Personalized Medicine
U N I T
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Law, Value Creation, and Risk Management 2 Ethics and the Law 21 Courts, Sources of Law, and Dispute Resolution 59 Constitutional Bases for Business Regulation 113 Agency 157 Administrative Law 183
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Foundations of the Legal and R egul atory En vironment
12/19/08 10:12:43 PM
Chapter
Law, Value Creation, and Risk Management
INTRODUCTION
Winning Legally1
Governments immerse modern organizations “in a sea of law.”2 Public law provides the rules of the game3 within which firms compete to create and capture value. Law does more than regulate and constrain, however. It also enables and facilitates.4 Indeed, multiple-country studies reveal that the efficiency of a country’s capital markets is directly related to the country’s legal environment.5 Researchers found a statistically significant relationship between a country’s economic prosperity, as measured by the per capita gross domestic product, and each of the following: • • • • • • Judicial independence. Adequacy of legal recourse. Police protection of business. Demanding product standards. Stringent environmental regulations. Quality laws relating to information technology. • • Extent of intellectual property protection. Effectiveness of antitrust laws.6
For example, adequate protection of minority rights increases investment in new ventures.7 Conversely, excessive regulation, including burdensome licensing requirements and filing fees, can hamper new venture formation.8 “Legally astute” managers who understand and proactively manage the legal aspects of business can use the law and the legal system to increase both the total value created and the share of that value captured by the firm.9 As Tom Hinthorne remarked, “[L]awyers and corporate leaders who understand the law and the structures of power in the U.S.A. have a unique capacity to protect and enhance shareowner wealth.”10 For example,
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Law, Value Creation, and Risk Management 2 Ethics and the Law 21 Courts, Sources of Law, and Dispute Resolution 59 Constitutional Bases for Business Regulation 113 Agency 157 Administrative Law 183
82048_01_ch01_1-20.indd 1
I
Foundations of the Legal and R egul atory En vironment
12/19/08 10:12:43 PM
Chapter
Law, Value Creation, and Risk Management
INTRODUCTION
Winning Legally1
Governments immerse modern organizations “in a sea of law.”2 Public law provides the rules of the game3 within which firms compete to create and capture value. Law does more than regulate and constrain, however. It also enables and facilitates.4 Indeed, multiple-country studies reveal that the efficiency of a country’s capital markets is directly related to the country’s legal environment.5 Researchers found a statistically significant relationship between a country’s economic prosperity, as measured by the per capita gross domestic product, and each of the following: • • • • • • Judicial independence. Adequacy of legal recourse. Police protection of business. Demanding product standards. Stringent environmental regulations. Quality laws relating to information technology. • • Extent of intellectual property protection. Effectiveness of antitrust laws.6
For example, adequate protection of minority rights increases investment in new ventures.7 Conversely, excessive regulation, including burdensome licensing requirements and filing fees, can hamper new venture formation.8 “Legally astute” managers who understand and proactively manage the legal aspects of business can use the law and the legal system to increase both the total value created and the share of that value captured by the firm.9 As Tom Hinthorne remarked, “[L]awyers and corporate leaders who understand the law and the structures of power in the U.S.A. have a unique capacity to protect and enhance shareowner wealth.”10 For example,