: International administration, strategy, systems planning, investment management, private banking, consumer lending, human resources, economics, government relations, legal affairs, and community development.” JanetZich, GSB Grad Robert Jones Named Eighth Dean, STAN. BUS., June 1999, at 8.

(65) Supra note 61.

(66) For discussion of the role of operational effectiveness in achieving competitive advantage, see Michael E. Porter, What Is Strategy?, HARV. BUS. REV., Nov.-Dec. 1996, at 61, 61-62.

(67) Corporate Employees Misunderstand Attorney-Client Privilege, ACCA DOCKET, Sept.-Oct. 1998, at 7. For detailed survey results see Paul R. Rice, Corporate Attorney-Client Privilege: Study Reveals that Corporate Agents are Uninformed

(68) The distraction of law practice causes other problems when practitioners are hired as adjunct professors. These problems include difficulty in preparing for class, cancellation of class, and limited availability for students outside of class. For examples of these and other problems see James C. Freund, Part-Time Professor, BUS. L. TODAY, July-Aug. 1998, at 20.

(69) Of course, the benefits of legal research extend beyond globalization.

Legal scholarship fits naturally within the intellectually diverse context

of the business school, and contributes significantly to the business

school’s research mission. Legal scholars in a business school are

positioned to make a unique contribution to the advancement of knowledge

about, and the improvement of, the legal principles and processes that are

of vital importance to business.

John R. Allison, The Role of Legal Scholarship in the Business School, 10 J. LEGAL STUD. EDUC. 131 (1992).

(70) “Law is the public’s agency for translating morality into explicit social guidelines and practices and for stipulating punishments for offenses.” TOM L. BEAUCHAMP & NORMAN E. BOWIE, ETHICAL THEORY AND BUSINESS 4 (4th ed. 1993).

Science and law are not enemies. They are man’s servants. But there is a

profound and pervasive difference. Science embraces all things material.

Law, with its legitimizing moral and ethical philosophies, embraces all

things spiritual. Hence science and law are all we have as we strive to

become what we have never been before. We need both the slide rule and the

golden rule.

Howard T. Markey, The Legal Implications of Risk, 36 AM. STATISTICIAN 256, 258 (1982).

There is growing agreement on the subjects that should be in global corporate ethics codes. The most common subjects — such as discrimination, environment, and antitrust — are intertwined with legal requirements. See RONALD E. BERENBEIM, GLOBAL CORPORATE ETHICS PRACTICES: A DEVELOPING CONSENSUS 29 (1999).

For a theoretical discussion of the three areas that shape management decision-making — legal, economic, and ethical — see Timothy L. Fort, How Relationality Shapes Business and Its Ethics, 16 J. BUS. ETHICS 1381 (1997). Fort’s tripartite dialectic provides managers with an analytical tool for resolving ethical issues.

(71) For examples of the integration of business law and business ethics at Wharton and the University of Michigan, see George J. Siedel & Thomas W. Dunfee, Business Law Research and Teaching: Two Models, ACADS. F., June 1999, at 11. The Zicklin Center for Business Ethics Research is based in the Legal Studies Department at Wharton, which is known for research on the implications of social contract theory for business ethics. See, e.g., Thomas Donaldson & Thomas W. Dunfee, Towards a Unified Conception of Business Ethics: Integrative Social Contracts Theory, 19 ACAD. MGMT. REV. 252 (1994). Ethics research at Michigan focuses on the relationship between organizational ethics and human nature. See, e.g., Timothy L. Fort & James J. Noone, Banded Contracts, Mediating Institutions, & Corporate Governance: A Naturalist Analysis of Contractual Theories of the Firm, 62 LAW & CONTEMP. PROBS. 163 (1999)

(72) Supra note 32.

(73) However, legal studies concentrations in business schools may be increasing, perhaps in response to the growing importance of law. For information regarding legal studies concentrations at Wharton, Indiana University, and California State University, Northridge, see Undergraduate Concentration in Legal Studies (visited January 8, 2000) <>

In 1999, AACSB (International Association for Management Education) reported a “dramatic decline in recent years of undergraduate student interest in business as a major and as a career.” In 1996-97, only 19.3% of bachelor’s degrees “were in business, the lowest percentage since the late 1970s.” Newsline–Fall 1999 (visited April 25, 2000) < ?year=1999&file=fldoestats_l.html>. Business schools affected by this decline would be well advised to offer a legal studies concentration. With its emphasis on decision-making under conditions of complexity and uncertainty, analytical skills, critical thinking, public policy, ethics, and effective communication, the study of law provides an attractive business school alternative for undergraduates considering majors in other schools. As the late A. Barlett Giamatti observed when he served as President of Yale University: “The law is not simply a set of forensic or procedural skills. It is a vast body of knowledge, compounded of historical materials, modes of textual analysis and various philosophical concerns. It is a formal inquiry into our behavior and ideals that proceeds essentially through language.” Yale President Calls for Legal Studies, PASSPORT TO LEGAL UNDERSTANDING, Winter 1983, at 5. Giamatti proposed the incorporation of law into undergraduate studies designed for “future lay people.” Id.

Outside the United States, law is a common major for undergraduates who intend to pursue management careers. For insurance, while Japanese law schools graduate over 35,000 students per year, fewer than 500 of these graduates become licensed lawyers. Ray August, The Mythical Kingdom of Lawyers: America Doesn’t Have 70 Percent of the Earth’s Lawyers, A.B.A.J., Sept. 1992, at 72, 73. A large cadre of law-trained managers, who understand the legal implications of their decisions, may account in part for the low incidence of litigation in Japan.

(74) See Donald L. Boren, An Analysis of Law Courses in the Masters of Business Administration Programs at AACSB Institutions, 11 J. LEGALSTUD. EDUC. 21 (1993)