Erb Perspective Blog

Maybe we ought not “kill all the lawyers.”
Public policy strategies of the business community post-election – moving from Commissions to Courthouses
Executive Perspective
Commentary by Tom Catania, Executive in Residence at the Erb Institute

Through this inaugural blog I am initiating what I hope to be a regular set of commentaries organized around harnessing the power of business enterprises in ways that address society’s policy challenges, which is at the core of the mission of the Erb Institute for Global Sustainable Enterprise. The views expressed here are my own and should not be interpreted as representing the views of the Erb Institute, the University of Michigan, or any of my former employers, or organizations of which I am a member.

I would begin this commentary by positing that, if pressed, the CEO of a large global enterprise would find the choice between relying on either a politician or a lawyer as a foundation around which to build a business strategy to be truly a Hobson’s one and be asking for a third option. Based on recent experiences with climate change policy and in light of the outcome of the last national election, a strong argument could be made that CEOs may be forced to hold their noses and choose the lawyer. Specifically, I mean that CEOs and their enterprises will choose to back off from previous efforts to directly engage in the political process as illustrated by initiatives like the US Climate Action Partnership (USCAP) or the Jobs Council, and instead, focus more on putting the government and its administrative agencies to their statutorily required proof in law, when they propose to change the way business operates. Large corporation CEOs–who made personal contributions to Romney over Obama in a ratio of 4-1—have been frustrated by ineffectual political strategies and advice, and have had their fill of elected officials of both political stripes. Direct engagement has also been an unavailing strategy. CEOs are used to being listened to and to holding people accountable for their commitments, qualities in very short supply in Washington. It is in that context, that I believe the focus will shift to legal remedies as the preferred means to affect policy. This approach has, among other tactical virtues, the possibility of dragging out final resolution of some critical questions until the political winds have changed to a perceived more business-favorable direction.

Efforts such as USCAP, the Simpson-Bowles Commission, the Jobs Council, as they have played out in recent years, illustrate some of the fundamental problems with attempting to blend the political and private sector world through informal and voluntary efforts. There are inherent infirmities among all sides of the process. For politicians, frankly, they resent attempts to usurp their policymaking role. The need to create entities outside the regular political process is an admission that politicians are not, cannot or choose not to do their jobs. We have seen several waves in recent elections of anti-incumbency transformations of the political landscape and, ipso facto, these policy workarounds and their recommendations threaten incumbents of both parties.

In the private sector, holding a consensus together among organizations that are built to maximize profit and defeat their business rivals is very challenging. The motives of private competitors at the table are viewed with suspicion and outside observers are rightly concerned about concealed rent seeking or marriages of convenience motivated less by the policy issue in question than by a desire to exploit a marketplace advantage. In the climate change area the recent debates over whether the US should export excess natural gas or enjoy the price reduction benefits of excess supply show how muddy these private sector waters can become. The civil society participants are not without their own conflicting agendas. Breakdowns inevitably occur based on: a) groups resentful that they have not been invited to the table, b) pragmatists versus absolutists, c) ngo business models that benefit more from confrontation than consensus, and d) competing dimensions of the environmental and social justice global agenda in the context of a complex geopolitical world of competing sovereign states. Finally, ultimately, these informal consensus building efforts founder on the rocks when the recommendations are brought back to the political process for adoption. Carefully negotiated outcomes that are the product of months of detailed discussions are rejected outright or drastically changed, misunderstood or mischaracterized by the politicians and the media. Participants on all sides feel betrayed and begin walking back their consensus positions justified by the changed circumstances. Whatever light had been cast on the problem in question is overwhelmed by the political heat that arises as winners and losers are very publicly identified in the political process.

The often criticized legal and litigation process begins to look more attractive for business only when compared against the incomprehensible and frustrating political process. For the business community, this process is particularly scary in the post-2012 electoral environment when the anti-business forces are in full-blooded victory howl and traditional political allies seem deeply divided and rudderless. In fact, especially for larger corporations, there is a segment of the Republican party which believes its electoral defeats were in part a result of ill considered flirtations by business with political enemies. However, there are certain benefits to business of taking a more legalistic approach to public policy questions.

First, despite the legal requirement for courts to give great deference to legislative and administrative action, many of our important environmental statutes and regulations bear no resemblance to the beauty of Shakespeare’s use of language and are only similar to his “first, …let’s kill all the lawyers,” line in that they are subject to several interpretations. Government lawyers and agency heads are well aware of the issues with their statutes, and are not eager to respond to legal challenges brought by any side questioning how they have been applied or enforced. A second value for business in litigating over environmental regulation is that it drags the final resolution of an issue out. There may even be instances where some delay leads to a better outcome for all. During the legal battles over “new source review” in the power sector, the natural gas revolution has occurred and market economics are driving coal emission reductions and avoiding duplicate investments in retrofitting no longer economical generation sources. A more Machiavellian rationale for business to pursue a litigation strategy is a function of the glacial pace of the federal trial and appellate courts. When final judicial resolution ultimately arrives, the political landscape, including control of the Executive and or Legislative branches of government, could have shifted to something more favorable, especially if the current political leadership is motivated by some version of the “let no crisis, go to waste.,” or, “kick them while they are down,” strategy. Third, the court of public opinion is typically not a home court for the business community, whereas the federal courts are a much more neutral venue. In contrast to the federal courts’ Rules of Evidence, adequate briefing schedules, sanctions against frivolous pleadings and opportunities to appeal adverse decisions; businesses wade into the public debate over policy with inherent liabilities and few advantages. Lastly, litigation, ironically, brings all sides of an issue to the table with something to lose, and that includes the government. Agreements negotiated in the context of litigation impose obligations of compliance, are usually transparent and include mechanisms for enforcement. They also force both sides to admit, defend and recognize weaknesses in their own positions, as well as, fundamental problems with underlying statutes and regulations that everyone can agree need to be fixed, or at least made comprehensible.

Many of the nation’s largest and longest standing environmental and consumer advocacy groups recognized early that they needed to “lawyer up” to achieve their goals. Nader’s Raiders, Public Interest Research Groups (PIRGS), the Natural Resources Defense Council, the Sierra Club, the Environmental Defense Fund etc., all represent examples of using the legal system to achieve policy goals. Legislation was secured through the political process, in many cases creating the government agencies that many in business find most challenging and problematic, and the courts were used to enforce the newly passed laws or hold the government agencies to their statutory obligations. Having been burned in their recent attempts to become more direct and voluntary actors in the political process, and with little clarity, certainty or economically appetizing choices ahead in areas such as climate change policy–business may be inclined to take a page out of the environmentalists’ playbook and head for the familiar, if unpleasant, confines of our nation’s courts. Whether you view the current state of what passes for the nation’s public policy development process as a tragedy or a comedy of errors, business and civil society may well be ready to leave ‘the sound and fury signifying nothing,’ behind in pursuit of the rule of law upon which our nation was founded.

Tom Catania is Executive in Residence at the Erb Institute for Global Sustainable Enterprise, and was formerly Vice President of Government Relations and Senior Counsel for the Whirlpool Corporation, as well as, former Special Assistant Attorney General for the State of Minnesota. Click here for more about Tom Catania including a complete list of his Executive Perspective blog postings.

Posted in Executive Perspective | 6 Comments

6 Responses to Maybe we ought not “kill all the lawyers.”

  1. Sandy Sapienza says:

    I would like to say that I have called on quite a few business owners, none of whom were involved in the climate. All of them gave me advice during elections, they would say believe and vote for who you want, and don’t share your information with anyone. If you give money make sure both candidates (Democrat and Republican) get some, in the event the one you want doesn’t win you will be covered. So you choose a candidate based on your beliefs or policies of what you want represented but make sure everyone gets some money. I wonder when or if it will ever happen that everyone starts doing what is morally right for our country, and with the most respect to our environment. Not money based but fact based. So I would pay someone to get the job done the way I want it done legally in hopes that there are still some moral values left in our judicial system before I would trust politics since you have to give both sides some money.

  2. John DeCicco says:

    In a public policy context, it’s often pretty hard to disentangle lawyering from other aspects of political process. Both are messy and though the courts are in principle about interpreting policy already crafted by politics, that process is itself often advanced through litigation.

    Indeed, formative events in the history of environmental protection involved creative use of the law. Such “progress” may have seemed aggravating those in the businesses ultimately bound by the new laws that ensued, but in retrospect it’s clear that the results were a boon to sustainability.

    A classic story is the use of general torts law to stop mass spraying of DDT for mosquito control, accomplished by what both businesses and the political establishment at the time viewed as renegade lawyering on Long Island. The vehicle ginned up to advance that strategy was an ad hoc “Environmental Defense Fund,” a legal fund created at arms length from the National Audubon Society, which was directly concerned with DDT’s deadly impacts on wildlife but at a loss of how to stop the rampant poisoning in an era before the invention of environmental law and the creation of the EPA. Indeed, EDF’s progression was not so much one of “lawyering up” (litigation was already in its blood) but rather one of “wonking up” to become more engaged in the development of new law.

    A more recent example of progress (in my humble opinion!) is the court challenge to EPA’s initial refusal to consider carbon dioxide a pollutant under the Clean Air Act. The resulting April 2007 Supreme Court decision that carbon dioxide can be considered a pollutant certainly changed the political landscape for the climate issue.

    So in terms of the concerns of business, the question is then, what are the objectives of any given business, trade group or broader business coalition with respect to sustainability? Most would agree that society collectively faces major challenges. Is existing law adequate to meet those challenges? If so, lawyerly skills in negotiation can certainly be crucial for crafting consensus. If not, then there’s no escaping the need to engage the political process of new policy formulation. Lawyers can either help that process along or slow it down. Again, it comes down to a question of objectives.

    As for the Shakespearian quip, and even as an engineer who’s worked for lawyers, I certainly share Tom’s sentiment that “we ought not.”

  3. Tom, thanks for sharing these perspectives about lawyers, business, and environmental sustainability. I’m not a lawyer and so I have little experience with the legal perspectives about which you expound. I do wonder about the mechanisms compelling firms to report environmental data voluntarily in the absence of legal/regulatory requirements. Are Global 500 firms waiting for a price on carbon, or, are they finding positive NPV emissions/energy projects and going forward?
    -Nigel

  4. Tom Catania says:

    It is gratifying to find such thoughtful initial responses to my inaugural blog. Let me address a couple of the comments.

    John DeCicco, I would readily admit that there is substantial overlap between lawyers and politicians, with no better illustration than the current occupant of the Oval Office. It may be that grand bargain negotiations, like USCAP, will require a prior statutory or Executive-Congressional branch commitment akin to the Military Base Closing Commission, or what used to be called “Fast Track” authority in trade agreement legislation, wherein some of the de-railers in political process are taken off the table. Under those circumstances the private sector might be more willing to engage.

    Nigel Melville, it is generally true that business has preferred voluntary reporting schemes like GRI to the mandates, complexity and cost that is evidenced by Sarbanes-Oxley. Business has come to believe that its license to operate, and its stakeholders are interested in this environmental information, and therefore, have voluntarily reported it. In my experience, voluntary reporting requires some quality control in the form of industry self-policing and third-party validation, but i expect it to continue even if there is less appetite for voluntary commissions.

  5. Tom Lyon says:

    I think Tom’s main point is that the political process is broken, a point on which many Americans would agree. His secondary point seems to be that litigation can be a useful way for business to stall legislation, and this is another point on which many lobbyists would agree. After all, there is a long tradition of doing so! If only business can hold out until the next Republican administration, maybe meaningful financial re-regulation can be avoided…

    Suppose we shift the focus from the environment to the financial sector. The Great Recession had numerous causes, but bailing out banks that were “too big to fail” was a key part. And the political process has done nothing to solve this problem. Even with a Democrat in the White House, Wall Street has been able to prevent any legislation that would address the “too big to fail” problem. Indeed, our biggest conglomerate banks/investment banks/insurance companies are bigger than ever before! And this didn’t even take litigation—just the traditional lobbying behind the scenes that business has been good at for many years.

    Personally, I don’t think business is going to give up involvement in politics at all. Businesses will still lobby for special-interest tax loopholes, the “grandfathering” of dirty old manufacturing facilities, weaker capital requirements for banks, protection against Chinese competition, etc etc. So it’s not really a question of litigation vs. legislation. Business will engage in both, depending upon the needs of the moment.

    But perhaps Tom’s larger point is that businesses will abandon pushing for socially beneficial legislation. Sadly, that is quite possible. Many businesses—and many environmentalists—have concluded that the fight for climate legislation was a disastrous waste of time. However, one can look at USCAP as an abject failure, or as something that came very close to passing a cap-and-trade bill. Lest one forget, both Waxman-Markey (the House bill, which passed) and Warner-Lieberman (the Senate bill, which never came up for a vote on the floor) were based on the proposals of the USCAP coalition. And arguably what blocked passage on the Senate side was the unanticipated Great Recession that began to drown all environmental efforts. So I look at USCAP as an extraordinary effort that could have worked but for the financial disaster that our friends on Wall Street and their friends in DC rained down upon us.

    In the end, businesses that seriously want to save the planet cannot avoid the political process. Yes, they need to clean up their own houses and take advantage of any win/win opportunities that allow them to cut costs or serve green consumers. But the tough issues are not win/win. And if we are to have any hope of solving them, we need at least some progressive businesses who are willing to stand up for the right thing in public.

  6. Tom Catania says:

    I thought I would mention a current reinforcement of my idea that business would only be interested in participating in voluntary negotiated political proposals if Congress and the Executive branch agreed to modify “business as usual.” In an article in the March 21st issue of the WSJ Siobhan Hughes discusses Senator Dick Durbin’s proposal to create a Commission to recommend how the finances of Social Security could be shored up for the next 75 years. “The Commission would remove negotiations over the retirement program from the broader discussion in Congress of what changes to taxes, entitlement programs and other federal spending should be enacted to reduce the deficit.” “Both chambers of the Congress would be required to vote on the plan–or an alternative that achieved the same result–on an expedited basis.” The rest of the article illustrates how difficult it is for the Congress and the Executive Branch to abandon their traditional and admittedly dysfunctional modus operandi.