GENCO MEMO: May 29, 2024
The Forces at Work; Musk Hires xAI General Counsel; Lawyers Implicated in Criminal Conduct, and; DOL Cracks Down on Restaurants
Hello.
It's midweek, and some noteworthy things are happening at the crossroads of business, law, and strategy.
The core idea behind my memos is that business operates at multiple distinct and blended levels of business, law, and strategy.
Each level has its details. And each level blends with another to establish its ideas and practices. All three converge into a valuable understanding of how each is a part of and dependent on the other.
I diagram it like this.
You only have to look deeper at events to see these underlying Forces at Work.
I first got the idea of these unseen forces from Marvin Bower, former head of McKinsey, and his description of a painting he kept in his office as a reminder.
“I have an abstract painting in my office that I bought in London off the Piccadilly fence. In that open-air mart, which operates on weekends, the artists sell their own works. Judged by the $43 price, my painting is not great art. But it has delightful swirls, angles, and other abstract forms, all in bright colors. And when Mr. Eves, the artist, told me the title—Forces at Work—I bought it immediately.
With a little metal plate bearing the title and the artist's name, the painting is a constant reminder to me that any successful organization must give continuing attention to keeping adjusted to the forces affecting it—that is, to the forces-at-work element of its philosophy. But before discussing that element, let us examine the whole concept of company philosophy as a system component and identify other important elements of a successful philosophy.”
I found this picture of Bower in front of the Forces at Work painting.
Here are a couple news stories where I saw the interplay of some forces.
1. Musk Hires a Business-minded Legal Strategist for His A.I. Venture
THE STORY: Elon Musk's xAI is making moves in the A.I. war and recently announced a capital raise of $6 Billion and plans to build a "Gigafactory of Compute."
But before this announcement, xAI hired a new general counsel to spearhead legal strategy as these initiatives progress. In this same article, a high-level lawyer who knows Keene said, "Rob is top-notch, he's a business-minded lawyer and adept strategic thinker."
WHY IT MATTERS: Every business owner will need to hire a lawyer at some point. It's probably a good idea to pay attention to who Musk hires and try to discern why he chose him.
THE TAKEAWAY: Evaluate your business lawyer based on whether they’re both knowledgeable in business and strong in strategic thinking. How?
Use the T.E.E. Framework. Courts evaluate an experts background in three general categories: training, education, and experience (T.E.E.). You can do the same when looking for legal guidance in business.
Applying the same framework, look at the lawyer’s history and actual performance in both law and business. And see if they can demonstrate some strategic accomplishments in each. To do that,
Ask for examples of prior cases or clients you can speak to.
Look to see if they have written or spoken in these general areas.
Ask if they serve on boards of companies or own any themselves.
You want to see a resume of accomplishments you can track down.
The same goes for every other high-level function of the company. For financial, evaluate their T.E.E. in business, accounting or finance, and strategy. Do the same for marketing and so on with every other team member.
2. Lawyers Implicated in Misconduct
THE BIG PICTURE: The other side of hiring a good lawyer is hiring one that steers you in the wrong direction.
Two recent cases serve as a warning to lawyers and business clients, alike.
In the first story, well-known law firm, Fenwick, is alleged to be complicit in the F.T.X. fraud. It acted as lead outside counsel for crypto exchange FTX until just before its collapse and is under investigation in the FTX Chapter 11 bankruptcy.
Fenwick & West is described as the only law firm “entrusted with a birds-eye view” of what was happening at FTX and its sister hedge fund Alameda Research, according to bankruptcy examiner Robert Cleary.
It’s the “birds-eye view” that struck me. That’s the point of legal counsel–someone to step back and look at a situation objectively from a distance.
In the second story, a California lawyer was sentenced in a case where he was found guilty of helping a client try to mislead investigators.
Fred Minassian, a Glendale criminal defense attorney, gave false information to law enforcement to thwart an investigation into an opioid distribution scheme. He admitted to directing the creation and submission of a fraudulent doctor's note to mislead investigators about the legitimacy of a client's prescription for hydrocodone, thus taking part in the cover-up of illegal activities.
THE TAKEAWAY: If your lawyer doesn't push back, you should push them out.
Otherwise, you could go down together–one leading the other, or vice-versa.
3. DOL Restaurant Crackdown Previews Pay Practices that Will Get You in Trouble
CONTEXT: Since the start of May, the Department of Labor (DOL) has been cracking down on the hospitality industry (i.e., restaurants), collecting back wages and fines in four cases. This article gives the details.
WHY IT MATTERS: Taking notice of these cases allows you to do a quick check to see if your business is doing the same thing.
And if you are– to take appropriate action before the DOL shows up!
ZOOM IN: Here, the DOL took action in the following situations:
Friendship Diner, L.L.C. was cited for not correctly paying minimum and overtime wages and illegally requiring workers to hand over part of their tips to share with bussers.
Three Mojarra Loca restaurants in Las Vegas were ordered to pay 33 workers $150,000 in overtime back wages because they paid a "flat salary" no matter how many hours they worked.
An Arkansas restaurant paid a worker $11,000 in back wages when it didn't rehire the worker back to an equivalent position after returning from FMLA leave.
Little Big Burgers in Oregon and Washington agreed to pay back $148,248 in tips that it forced workers to share with managers.
NEXT STEPS: If you’re doing something similar to these these other companies, the best action you can take is immediately get to a legal advisor to plan out:
How to stop the bleeding and make immediate corrections so it doesn’t get worse, and
How to fix the damage that is already done.
TO CONCLUDE, here is an excerpt from my library that offers good advice to a lawyer and a standard of performance they should be held to by their client.
That is all.
Talk to you next time.