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Note: Business 2.0 is now part of CNNmoney and some older articles are no longer available

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Intellectual property is a balance between monopolies granted by the state to create an incentive to produce and access, and fair use guaranteed by the balance the law creates to ensure that follow-on innovators and creators can take advantage of the innovations that have been produced. That's the balance the law has traditionally struck.

...it's not like every kind of property. There's nothing that says you have a fair use right to my car, and I guarantee it -- don't touch my car. There's nothing that says that my car will be turned over to the public after a "limited time." But the Constitution guarantees that there's such a thing as fair use to copyrighted materials and guarantees that intellectual property gets turned over to the public after a limited time, and that's not because the framers were communists, it's because they understood that intellectual property is different.

Note: Business 2.0 is now part of CNNmoney and some older articles are no longer available

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Of all the persistently good companies we studied in Good to Great, only one was led by a CEO who had an MBA. The most common academic background, oddly enough, was law. I asked one of the CEOs how law school helped prepare him to be a business leader, and he replied, "It taught me to ask the right questions rather than come up with the right answers."

Note: Darwin Magazine is now dead. Some articles are moving to CIO. I will try to update the links when I have time...

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We hew to laws against stealing because there is already cultural consensus that stealing is wrong, rooted in the fact that the thief deprives the good citizen of the stolen property. To copy an idea does no such thing; wrote Jefferson, "he who lights his taper at mine, receives light without darkening me." It does indeed deprive the original author of the ability to monopolize the idea and perhaps extract money from it. That can serve as a reason to create and enforce such a monopoly, but it's not nearly as grounded in our ethical senses as is robbing a bank or vandalizing a house.

Traditionally, environmental strategies are managed separately as a cost center and viewed as a compliance issue. Unfortunately, the compliance mentality leaves companies vulnerable in two ways. First, if you're focused solely on compliance, you will only do the minimum amount required to be in compliance with the law, which leaves you open to competitors who are willing to be more creative in their efforts. Second, the normal state of affairs in most companies is cyclical. There will be times when things are going well and you are in compliance with the law. Other times, there will be upsets that reduce your level of compliance. If you shoot for compliance only, in my opinion, you are almost assuring yourself of a period of noncompliance.

In principle, patents open up innovations in two ways. First, they confer only temporary rights; once patents expire or are abandoned, the intellectual property they are designed to protect passes into the public domain. Second, they require the details of the invention to be disclosed so they can be replicated. This permits follow-on innovation, which is essential for industrial progress.

More recently, as the patent system has evolved, it has been seen to provide other benefits. It leads to a degree of economic specialisation that makes business more efficient. Patents are transferable assets, and by the early 20th century they had made it possible to separate the person who makes an invention from the one who commercialises it. This recognised the fact that someone who is good at coming up with ideas is not necessarily the best person to bring those ideas to market.

...As the patent system has matured and licensing has become much more widespread, these transfers are turning business relationships on their head. Some economists argue that the growth of patent transactions is establishing a proper "market for technology"...just as the banking system created a market for capital and the insurance industry created a market for risk, the growth of the patent system may be creating a market for innovation.

Nobody really believes that it's an ethical precept that you obey every law. If you obey a law that requires you to do something that is unethical or amoral, I think everybody in the room would agree it's a proper human behavior to break that law as long as you're willing to accept the responsibility for that. That was the justification for conscientious objection during the war.

Law is spelled out by consensus in society: It is a minimum standard of conduct. But ethics is not a result of consensus, not something discerned by taking a poll. Ethics is the ideal; law is the minimum.

There are some companies that say, Let's do whatever it takes to meet the requirements of the law. There's nothing wrong with that, but you have to recognize that the law, by definition, typically is made up of rules that have been made to address previous situations. It's tough for it to anticipate future violations that might occur. Companies that invest in building an ethical culture recognize that when new issues arise, people will need an ethical compass that will help them make the right call, or at least get help in a gray area.

Regulation is merely society's way of saying that it does not approve of the way business is operating or, that by operating the way it is, business is ignoring what the society has set as objectives and goals for itself.

Note: Older EBF articles are not currently online. I'm not sure if this is temporary or permanent. If you click you will be taken to the Archive.org site to find an archived copy.

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Businesses in the Western world are still governed by antiquated corporation laws. In the past, employees were regarded as an adjunct to business; they were simply the "hands" to operate the machines. Power was concentrated at the top. The law gave priority to the shareholders, based on the assumption that the human elements were mere extensions of the capital assets.

Most of today's corporations, however, have no or few capital assets. They are dependent on brain power; people are the critical success factor. But businesses are still ruled by 19th-century legislation. Managers are forced to optimise capital before all other concerns. Excessive power is given to shareholders and that power is being abused.

Note: Older EBF articles are not currently online. I'm not sure if this is temporary or permanent. If you click you will be taken to the Archive.org site to find an archived copy.

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If you have a great idea, you want to set up your own firm, make a quick buck and a swift exit, then the limited liability structure makes sense. If, however, you want to grow a successful company over the long term, you should steer clear of the classical limited liability formula - it gives too much power to too few people.

A fundamental question examined in the management arena is not only the factors that may lead people to make clearly illegal decisions, but more so the dilemma faced by individuals when confronted with legal but irresponsible or illegal but responsible behaviors. Under those conditions, what should one do? What will influence what behavior the manager chooses?

An inevitable and unfortunate part of the "I want to be me" movement has been the idea that there is no distinction between your business life and your personal life. People treat colleagues as friends and family-often to disastrous effect. Sexual harassment is a prime example. If you flirt with somebody at a party, that person can't have you arrested. But if you flirt at the office, it could cost you your job. Well, flirting at work has always been unmannerly. The distance of formality should make it obvious that office flirtation is wrong. But because people don't care about etiquette anymore, we have to use the law to make them obey...the problem with many of today's workplace issues is that they are too subtle and nuanced for the law, which is a very heavy-handed instrument. But if people don't obey the rules of etiquette, we have no choice but to use the law.