Legal literacy can go a long way towards helping an organization manage routine legal risk. But sometimes issues are more complicated than they appear at first blush and sometimes the law is just plain counterintuitive.
When Salesforce.com decided to take its stock public in 2004, the San Francisco-based software company didn’t realize that cooperating with the New York Times on an article profiling the company just before its IPO would violate a U.S. Securities and Exchange Commission rule. When the Times trumpeted the Salesforce.com IPO in a headline screaming “It’s not Google, it’s that other big IPO,” the SEC saw red. They viewed it in combination with other media coverage of the IPO and decided it crossed the line of acceptable disclosures.
SEC rules require investor information for initial public offerings to be exclusively communicated through official registrations statements. It’s a provision of the law that is vague and seldom used because it’s heavily dependent on context. But in this case the SEC decided the company had gone too far and mandated a “quiet period.”
As the name suggests, it means shhhhh. The quiet period prohibits managers from engaging in communications that could be interpreted as influencing investors. In effect, it’s a management muzzle.
Management, as you might imagine, doesn’t take kindly to being muzzled. For managers and entrepreneurs who build their businesses on their ability to promote, being stripped of bragging rights and not being able to tout their success is totally counterintuitive to their established business habits. To successfully navigate a situation like that requires expert guidance and coaching. Having access to a trusted legal professional, either in-house or through a law firm, is essential because they can provide you with a valuable reality check to help guide your activities.
Advice from a licensed professional also carries with it the benefit of attorney-client privilege, a special form of confidentiality that allows communications to remain within the confines of the attorney-client relationship.
Finding the right lawyer and establishing a constructive relationship, however, can present a special set of challenges. Lawyers and business owners/managers view the business world through different lenses. Joseph A. Raelin, author of The Clash of Cultures, attributes those differences to a unique set of educational backgrounds, work habits, and professional social cultures.
For the legal profession, these differences have sadly evolved into caricatures and lawyer jokes that have sadly earned the profession an unflattering stereotype. Nonetheless, there are many lawyers available who are capable of providing practical legal advice that seamlessly blends the requirements of the law with the realities of the business world. Don’t stop until you find a lawyer you’re comfortable with and who is willing to listen to your concerns and learn about your business and industry.
Good corporate governance demands that risky behaviors be addressed before they jeopardize the business enterprise. Having a trusted legal advisor available as either a member of your management team, or as an adjunct to it, can save you countless delays and headaches plus the dollar cost associated with them.
Pooh-poohing risk only leads to being knee-deep in it because such problems typically don’t go away. They fester below the surface until BA-boom: they reach a tipping point and develop faster than a digital photograph. It simply doesn’t pay to ignore a latent legal problem. Getting dragged into court is not only expensive it can be unpredictable as well.
Denying the existing of a legal problem doesn’t advance the company’s best interest. It only robs you of the opportunity to identify it and resolve it while the problem is still small, manageable, and less expensive to deal with.
The best practice is to have the foresight to recognize and proactively deal with legal issues early. Having the right lawyer on call can make that job easier and give you peace of mind.