Ethics Today Law Tomorrow

Dr. C.V. Chen9 May 2014

1

calligraphy by Admiral Liu Ho-chian

The concept of Datong, or Great Communion, comesfrom the chapter Conveyance of Rites of the Book of Rites, aclassic text of Confucianism.

Datong describes an ideal state of human existence andsociety where

love and cooperation are practiced freely,peace and prosperity are enjoyed by all, andprejudice and war have long been abandoned.

This state is called the World of Great Communion.In the modern context, Datong encompasses political,

economical, technological, and cultural unity.L&L's vision for the World of Great Communion

It is Dr. C.V. Chen's belief that the "Rule of Law" illuminatesthe path to justice and harmony.

2

3

1949Came to Taiwan. Father died in battle

1949Came to Taiwan. Father died in battle

1967Graduatedfrom NTU

1969 LL.M.University of British Columbia.

1970 1972Harvard

LL.M. S.J.D.

1971 Taiwan lost U.N. membership 2009

Cancer

About Me

Married

1944Birth

1963National Taiwan University

1972Returned to TaiwanBegan teaching & private practice.

*Law professor*Private practice*Straits Exchange Foundation

*Red Cross

2012 Received Order of Brilliant Star with Grand Cordon

2000-2012Stepped down as President of R.O.C. Red Cross

Daughter married

2003SD/Fox Incident

1989Received Order of Resplendent Banner with Special Cravat

2004 Mother Passed Away1974 Daughter Born1982 Son Born (severely mentally handicapped)

Outline

I I • Staring into an Abyss : A Story

costing US$100 Million

IIII• Ethics Today, Law Tomorrow

and the Day after Tomorrow?

III III • Can Ethics(Law) Be Taught?

US$100 Million13 October 2003

Photo/ Flickr.CC/Ervins Strauhmanishttps://www.flickr.com/photos/ervins_strauhmanis/9544847065/

Facts� San Disk held 127.8 mm shares in its OEM, United

Microelectronics Corporation. � L&L was SD's attorney authorized to file investment

applications with TW Govt.� SD paid US$83 mm for those shares.� US$106 mm was their worth on the market in Sept 2003.

� Liu, an assistant, went on unpaid leave on the pretext of the upcoming bar exam.

� In October 2003, Liu forged documents to withdraw all shares of SD from brokerage agency, sold the shares , and fled Taiwan on a fake passport.

He took off with US$92 million.Photo/ Flickr.CC/Ervins Strauhmanishttps://www.flickr.com/photos/ervins_strauhmanis/9544847065/

The AbyssUS$83 million~US$106 million

In 2003Lee and Li was 38 years old• Had 14 Partners• 500 Staff• 12,000 Clients Worldwide

Photo/ Flickr.CC/Ervins Strauhmanishttps://www.flickr.com/photos/ervins_strauhmanis/9544847065/

The DilemmaThe Dilemma

Bargain with SanDisk? Dodge the

Responsibility?

Will staff abandon

ship?

Photo/ flickr.CC/ Nathan Siemershttps://www.flickr.com/photos/nosha/2980362505/

The Settlement: US$86 million

US$20 million2003 down payment

US$48 millionOver 4 years L/C

~2007

US$18 million� 1 m/year� Legal Fees� Pro bono

~2021

Photo/ flickr.CC/ SalFalkohttps://www.flickr.com/photos/nosha/2980362505/

2004~2021 US$1,000,000 /yearTo defray�Legal fees �Public interest initiatives � Charity work

Photo/ flickr.CC/ SalFalkohttps://www.flickr.com/photos/nosha/2980362505/

Traumatized L&L Emerged as an Iridescent Pearl

An explanation of the settlement reached between L&L and SD

SD VP & General Counsel:"We do not believe that

the acts of a single rogue employee should alter the

40+year solid reputation of one of the region‘s premiere

law firms."

Economic Daily News 17 Nov 2003

A satisfactory and productive settlementOne Thanksgiving: SanDisk's TrustOne Lesson: As you sow so shall you reapOne Reflection: No Lee & Li without TrustSupport from Society Sustains Lee & Li� 圓滿且具建設性的協議� One Thanksgiving 一個感謝� One Lesson 一個感想� One Reflection 一個反思� 社會支持 理律永續的動力

L&L and SD Honored CSRDespite Grave Predicament

Commercial Times 18 Nov 2003

Considerations behind Decision Making

Photo/ flickr.CC/ Nathan Siemershttps://www.flickr.com/photos/nosha/2980362505/

Business School Case Studies Kellogg-HKUST & Ivey-NCCU

How didL&L handleSD Crisis?

How did L&L demonstrate

ethical leadership？

How can loyalty and

commitment be fostered?

The role of

corporate culture?

On the Settlement?

Photo. Flickr CC/ PromoMadridhttps://www.flickr.com/photos/promomadrid

There Was No "I" But "We"A law firm is a group of people

24 Dec 2004

Photo/Flickr,CC/ Pablo Twose Vallshttps://www.flickr.com/photos/twose/887903401/

We Care

關懷

We Excel

卓越

We Serve

服務

L&L CORE STRENGTH--OUR PEOPLE!

The Way 道道道道

The river is tranquil and yet dynamic.It parts around a boulder and yet erodes it.

There is action in inaction.There is force in non-force.

Jeffrey Hsu, L&L

(ABA Journal / December 2000)

� Volunteerism� Long-Term Supporter of Red Cross� Legal Education—Both Sides ofTaiwan Strait *including teaching and L&L Moot Court project

� 1999 L&L Educational Foundation—promotes rule of law education.� Created with endowment from L&L

and continues to be funded by theL&L partnership

1965~2003 Pro Bono

(ABA Journal / December 2000)

� 2001 L&L honored withPro Bono Law Firm Award

� 2008 Dr. C.V. Chen honored with

Pro Bono Lawyer Award

1965~2003 Pro Bono

� Excellence in Legal Practice/ KM � Judicial Reform Efforts� Drafted Bills to Boost

Taiwan's Socioeconomic Growth� Named Honest Taxpayer 3 times

(Recognition given out only between 1983~1985)

1965~2003 Excellence & Integrity

( Spring 2005)

Lesson Learned:Lee & Li Is Founded on Trust

• 2004 Partnership restructured, pro bono commitment reduced to writing in new partnership agreement.

No less than 2% profit earmarked for

public interest & employee benefits

Embedding Public Interest in L&L's DNA

• 2013 L&L Educational Foundation launched the Lee & Li Classroom

a series of lectures on law that is free to the public.

Lesson Learned:Lee & Li Is Founded on Trust

2014 50th AnniversaryPast, Present, & FUTURE

Lee & Li after Baptism of FireEthics/Law—Help Us

Do the Right Things Right

Law serves to keep us from wrong—Is that enough?

• Start with legislative intent• Cultivate strong FIRM culture• Pursue specialization, integrity, and

trust

Ethics pushes us beyond legal minimum

Ethics & Law: What's the Connection?Harmonization of Laws (Ethics included)

II. Ethics Today, Law Tomorrowand the Day after Tomorrow?

Business, Laws, Ethics

A Reflection on Teaching in Law/Business Schools

Shang C.1750-C.1040 B.C.

Xia C.2200-C.1750 B.C. Wang Hai (ancestor of founder of Shang Dynasty) – 1st businessman in China

Ended Xia Dynasty by outperforming in trade

Sping & Autumn Period Warring States Period

Western Zhou C, 1100-771B.C.

Many famous businessmen: Tse-Gung, Confucius's disciple; Fan Li, officer-turned-business tycoon of the state of Yue; Bai Kuei, a politician and business tycoon of the Warring States Period

From Qin (221-206 B.C.) onwards

Inferiority of businessmen in the social hierarchy of scholars, farmers, craftsmen and businessmen

Late Qing Dyansty to the early Republic Break through of capitalism; rise of

commercialism

Establishment of P.R.C.

Surpression of private business Relocation of the Republic Government to Taiwan

Planned economy

Free economy Policy reforms/ liberalization rising social status of businessmen

Rising Social Status of business-men

Business in China (including Mainland China & Taiwan)

SocialismPlanned Economy

Business

15-16th14-16th Renaissance 文藝復興

16-17th Protestant Reformation宗教改革

Rise of the middle class【【【【新教新教新教新教 Ethics】】】】Protestant Ethics

15-17thAge of Discovery/Maritime explorationnew ocean routes; trade expansion 貿易

16-18th Mercantilism 重商主義

18th Industrial Revolution

ScholarsFarmersCraftsmen Merchants

Clergymen 教士

Nobles 貴族

Knights 騎士

Freemen平民

Peasants/Serfs 農奴

China(including Mainland China & Taiwan)

The West

15th Zheng He's ExpeditionCommerce and Trade Flourished鄭和下西洋、經濟商業繁榮

Scholars become merchants【【【【Confucius's Ethics】】】】 Rise of

Merchants

GlobalEconomy

18th Qing Dynasty Closed-door policy鎖國

Ban on maritime trade海禁

19th末 Late Qing Dynasty Rise of commercialism

CapitalismMarket Economy

Merchants

Merchants

Merchants

20-21th

the social hierarchy

How Rule of Law Came to Be

Ethics alone no longer

adequate

WestSocial issues arose

after industrial revolution

EastAgricultural

↓↓↓↓

Industrial

Photo.Flickr,CC,John Cooper,http://www.flickr.com/photos/atomicshed/311082285/

• Bringing order to human relationships.

Ethics in Chinese

• The morals of a culture that often influence laws.

Ethics in English

Ethics

Person +Books/Order人= =條理

Wheel

Human pic, http://www.fantizi5.com/jiaguwen/view/232.htmlBook Photo, from wikipedia.org

• The original form of the Chinese character for law consist of symbols representing water and a mythical unicorn capable of identifying people whose integrity is questionable.

• The even surface of a body of water symbolizes fairness, impartiality. .

Law in Chinese

• A body of rules of action or conduct prescribed by controlling authority, having binding legal force.

Law as defined by Black's Law Dictionary—6th edition

® ®

Water 水水水水=

=去去去去 get rid of

_Pixelmaniac_,http://www.flickr.com/photos/_pixelmaniac_/4569185046/

According to Yassa, scouts who returned with bad tidings shall be beheaded.Business operators often dismiss legal advice that is not pleasing to the ear.

Photo/ Flickr.CC/ Ludovic Hirlimannhttps://www.flickr.com/photos/lhirlimann/6076981200/

Law Cannot and Should Not Be Dismissed in Business.

Individuals have personalities. But under the law, corporations have fictitious personalities and are considered legal persons.

Ethics

Law

Ethics

6 Functionsof

Enterprises

Production

Marketing

Finance & Investment

Human Resources

R&DInformation Management

Laws on Environmental Protection, Waste Disposal, Pollution, etc.

Laws on Banking, Securities, Accounting, Insurance, Offshore Listing, etc.

Laws on Protection and Confidentiality of Personal / Corporate Data, etc.

Patent Law, Trademark Law, Copyright Law, etc.

Labor Law, Employment Act, etc.

Consumer Protection Law, Fair Trade Law, etc.

Thoughts of the

Management

Establishment and Governance of Enterprises

Company Act, M&A Act, etc.

Sound Knowledge of Domestic Law

Fairness

Clients

Employees

Business partnersNature

CommunitySociety

Business & Laws—Domestic

Corporate Ethics

World-class business: Legal advice should be sought tomake a proper business judgment; otherwise, a misjudgment will cause the company to suffer loss or the management tobear personal liability.

In-house LegalCounsel

Outside Legal Counsel

Providing Legal Consultation Providing Legal Consultation

Providing Legal Consultation

Convergence of legal advice and

business judgment

Duty

Set up support system for regular

information

Set up international

support system for special

information

Role

Normal situation Decision-ma

king process

Emergency

Crisis Management

process

Business Judgment

Business Manager/CEO/

Board

Role

Decision-Making Must Include Legal Considerations

Ethics & Law: What's the Connection?Harmonization of Laws (Ethics included)

II. Ethics Today, Law Tomorrowand the Day after Tomorrow?

Business, Laws, Ethics

Morality

Norm SystemDynamic Wheel

Ethics & Law: What's the connection?

Photo/Flickr.CC/ Carl Jones(Cut Part)https://www.flickr.com/photos/_belial/4881763904/

Morality

Ethics

Ethics & Law: What's the connection?

Norm SystemDynamic WheelPhoto/Flickr.CC/ Carl Jones(Cut Part)

https://www.flickr.com/photos/_belial/4881763904/

Morality

Ethics

Law

Ethics & Law: What's the connection?

Norm SystemDynamic WheelPhoto/Flickr.CC/ Carl Jones(Cut Part)

https://www.flickr.com/photos/_belial/4881763904/

Law and Ethics are Complementary

and Interdependent

Law Ethics

Law

Ethics

Law's Inherent InadequacyToday's Law Is Obsolete Tomorrow

Lester Thurow (MIT)• New laws are like generals fighting the

previous war.• New laws cannot prevent fraud because

loopholes in the new laws could be exploited.

Andrew Fastow (Enron)• Rules versus Principles: How the ambiguity and complexity of laws and regulations breeds opportunity for problematic decisions.

• "Not only follow the rules, but also uphold the principles behind them."

(Photo)Fastow, by Washington PostThurow, from http://web.mit.edu

Law's Acquired InadequacyThree Branches of Govt. May Fail

Unrestrained Executive

Idle Legislature

Reactive Judiciary

• Inherent adequacies can be remedied. But human failings lead to acquired inadequacies. ，

• Those practicing law should study ethics, which includes understanding legislative intent and policy with CONSCIENCE.

Eternal Wisdom"If the People be led by laws, and uniformity sought to be given them by

punishments, they will try to avoid the punishments, but have no sense of shame." 導之以政，齊之以刑，民免而無恥

"If they be led by virtue, and uniformity sought to be given them by the rules of propriety, they will behave with the sense of shame, and moreover will become good." –Confucius, BC 500. 導之以德，齊之以禮，有恥且格

Photo/ wikimedia.org

Ethics & Law: What's the Connection?Harmonization of Laws (Ethics included)

II. Ethics Today, Law Tomorrowand the Day after Tomorrow?

Business, Laws, Ethics

Ethics

Law

Ethics

6 Functionsof

Enterprises

Production

Marketing

Finance & Investment

Human Resources

R&DInformation Management

Laws on Environmental Protection, Waste Disposal, Pollution, etc.

Laws on Banking, Securities, Accounting, Insurance, Offshore Listing, etc.

Laws on Protection and Confidentiality of Personal / Corporate Data, etc.

Patent Law, Trademark Law, Copyright Law, etc.

Labor Law, Employment Act, etc.

Consumer Protection Law, Fair Trade Law, etc.

Thoughts of the

Management

Establishment and Governance of Enterprises

Company Act, M&A Act, etc.

Sound Knowledge of Domestic Law

Fairness

Clients

Employees

Business

partners

Nature

Community

Society

Business & Laws—Domestic

Business & Laws—Transnational

An enterprise should have sound knowledge of the domestic laws of a country when doing business in that country, and if applicable, have knowledge of transnational law.

Think globally and act locally - understanding the regulations related to corporate governance

and the 6 major functions of business management of the country concerned.

Space Axis: Accelerating Globalization

Ethics Today, Law Tomorrow

Ethics

Law

Ethics

Time Axis: Ethics Becoming Law

Business & Law

Globalization SpursHarmonization of Law

Post-WW IIInstitutionalized multilateral cooperation regimes �Multilateral covenants�Universal values in form of Law (ethics included)

EthicsLAW

Ethics

Law

Ethics

EthicsLAW

Developed NationsRule of Law Taken Root

Developing NationsImmature Rule of Law

Incompatibility in Transnational Law Setting

Pic,by(Tony Auth)http://creartivism.com/cartoons-about-nike-sweatshops/#2

Example 1Code of Ethics

of Multinational Corporations

‧Market Economy‧Fairness‧Anticorruption

‧Worker‧Consumers

‧Air‧Water

Competition People Environment

Respect for competition, as a crucial instrument for the development of the economic system.

PRADA's Code of Ethics: The Value of . . .

Example 2Labor Is Not a Commodity

U.N. ILOCovenants

Labor-Related Legislation

Child Labor

L&L Practice 1998-2014

Slave Labor

Labor Law…

Example 3Fair Competition Laws

�Fairness: Core of corporate ethics�19th century U.S.—Antitrust Act� End of 20th century Taiwan: Fair Trade Act�(2009 Case) Asia LCD Price-Fixing

Prevent inappropriate

concerted action to fix

prices

Antitrust Act

Impact on other

nations' legislation

Ethics1976 Lockheed Corporation

Ethics1976 Lockheed Corporation

Law1977 U.S. FCPA

Law1977 U.S. FCPA

Transnational Impact1988 OECD Members

Transnational Impact1988 OECD Members

Global Harmonization2003U.N. Convention against Corruption

Global Harmonization2003U.N. Convention against Corruption

Example 4 Foreign Corrupt Practices Act

Example 5Environmental Protection

Environmental Protection

Carbon Trading

Kyoto Protocol

RoHS

Corporate Social Responsibility

Law‧Obligations‧Sanctions

Ethics‧Social Responsibility ‧No Sanctions (Media/consumers/NGOs)

Non-binding Today, May Be Binding Tomorrow

� Breach of ethics may trigger

penalties in law

� Through a free press, the

people see everywhere.

The Day after Tomorrow

Ethics ? Law

An Inconvenient Truth . . . or

Convenient Fiction?Photo, Flickr, CC, Patrick Hoeslyhttps://www.flickr.com/photos/zooboing/5426098861/

Ethics ≒≒≒≒ Law

An Inconvenient Truth . . . or

Key to Sustainable Development?

E

L

EL

E

L

Photo, Flickr, CC, Patrick Hoeslyhttps://www.flickr.com/photos/zooboing/5426098861/

Wheel in Motion!

2006.Set-Oct

Can Ethics Be Taught?Baker Foundation Professor

Harvard Business School

III

Students have a strong sense of positive values, but have not yet had an opportunity to apply those values in an organization.

Allen S. Grossman, LCA faculty (Leadership and Corporate Accountability, Harvard Business School)

Thomas R. Piper

12 May 2007• “Many agreed with one commentator that the only way

to solve the ethical problems of corporate America was tofire everyone under 35 with an MBA. ”

• Because they were not taught business ethics.

“As business schools startto teach more ethics andpractical skills, enrolmentsare climbing again.”

April 30, 2014

Schools Try Philosophy to Get B-School Students

Thinking Beyond the Bottom Line

. . . But People Never Learn• 2001 Enron• 2002 WorldCom• 2005 AIG Inflated assets

– American International Group• 2008

– Siemens AG (800 mm) Foreign Corruption– Bernie Madoff Ponzi scheme– Three Deer Toxic baby milk

• 2011 IBM, GlaxoSmithKline . . . Foreign Corruption• 2014 AVON . . . Foreign Corruption

What next?

SUMMARYObservation 1

Seeing Ethics and Lawin a Different Light

"Ethics Today, Law Tomorrow""Ethics Today, Law Tomorrow"the Day after Tomorrow

"Ethics ≒ Law" the Day after Tomorrow

"Ethics ≒ Law"

Law Requires Ethics at Its

Core to Operate

Law Requires Ethics at Its

Core to Operate

Connect• Universal values need to be backed by law.• Harmonizing ethics into law to produce "universal

values in form of law."

Integrate

• Interdisciplinary cooperation (theology, science, medicine, business management, etc.)

• Businesspeople have greatly elevated their social stature.

• Lawyers played an instrumental role.

Educate

• Ethics and law, in equal measure, need to be taught and learned.

• The wheel: Conscience is the hub, ethics are the spokes, and law is the rim.

Observation 2Harmonization of

Transnational Laws

World-class business: Legal advice should be sought to make a proper business judgment; otherwise, a misjudgment will cause the company to suffer loss or the management to bear personal liability.

In-house Legal Counsel

Outside Legal Counsel

Providing Legal Consultation

Providing Legal Consultation

Providing Legal Consultation

Convergence of legal advice and business

judgment

Duty

Set up support system for regular

information

Set up international

support system for special information

Role

Normal situation Decision-making

process

EmergencyCrisis

Managementprocess

Business Judgment

Business Manager/CEO/

Board

Role

Observation 3 An Inconvenient Truth May Be the Key to

Sustainable Development

What Is a World-Class Business?

Chaos & Disasters

Benchmark of Enterprise Value

Separation

Utility

Convergence

New Model of World-Class Business

Enhanced by Law

Enhanced by Self-discipline

Consumer Consciousness

Profit

Utility Profit

Ethics ≒ Law Modern Way to Great Communion?