How to Handle Partners Who Are Bullies

Bullying and bullies are in the news a lot these days. Usually these are kids who physically or mentally torment and intimidate their classmates. In business partnerships, we frequently see a different kind of bully – the partner (who never should have been a partner in the first place) who refuses to listen to other points of view, puts his own interests ahead of those of the partnership, and generally wreaks havoc on the business. So, how do you deal with these bullies?

The first and most effective way is not going into business with them in the first place. There are plenty of articles warning you to choose your partners carefully, so I won’t belabor that point, but it’s worth noting once more – there is virtually no business decision that will affect you more than the decision of who you go into business with – choose well.

Second, have clear, detailed and well thought out organizational and governing documents that all partners understand and agree to at the outset. These documents should cover such basic issues as: (i) who gets to be an owner; (ii) who participates in management and how management decisions are made; (iii) what your general business objectives are; (iv) what happens if the company needs more capital; (v) how you avoid or address disagreements; and (vi) how and when you will make the decision to sell, merge, dissolve or otherwise exit the business or the owners’ partnership.

The third strategy follows logically from the second – having those governing documents in place is not enough – follow them. The easiest way to handle a difficult partnership disagreement is to simply follow the rules that you’ve laid out for the business.

The final strategy is more of an admonition – do NOT allow your difficult partner to bully you into making bad decisions or otherwise treat you or the business unfairly or act unwisely and then claim to be a victim! I see this frequently, and it is NOT an excuse to simply say your partner is a bad person and made you do these things that were bad for you or the company. You’re the caretaker of your business, and no one said it would be easy. Stand up to the bully!

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Outside and In-House Counsel – Why the Disconnect?

Perhaps no situation validates the premise behind BizB4Law than the relationship between in-house counsel and their outside private law firm counterparts – that premise being that business issues and objectives should always come before and actually determine the legal approaches and strategies.

There’s a historical tension between in-house and outside lawyers that, if anything, has become more prevalent in the past several years.  Although there are hundreds of articles speculating as to why this tension exists, I think it can be summed up simply – outside counsel doesn’t take the time or care enough to focus on the specific company as a business and the in-house counsel as a business person, rather than viewing both as simply clients or worse yet, viewing the in-house lawyer as only a lawyer (there’s a reason many in house attorneys have additional titles such as Vice President, Secretary and General Counsel). 

Don’t get me wrong, as clients these businesses are entitled to the same benefits and privileges as other clients (e.g., top level service, responsiveness, communication, etc.), but what’s too often missing from outside counsel is the level of commitment necessary to really understand this client and this business/industry, and this division or product line, and this transaction, and of course, this particular in-house attorney.

What I’m really saying is in each relationship with in-house counsel, the outside attorney or firm needs to think not just like a lawyer and a business person, but like a business person at this specific company in this specific situation and with these specific objectives – and the only way outside counsel can do this is if they really know and understand these things about this client.  That means understanding things like budgeting, timing constraints, scope, priorities, etc.

The bottom line is, the tension between in-house and outside counsel is not inherent or inevitable, but rather is the result of a lack of effort and/or commitment by outside counsel – as in-house counsel you should demand more; and as outside counsel we must do better.

The Legal Memorandum

The legal memorandum is a perfect topic for BizB4Law.  Remember my central theme – business issues are more important than legal ones, and the legal strategy and approach, therefore, must always follow from the business objectives and realities.  So where does that leave the legal memorandum?

The legal memorandum has its proper purpose, although it sometimes gets lost.  The purpose is not to protect the lawyer from the client or allow the lawyer to avoid providing real legal advice and recommendations.  In fact, although it happens all too often, there’s almost no business value in a legal memorandum that states something like:  “Given our limited understanding of the facts as you’ve explained them, and in light of the substantial uncertainty as to how the project will proceed and how a court might analyze this particular situation, we believe it is more likely than not that your proposed legal structure will be found to be permissible.  However, we must qualify our opinion by . . .”

The purpose of a legal memorandum is to provide necessary analysis so that an informed decision can be made by the client in light of specific and complex legal issues or challenges impacting the business objectives.  In other words, the process starts with the specific business goal and the existing facts and circumstances – if, based on those, there are complicated legal issues that must be addressed, a memorandum may be appropriate.  If not, you don’t need one.  Then, the research should specifically analyze how the law impacts this situation (not some abstract or unlikely situation in the land of make-believe).  And more importantly, the memorandum should provide actual advice and recommendations as to how the business objectives can be met even in a challenging environment, and even when the client’s desired approach may need to be modified.

The next time you read a memorandum from your lawyer, I hope it’s consistent with this article – if not, you may have detailed legal analysis but still be left questioning the business value and purpose.