Oct 27, 2019

See you in court? No — it’s just a black hole for entrepreneurs

written by Lisa Eason

They say that revenge is a dish best served cold. I think they’re wrong: it is better never pursued at all.

The Bible is a touch contradictory on the issue. The Old Testament suggests that justice demands “an eye for an eye”, also known as the law of retaliation, but Jesus taught that one should turn the other cheek and make friends with our enemies, rather than fight them. Those who seek vengeance tend to find it brings no satisfaction, only bitterness.

In business, it can seem important to present yourself as tough, and unforgiving to those who have crossed you. So executives are tempted to exact revenge on those who have cheated them. However, vendettas also damage those who undertake them. Better to chase more purposeful opportunities while remembering not to do deals again with the individuals in question.

The usual tool employed to strike back in such commercial conflicts is litigation. My experience of this, however, is that it is almost always financially draining and deeply frustrating, and best avoided unless there really is no alternative.

Arbitration is not ideal but is better than full-blown legal action. Often the best policy is simply to walk away and put it down to experience.

Countries such as America are swamped by litigation. It may be a paradise for lawyers, but it is a miserable black hole for entrepreneurs and the economy as a whole. I am sure that such activities have a negative impact on America’s productivity and attractiveness as a country in which to invest. It is most unfortunate that almost all big corporations there have attorneys on their boards. Inevitably, lawyers seek work and look to extend their influence — and so, due to vested interests, m’learned friends continue their remorseless march through enterprise.

Certain industries are beset by litigation — construction and insurance, for example. Again, I would tend to avoid sectors where a major form of activity is defending claims and suing people. Life is too short to allow such depressing stuff to absorb your valuable time and energy.

Among the most destructive areas of business I can imagine is litigation financing. I think it was no coincidence that champerty, as it used to be called, was illegal until fairly recently. It is shameful that Britain appears to have become something of a centre for such funds. Several are quoted companies here, including Burford Capital and Litigation Capital Management. Burford’s share price has halved this year over concerns about its accounting policies — driven by an aggressive short-selling campaign. I find it hard to be upset about its recent difficulties.

A boss should not only cast aside ideas of revenge. He or she should also be prepared to say sorry and eat humble pie on a regular basis when necessary and appropriate.

I’m afraid it goes with the territory, as I learnt with the shattering experience of Patisserie Valerie.

We all make mistakes, and leaders are expected to apologise on behalf of their organisation if circumstances call for it. I don’t mean grovel — any apology should be sincere, and not overdone — but no one is so grand that they must always project an image of perfection and invincibility.

Recent research shows that the trait most admired in a chief executive by employees is vulnerability. The era of the strong man at the top, constantly at war with rivals, is over.

For good or ill, society now demands that companies operate to higher standards than in the past. This applies to health and safety matters, environmental issues, relationships with customers, staff and suppliers, financial dealings, government interactions and so forth. Administering all this supervision is costly, and it probably raises the barriers to entry for start-ups, which is unfortunate. Because the state does not understand business, nor necessarily trust entrepreneurs, the overall burden of regulation has increased enormously to police such high expectations.

All this bureaucracy may lead to less competition and possibly less innovation, but this reflects the mood of our times, and firms that rebel will lose custom and may possibly be shut down.

A more compassionate and caring type of capitalism seems to fit with our current culture, and those entrepreneurs who manage to deliver it will be well rewarded.