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C H A P T E R 1
LAW, VALUE CREATION, AND RISK MANAGEMENT
The first chapter lays the foundation for the modern corporate manager who is
swimming in a “sea of law.” It sets forth a framework for the legally astute manager
to understand the intersection between law and management. The chapter introduces
a systems approach to business, law, and society and helps managers become legally
astute by understanding how to legally protect a company’s value, while managing
legal risks.
I. THE SYSTEMS APPROACH TO BUSINESS AND SOCIETY.
Because we live in a social system, managers must anticipate, understand, and
respond to changing policy and social perceptions of ethical management.
A. Meeting Societal Expectations. Business decisions are a series of
B. Effect of Law on the Competitive Environment and Firm’s Resources.
1. Law shapes competitive environment with five forces that
determine a company’s attractiveness to customers: (i) Buyer
C. Law and the Value Chain. Each activity in the value chain has legal
aspects: design, manufacturing, distribution, sales and warranties.
D. Law is Dynamic. Systems approach recognizes that the law is not
BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT, 7TH ED. —INSTRUCTOR’S MANUAL
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II. LAW AND PUBLIC POLICY.
American law seeks to enhance economic activity, commerce, and for-profit
corporations through the pursuit of four key public policy objectives:
A. Promoting Economic Growth.
B. Protecting Workers.
CASE 1.1 Sorrell v. IMS Health, Inc., 131 S.Ct. 2653 (2011).
Vermont statute prohibited pharmacies from selling
prescriber-identifying information for marketing
III. THE LEGALLY ASTUTE MANAGER.
Legally astute managers (LAMs) know how to communicate and work with
counsel to solve legally complex problems. LAMs know how to: (1) negotiate
contracts, (2) protect and enhance the firm’s value (3) create legal options, and
(4) convert regulatory barriers into value.
A. Value Laden Attitudes. LAMs appreciate society’s expectations of
appropriate behavior.
CHAPTER 1 LAW, VALUE CREATION, AND RISK MANAGEMENT
D. Contextual Knowledge of the Law and Legal Tools. Managers should
have clear pathways to where they want to go, legally, such as
understanding the basics of choice of business entity and contracts,
during five stages of development:
(1) Evaluating the opportunity and defining the value proposition,
which includes developing the business concept for exploiting
the opportunity.
TEACHING SUGGESTIONS: THE RESPONSIBLE MANAGER.
A. How should the legally astute manager deal with “water cooler” gossip
about possible legal or ethical wrongdoing?
B. Discuss the cultural dilemmas that face managers in the global
economy: Are gifts of money or services illegal or unethical, or
C. Discuss the possible conflicts between legally doing business and
selling fast-food, given the increasing evidence of how it is a