EQUINOX Business Law Group - Seattle Bellevue

Ethics of Business Client Representation

August 29, 2007

I've run into numerous situations recently where I am asked to represent a business as well as the companies that own that business. I attempt to explain to clients how a conflict of interest may arise in a situation where I represent all three entities but it's much clearer to understand how a conflict arises between people versus business entities. If a lawyer represents a business, then the business is the lawyer's client. The lawyer is ethically bound to act in the best interest of the business as his or her client. If the owners of that client entity end up in a dispute or must negotiate any document that affects the owners' individual rights, the attorney cannot participate in that negotiation (except in limited circumstances where the clients may acknowledge the potential conflict and waive their rights with respect to any conflict) because they lawyer cannot adequately serve multiple shareholders and still remain independent and unbaised counsel for the business itself. This is pretty clear. It gets a bit muddied where the owners are also entities. It's certainly simpler to have the same lawyer represent all the companies but there are typically contracts among these businesses and possible disputes among the owners of the businesses. If the lawyer represents a business as well as its two business owners, who does the lawyer advocate for in a dispute? Typically, the lawyer must withdraw completely from the situation to ensure that no conflict of interest exists. Often, clients want the lawyer they know and trust to help them resolve the situation despite certain potential conflicts; after all, the lawyer knows all the businesses and all the transactions. The lawyer may be able to participate in a mediation type role in certain limited circumstances but only after obtaining a consent and waiver from all the parties. When you ask your lawyer to act as counsel for multiple companies that interact, ensure he or she explains any potential conflicts of interest and how the scenarios might play out if a conflict arises.

More creative benefits

August 22, 2007

Wow - these keep popping up and people are becoming so creative in small businesses as to how to best reward and value employees. I met the owner of Special Places, a publisher of travel books. The current one is focused on best places to stay all over the country. He has also put together a travel program for employers to offer employees that provides employees with special travel discounts. It's valuable, innovative and something everyone can use!

Alternative Benefits

August 15, 2007

This week, I've run into a couple of interesting options for employers trying to offer compelling, cost-effective benefits to employees. A colleauge of mine called earlier this week to share with me a product called a "Bereavement Benefit Package" offered by Dignity Memorial. This package is free to employers and offers employees and their families numerous benefits in managing and coping with a loss. I also read through last week's Washington Best Places to Work, the insert in the Puget Sound Business Journal. Much of the discussion in those pages focused on what kinds of benefits were offered to employees. Reading through the comments made it clear that the traditional benefits are expected but the alternative benefits may take an employer over the top with respect to employee perception. My favorite was a deal that one of the larger downtown law firms has with Virgina Mason hospital that allows parents of mildly sick children to have a safe place to take them on days where parents just can't stay home. What a benefit! Other interesting offerings were allowing pets and/or children at work and facilities and services that promote health and stress reduction. It doesn't necessarily cost a lot to offer new benefits to employees. You need to understand what's important to them and offer something that fits into their values and lifestyle. Maybe it's a charity event or food drive or simply the abililty to telecommute on certain days. Let them know you're thinking of them and want them to be happy -- and productive!

Going Private

August 08, 2007

I heard a piece on NPR yesterday about the pros and cons of a recent trend of larger companies "going private." As part of a piece, the CEO of Axel Tech spoke about how successful the company has been since it was separated from its larger public company and purchased by a private equity firm. When asked why she thought they were more successful, she cited less bureaucracy and the ability to focus on goals and quickly make decisions that move toward those goals. She hints at, but doesn't drive home, one important benefit that private companies have -- no accountability to Wall Street. Having been in Fortune 500 companies as a consultant and manager, the demands of Wall Street have a tremendous impact on business decisions. What is seen as "red tape" to employees is typically the drive to make decisions that Wall Street will like whether or not these decisions strategically move the business forward. Private companies have shareholders who hold them accountable but the public demands of Wall Street don't drive decisionmaking. Therefore, a business is able to clearly work to grow in a way that positively impacts customers, employees, and shareholders.

To Partner or Not To Partner?

August 01, 2007

The question of how to expand a business comes up regularly among small business owners -- something that has come up pretty often recently has been partnering with others as a means of expanding. This is an interesting approach that does possibly offer expansion opportunities for both parties but should be taken very seriously. The partners must spend significant time on their own and together considering what a partnership would mean to the business overall -- financially, managerially, and operationally. It's great if the partners have different skill sets and likes/dislikes -- this makes things a little easier but there's always a question of perceived fairness, monitoring of activities and handling of conflicts. Each person must consider why they are moving into the partnership and what other alternatives might provide a similar solution to the expansion quandry. Will the business gain significant "economies of scale" -- i.e. by being bigger, the company can negotiate better rates in purchasing, hiring, etc.? Will the company together make more money than the two companies separately? Do the businesses offer the same services or complementary services? Sometimes it makes sense to retain two separate companies with joint ownership by both partners simply to protect from risk. Many people liken a business partnership with a marriage -- it's a lot like that -- in fact, the last business partnership I entered into, I received a wedding bouquet from my partner the day we signed the agreement. Very astute, that business partner....