In today’s society, law is intertwined with business more than we may imagine. It is critical that managers possess at least the fundamental knowledge of legal issues relating to their business operations. With adequate awareness, a business can be properly managed and better safeguarded. On the contrary, ignorance of legal matters can seriously jeopardize a business. Therefore, a good manager should understand the impact of law in business. In addition, law is also vital in establishing a world-class business, which is a goal that the lagging local Chinese businesses are striving. I will present my recommendations on this subject matter in the later part of my speech.
To begin, how is law related to business The ways of business on one level can be seen as governed by law. Due to the rules in place, a business entity, which is not a natural person, is accordingly granted the legal capacity to engage in activities and claim ownership. Thus, an enterprise can own land, open bank accounts, issue stocks, apply for patent, and so forth. It is by the operation of law that enterprises acquire legal rights as well as obligations.
It is then fundamental that a business understands the impact of domestic and international laws on business management. A business has to abide by the domestic laws of the country that it resides in, and the impact of such laws is on all areas of business functions from production, finance, HR, MIS, R&D, and to marketing. For instance, laws are commonly in place for environmental and consumer protection, intellectual property, banking, labor rights and so forth, that would and should influence managers’ business decision-making. In all, an enterprise should have a sound knowledge of the domestic laws of the country in which it is doing business. In addition, businesses should also be familiar with international laws and treaties that may potentially affect business prospects, such as the Montreal Protocol, labor treaties, and WTO.
Upon comprehensive awareness of legal aspects, I further propose a new model with three major points for Chinese enterprises to use as a reference, as to how to become a world-class business. The first is to promote the strengths of our traditions, such as the old saying, “Doing well by doing good.” However, many local Chinese enterprises tend to separate “utility” from “profit” in doing business; more specifically, neglecting public welfare in the sole pursuit of company interest. “Utility-concerns” and “profit-concerns” should converge when making business decisions as they shape the company’s value in the long run.
An example of another Chinese tradition that should be encouraged is pointed out in the book, “Eastasia Edge,” of Holfheinz and Calder in that “Eastasians, deeply influenced by Confucianism, are diligent and frugal, value education and familism and respect their government and all these have formed a common source of economic drive.” These are some of the traditions that strengthen Chinese businesses. Second, to become a world-class business, a company needs to maintain a high level of self-discipline for the maximization of public welfare, as well as adherence to law for the demonstration of company’s goodwill, avoidance of risk from lawsuits, and early adaptation to today’s elevating ethical standards. And finally, a business should always take legal advice into account in its decision-making and establish such practice as a primary norm.
In examining the norm of some of the world-class businesses in the international arena, Chinese enterprises have much room to improve. Businesses should understand that most investors are willing to pay higher premium to invest in, aside from profitable, a well governed, and socially and legally responsible enterprise.
（ Dr.C.V.Chen, Lee and Li, Attorneys-at-Law）
【2005-01-30 經濟日報25版IMBA 940130】