Why business owners should renegotiate contracts during COVID-19

Strategy is like chess.

If ever there was a time to think about using legal strategy in contracts, now is that time. Hard times make value-based decisions all that more pressing and tangible.

Many who know me know that I am a fan of the value-enabling and strategic possibilities of contracts. As Fred Rosen, former CEO of Ticketmaster fame once told me during a recent in-person interview: “contracts let you create the rules of the game.”

Many small and medium-sized business owners have to make hard choices regarding expenses due to COVID-19. One big issue is real estate. Landlords and lenders are worried about the rising number of vacancies and bankruptcies so why not approach a landlord or lender to enable a private solution workout that takes into account reduced revenues? Many landlords would prefer making some concessions in exchange for maintaining the relationship. There could be beneficial exchanges on both sides but it would require negotiation, creativity and some work.

Another item to think about strategically is risk, and insurance contracts are one main aspect of this important side of business. Now is a great time to renegotiate insurance contracts to cover business interruption and offer more flexible terms. The time for relying on boilerplate language developed by insurance standard-setting bodies is over in my opinion. It is upon business owners to negotiate the best terms moving forward.

Yet another way to engage the new altered risk and value scenario we live in is to engage your local community and chamber of commerce. There is power in numbers and having the input on these issues and support of other businesses and community members can go a long way. Strategy, it turns out, is a multi-player game.

Professor Orozco elected to FSU University Committee on Faculty Sabbaticals

I am honored to have been elected to the FSU University Committee on Faculty Sabbaticals. It is certainly an honor to have been elected from the large body of tenured faculty eligible to serve on this committee. My one-year term began last month and continues through August 2021. I’m excited to support my wonderful colleagues at Florida State in this capacity. There’s incredible research emanating from our august university.

Will social distancing destroy tacit knowledge?

I sit here writing this post because my computer is malfunctioning. Earlier today I had a zoom meeting with colleagues, and our discussion turned to whether we’d meet this year at our yearly Summer conference. The outlook for that is not good.

That got me thinking about the importance of meeting face-to-face. How much will be lost if we live in a prolonged state of social distancing? In my view a tremendous amount would be lost.

Just think of the knowledge gaps that will begin to accrue. We are social creatures and our brains are designed to learn by doing and copying those who have achieved mastery of a skill. As the famed philosopher Michael Polyani stated: “By watching the master and emulating his efforts in the presence of his example, the apprentice unconsciously picks up the rules of art, including those which are not explicitly known the master himself.”

Learning is thus an art dependent on trust, habit and action. Also, this era of remote work and electronic communications will encourage our misguided digital-era instinct to fetishize information as rational and objective and thus removed from personal experience. The tacit, unspoken art of knowledge according to Polyani cannot be removed from knowledge. As he said: “deprived of their tacit coefficients, all spoken words, formulae, all maps and graphs, are strictly meaningless.”

I’m about to try to restart my computer to engage my Regulation and Compliance students on a collaborative writing project we have undertaken regarding COVID-19. This writing project is my refusal to allow the current crisis to dictate what I view as the best modes of learning. That is, a process whereby my students and I learn through personal and collaborative exploration, reflection, discussion, and participation.

Seize the day: capturing value beyond the pandemic

It is difficult to see past the negative headlines and constant stream of bad news. Yet, there is another world and timeline that is not often highlighted enough. That is the overwhelming generosity of spirit that individuals and businesses are showing during these hard times.

The doctor who posts an informative health YouTube video, the landlords who cut tenants a break, the CEOs who forego pay to avoid laying off workers, the academic colleague who helps another with Zoom, and the marketing consultant who gives a client free advice that leads to sales. These are examples of folks helping one another through our shared difficulties.

I’m hoping these acts of kindness accomplish two things. First, that they instill a reminder that fundamentally we are social beings that rely on one another’s generosity of spirit to thrive. The Scottish Enlightenment philosophers tried to address this but their views were subsumed by hyper-economic rationalism.

Second, that these intrinsically good and socially-beneficial acts get amply rewarded when the hard times pass. My sense is that the tenant, customer, colleague, and patient loyalty generated by these acts will add value above-and-beyond what was provided.

It is good to do right by those who need help at the moment. Pragmatically, this will be remembered when times are good and thus offer a powerful source of enduring value. By the same token, decisions motivated by short-sighted opportunism will likely have negative long-term effects.

Businesses in particular should note that the decisions taken today will have an impact felt long into the future. So, carpe diem!

Making sense of things going forward

It’s the middle of the day and amidst the quiet and worry I find it difficult to focus and stay positive. Right now, it appears we are all in survival mode.

Relationships, my work and spirituality keep me going. But the analyst in me keeps asking the same nagging questions: how will we move forward? Will this all just wash away?

I personally think life will never be quite the same once we get through this. The pandemic is going to change our collective perception of who we are and our place in the world. The temptation will be to simply use existing techniques and rhetoric to get over this iteration, but what structural long-term policies and reforms will we adopt to address the next major global crisis?

I hope as a species we see this as a warning call that is to be ignored only at great peril. Will the world change? I’m not sure. But if we don’t adapt to the heightened risks nature is increasingly revealing then we will pay increasingly higher penalties. The change can only occur if we all weigh in. As a society, I feel we have outsourced too much for the sake of convenience and economy. We’ve outsourced policy, ethics, jobs, and accountability. We did that because it worked wonderfully. Until now, that is. Yet, my sense is it’s time to take a hard look at that ideology. Increasingly so for the sake of our own survival.

Writing this has been cathartic. Thank you for taking the time to listen to one person’s point of view. Now, it’s time to get back to life, as hard as it is at the moment.

The importance of law and strategy during a crisis.

Securing health and loved ones is the top priority during an epidemic. Securing property during uncertain times, however, is also an important need.

Law and strategy can increase security and certainty by preserving much-needed capital. For example, tough times sometimes lead to broken promises. When this occurs developing a contract litigation or alternative dispute resolution strategy will be worth the investment.

Teaching during the era of Corona Virus

When undergraduate honors-level business law resumes next week, I’ll lecture on force majeure and liquidated damages. I have several real world examples that I’m sure will delight the students.

Force majeure, or Act of God clauses in contracts allow a breaching party to be released from their contract duties (promises) due to an unforeseeable act that renders the contract oppressive or impossible to perform.

Liquidated damages are contract terms that stipulate what penalty will apply due to contract breach. Like a nonrefundable deposit fee, for example.

Learning in a new era

When I first started teaching, I thought undergraduate student learning at a U.S-based business school would remain constant. I’d synthesize, analyze, translate and apply information and then the students would arrive at that Aha! moment. Nothing would change. Well, I was wrong.

Over time I’ve noticed students need something different. They want information chunked into packages, delivered through various formats, and messaged through relatable stories. The first and third aspects did not surprise me. I appreciated their importance nearly thirteen years ago during my first teaching job.

Educational content, however, should be in multimedia, delivered in a way that allows students to track performance (e.g. quizzes and cases) and obtain immediate validation, and of course always made available online.

My approach to teaching has necessarily had to change. Readings posted online and PowerPoints were starting to feel a bit stale.

More on how I’m currently adapting in the next post…

A Moment of Reflection

Today I received some copies of my co-authored first edition undergraduate textbook “Business Law and Strategy.” This project has been an ongoing effort spanning two and a half years. I’m excited to be able to finally physically hold the fruits of this collaborative effort. My hope is that this book will allow students and instructors to appreciate how business law can be used strategically as an instrument for good and value creation. Oh, and the cases/ examples are really fun. Enjoy!

Compliance and Patent Infringement

There are troubling signs of an “efficient infringement” model within large companies that knowingly trespass on smaller companies’ patents. Not only is it a strategic business decision, but according to this great article it is a duty that falls upon managers to enrich the company’s stockholders!

But this all seems to beg the question(s). What does compliance have to say about all this? Should compliance jump in early to assess ethics and other strategic options, such as cooperation and taking a license? Should compliance take a 360 perspective and advise management accordingly? What role does compliance have when it comes to patent infringement?