Key Issues
We think the issue that has a number of companies figuratively scratching their heads is how we are going to behave in this reactive environment, which allows a level of criminal liability for chief executive officers and chief financial officers who lie or mislead the public. What level of liability is there for directors trying to behave in a manner they believe is responsible in discharging their fiduciary obligations to direct the company from the board level? The issue there is what can we do to keep ourselves from going to jail or being perceived as being worthy of jail, or how do we operate normally without this overlay from the public looking for liability and problems, and seeking retribution? To us, one of the larger issues is finding good corporate directors willing to serve in this environment of heightened scrutiny and heightened liability. How does a company get back to its core business and perform and function without spending an inordinate amount of time complying with disclosures, presentations and things not really meaningful and that do not get to the core issues the public should be concerned about: financial performance and actual operations of the business? We see that – and we would suspect that others would agree – as a very large issue.
Other issues that we are seeing now, or that we have seen over the past few years, relate to the ability to raise capital in this economic environment – and in this context we are referring to the post-Internet-bust environment. Smart, clever business plans are not getting funded because it is more difficult to get business plans funded. Fortunately, the entrepreneurial spirit will never die. It still exists in America. But it is being squelched somewhat by the fact that it is harder to get noticed, recognized and funded.
We are seeing pressure on existing companies that already have workable business plans operationally but cannot get to the next stage, because the public markets have been essentially shut down. The public offering markets, where we have spent a great deal of our time in the past, have been quiet, and it is difficult to bring initial public offerings or secondary public offerings when the stock market is trying to find its level and the public is running away from corporate America because of what they fear are exceedingly bad abuses of corporate responsibility, mismanagement, waste, greed and corruption. They are casting a negative light on good, solid companies that never had, and perhaps never will have, those problems.
The CEO, as a status, is probably at a low point. We see that as an issue. The issues that confront rank and file corporate business relate to the ability to raise money and survive, to get the proper valuations they need to grow the business, versus the other issues relating to personal liability and corporate liability or actions or inactions. It is not a friendly environment for the development of future business and for the growth that we need in America.
As we try to analyze what will become the issues in the future, we think they will involve the difficulties newly formed entrepreneurial start-up corporations will have achieving public-company status. Historically, great ideas get funded, companies grow, develop and become public companies. In the future, we see it becoming more difficult, more challenging, and less desirable, to cross that threshold from private company to public company status. We hope that at some point we will find stability and a pattern of mutual behavior where the regulatory side and the regulated side are connected in a way that operates for the benefit of the investing public. Investors need to become comfortable again with the systems, controls and laws are in place so that mom and pop can go to bed at night realizing their investment in this company is safe from corruption and scandal and that results will get an appropriate accounting treatment.
We would like to see more attorneys come to understand the connection between law and business. We would like people to understand that the practice of corporate law is not like the provision of utility services. It is not electricity that can be switched on and off. It is really an intelligent art that involves a keen balance of brain power, motivation, drive, and understanding – legal understanding, business understanding, and human understanding. We would like to see a keener understanding – on the part of clients and the public – of this fairly expansive role of the corporate lawyer so that we can be utilized to the full extent of our abilities. Often, great corporate lawyers end up becoming frustrated, leaving the practice of law and going into business. We are not saying that that is necessarily a sad thing, but when the profession is losing great attorneys, this bleeding off of the profession into business is an admission that the highest and best use of that particular person was perhaps not in the law. If clients could learn to extract or demand (or at least accept) from their corporate lawyers that kind of behavior, business advice and input, then those corporate lawyers could be fulfilled in the practice of law.