Chapter Five
Keep Your Word

It’s high time to corral the corporate lawyers.

Shakespeare didn’t literally mean it when he said that the first thing we must do is kill all the lawyers, but you can forgive folks for smiling at the thought, given that the legal profession, collectively and with our complicity, is stripping America of personal accountability and trust. All of us, in ways large and small, partially are responsible for this erosion of integrity, but I place the greatest culpability, with notable exceptions, on attorneys—especially corporate lawyers.

Lawyers don’t start out their lives wanting to do that, but they are trained in law school to gain the edge, to win rather than mediate. Under the guise of legal protection, many corporate lawyers have made it impossible to seal business deals with just a handshake. They—I trust unwittingly—have created a tidal wave of distrust, ended long-term friendships, and bartered the inherent goodwill between people for loopholes, escape clauses, and weasel wording.

One’s word being one’s bond has been replaced with one’s word being subject to legal review.

Concise, straightforward transactions carry no weight unless accompanied by 100 pages of exceptions and wherebys in fine-print legalese. A deal sealed with a handshake is meaningless without a signed legal document whose complexity rivals that of the Treaty of Versailles.

This is a great weakness in our system because most lawyers have little in the way of business experience. They tend to focus on why something should not or cannot be done. Legal beagles make up the tenor and soprano sections of this choir of naysayers. Lenders, accountants, and consultants round out the hand-wringing chorale as the altos and baritones. They may hear themselves singing in perfect harmony, but to most of us it comes off as dissonance.

As Jeffrey Sonnenfeld, associate dean of executive programs at Yale School of Management, put it in a Business Week article, corporate attorneys are considered the “vice presidents of No.”

Problems nearly always arise when clients allow lawyers to make business decisions the latter are not qualified to make. In a recent Inc. magazine article, author Norm Brodsky says smart lawyers understand the boundaries of their expertise and limit themselves to providing legal advice. “Not-so-smart lawyers,” he says, “charge ahead and screw things up…. Lawyers are not business people, although many of them would have you believe otherwise.”

Many CEOs and others in the corporate hierarchy embrace every particle of “wisdom” uttered by a lawyer without realizing the person imparting the information often is the least prepared to counsel those who have developed a consistent marketplace track record.

Human beings are innately honest, but if you pack legal heat, the other side will do likewise. At that point, it becomes negotiation by attorneys.

Lock the lawyers in the attic until you truly need them. I came to a point in my career where I tossed the lawyers out of all meetings where merger negotiations were ongoing, summoning them only when the technical expertise in law and language to make the deals was required.

It’s not that lawyers are inherently unethical or evil, certainly no more so than members of any other profession. It’s a matter of lawyers overriding personal ethics with professional standards. Lawyers are taught to represent the best interest of their clients even if that mandate means inflicting unnecessary harm to the other side.

Murray Swartz, a New York attorney of considerable skill and fame, who is often described as a lawyer’s lawyer, maintains that when acting as an advocate for a client, a lawyer “is neither legally, professionally, nor morally accountable for the means used or the ends achieved.”

Former Utah Supreme Court Chief Justice Michael Zimmerman considers such rationale as nothing more than a comfortable way to avoid ethical responsibility. Lawyers are more than amoral technicians.

Lawyers certainly are not the only professional group occasionally separating personal ethics from professional norms. Tobacco company executives, who only want to expand their markets and further their corporation’s profits, cloak their consciences with the simplistic observation that no one forces people to smoke. The human toll their product extracts is not addressed in the business theories that cover the jingle of cash registers.

Politicians weasel and fib, promise much and deliver little, all in the name of remaining in public office. All’s fair in love, war, the bottom line, the final score, and re-election bids.

The news media wraps itself in the mantle of the “public’s right to know,” shielding sloppy, unfair, or erroneous coverage with a First Amendment excuse.

And I have already expressed my opinion of Wall Street, an arena in which misinformation is considered a virtue.

My point is there are larger issues of personal ethics, integrity, and human decency that, on occasion, ought to override the traditional standards of professional practices.

I have reserved my harshest rhetoric for this problem because I feel so strongly that integrity is central to all else virtuous. It is distressing that two people these days must necessarily be uneasy about simple oral agreements or that we don’t take responsibility for our own errors.

Reestablishing concepts of personal responsibility and one’s word being one’s bond, means kicking the lawyer dependency. We can avoid many unpleasantries, legal and social, by offering trust, accepting responsibility, and standing by our word, even when it causes discomfort.

Most spouses, neighbors, and business colleagues don’t require lawyers every time there is a disagreement. If we adhere to basic moral values, voluminous legal contracts would become unnecessary.

Abraham Lincoln, himself a lawyer, was on target: “Discourage litigation. Persuade your neighbor to compromise whenever you can. As a peacemaker, the lawyer has the superior opportunity of being a good man. There will still be business enough.”

There is a fun fact that suggests America has 40 lawyers for every engineer, whereas China, emerging as one of the world’s most dynamic nations, has 40 engineers for every lawyer. I am not sure exactly what that says, but it can’t be a plus for the United States. It may only be coincidence that the explosion in ethical and legal lapses in the business world parallels proportionately the increase in lawyers.

“Most business decisions involve risk,” notes Norm Brodsky in his Inc. article. “That’s why the business person has to make them. Who else can say how much risk he or she is willing to live with? Unfortunately, some lawyers don’t understand that it’s the client’s responsibility…to assess risk.”

Don’t misunderstand. It is important that we listen to lawyers, but only for a second opinion. Your opinion ought to be the first—and the last.

Some of us refuse to act or to move ahead in life without legal advice. In so doing, we lose our individuality. Somebody else is thinking for us, speaking for us, acting for us, making us mistrust everyone.

The legal profession has made life far too complicated. The problem is we believe we must always have a lawyer at our side. Virtually everyone brings along a lawyer to business transactions in anticipation of the other side pulling something.

Because the devil supposedly is in the details, negotiations represent a grand and lucrative playpen for lawyers. The law, like medicine, computer programming, and lunar landings, is complicated. Most of us aren’t skilled in computers, medicine, rocket science, or law. We feel we aren’t in a position to question, but we are. Insist the outcome be honorable and make good business sense.

Lawyers have us trained to believe nothing is airtight, any agreement can be broken, and that life is one big loophole. A handshake ends up as meaningless as an Enron audit. Heaven forbid the law be the law. Today, the law is whatever the client wants it to be. Today, we can sue anybody over anything. We can ruin a reputation with a simple allegation, trumpeting the canard worldwide on the Internet in seconds.

All that said, I have been privileged to know some wonderful lawyers who genuinely seek justice and embrace honest deals. Lawyers certainly can be helpful steering one through today’s myriad government regulations and contractual prose embedded with technicalities, legal pitfalls, or unintelligible blather. And, of course, they are invaluable should you find yourself in court, more than a remote possibility in today’s litigious jungle. That, though, ought to be the extent of their help.

The CEO is the individual who takes the risk; who must determine the personally decent, ethical route; who orders the speed and direction of the ship. If lawyers are allowed to decide all that, they are the ones leading the company. So far as I know, corporate attorneys are advisors.

During these litigious times, it is not surprising that more companies are seeking CEOs with legal degrees. Although there are exceptions, that seems like the wrong direction. Lawyers can be trained in accounting and finance principles, but team playing, entrepreneurial risk taking, allowing handshakes to say it all, and market vision do not readily attach themselves to those steeped in the work habits and mindsets of the legal profession.

I have observed that in most cases where the CEO is a lawyer, the company experiences a major void and, regularly, a financial catastrophe. The basic ingredients of customer satisfaction take a backseat to legalistic jargon. And heaven help suppliers and employees who want to continue a simple and straightforward relationship.

As Business Week noted at the end of 2004: Don’t look for JD degrees to replace MBAs anytime soon.

Keeping one’s word often requires great resolve. Two personal examples follow.

In 1986, after lengthy negotiations with Emerson Kampen, chairman and CEO of Great Lakes Chemical Company, we agreed he would purchase 40 percent of a division of my company for $54 million. Negotiations had been long and arduous, but a handshake sealed the deal.

I didn’t hear from Kampen for several months. Approximately four months after those discussions, Great Lakes lawyers called to say they would like to draft some documents. They had been dragging their feet—business as usual. It took three months for this rather simple purchase agreement to be placed on paper. The time lapse between the handshake and documents was now six and a half months.

In the interim, the price of raw materials had decreased substantially and our profit margins were reaching all-time highs. Profits had tripled in that half a year. Nothing had been signed with Great Lakes, and no documents had been exchanged. Kampen called with a remarkable proposal.

“Forty percent of Huntsman Chemical today is worth $250 million, according to my bankers,” said Kampen. “You and I shook hands and agreed on a $54 million price over six months ago.” Although he did not think he should have to pay the full difference, he thought it only fair he pay at least half and offered to do so.

My answer was no, it would not be fair to use the appreciated value, nor should he have to split the difference. He and I shook hands and made an agreement at $54 million, I said, and that’s exactly the price at which the attorneys would draft our documents.

“But that’s not fair to you,” Kampen responded.

“You negotiate for your company, Emerson, and let me negotiate for mine,” was my response.

Kampen never forgot that handshake. He took it with him to his grave. At his funeral, he had pre-arranged for two principal speakers: the governor of Indiana and me. I never was personally close to Emerson, but he and I both knew that a valuable lesson had been taught. Even though I could have forced Great Lakes to pay an extra $200 million for that 40 percent ownership stake in my company, I never had to wrestle with my conscience or look over my shoulder. My word was my bond.

(It is ironic that when I wrote this revised manuscript I was involved in a business situation where the executives of the company that contractually agreed to buy my company decided they no longer wished to pay the agreed-upon price. I had to take them to court, where the judge held that the company indeed was bound by its word.)

Back in the early 1980s, my first big deal was purchasing a petrochemical facility from Shell Oil Company. Peter De Leeuw, a vice president of Shell Chemical, drew up a straightforward draft agreement. He asked me to review it overnight and the two of us would then discuss it in the morning. I read it carefully, made a few minor changes, and signed it on the spot. Although he had not as yet submitted it to the corporate attorneys, it was the shortest, best-prepared, most binding document I had ever read.

De Leeuw was taken aback by my action. He wanted my lawyers (and his) to have a look at the agreement. I said I trusted him. Although he still had Shell’s attorneys look it over (they, of course, had scores of questions and additions), my immediate signing and display of trust gave De Leeuw confidence that I was serious and paved the way for his help working out one glitch after another in the months to come. When negotiating, seek out players you can trust; keep the lawyers on the bench.

I offer these episodes in no self-serving sense; it would be boorish to the reader to do so. It is imperative, though, that we all understand the importance of keeping one’s word.

We need not eliminate lawyers—simply reduce their modern-day omnipresence in our dealings. Use them for legal advice and leave other decisions to the experts.

Trust more in each other and in ourselves. As the late journalist and author Frank Scully once asked: “Why not go out on a limb? Isn’t that where the fruit is?”

Trust, however, should not be blind. Save blind faith for religion. A prudent businessperson knows with whom he or she is negotiating and exactly what is being negotiated. When it came to this, President Ronald Reagan had a great line: “Trust but verify.” If we trust in our own instincts and ability to evaluate, we will have less trouble trusting others.

As captains of our own character, it is essential we understand the great legacy of trust and integrity. We will be remembered for truthful disclosures and promises kept.

Individual and corporate integrity must become the hallmark of the marketplace. Deep in our hearts, we all have a basic understanding that when we shake on something, it’s supposed to stick. Remember the “cross my heart and hope to die” line? A handshake should always be as binding as a signed legal document.

We ought to negotiate earnestly and with all diligence for the best possible outcome. When a handshake is given, it must be honored—at all costs. Tough bargaining occurs only before the deal is agreed to. When you shake hands, the negotiating is over. Your word is your greatest asset; honesty is your best virtue. Without it, Cicero believed, there is no dignity.