Skip to content

Archive for


Identifying the Fundamental Technology Guiding Your Organization

When designing the appropriate organizational structure and creating a supporting organizational culture it is important to understand the fundamental technology that drives your business processes and the flow of day-to-day work.  Here is a helpful checklist for determining your dominant organizational technology.


In Troubled Times Contract Review is a Must

Troubled times like this trigger duties to review contracts to identify potential problems and opportunities in your client's contractual arrangements.


Managing an Organizational Change Program

Organizations should continuously monitor their external environmental to determine what changes have occurred that may trigger a need to alter the key design components of organizational structure and culture.  For example, changes in technology, customer requirements, economic factors or competition can all change the landscape for an organization and adaptation is necessary for survival.  In order for organizational change to be effective a formal change program should be created in advance to ensure that members of the organization are fully informed of the changes and that they understand why change is required and how it will impact them and the entire organization.  A change program should incorporate mechanisms for obtaining feedback and constantly reinforcing the changes given that it is often difficult to change accepted behaviors and ways of conducting business.

  • Has a customized change management program been prepared?  The change management program should take into account the specific characteristics of the proposed change and the history and culture of the organization.

  • Has consideration been given to how the individual members of the organization will react to the proposed changes and how their day-to-day activities for, and interaction with, the organization will be impacted?  Consideration of these questions should guide decisions about supporting mechanisms such as communications and training.

  • Have the lead sponsors for the change initiative been identified and are they at the appropriate level within the organization to be effective?  Sponsors should be active and visible leaders of the change initiative with authority to make and monitor all necessary funding and organizational design decisions.

  • Does the change management plan include an effective strategy for communicating with members and external stakeholders of the organization?  An effective communication plan will be targeted to appropriate audiences, rely on various communication channels (e.g., meetings, face-to-face conversations, newsletters, presentations, Intranet Q&A, etc.) and provide for feedback to ensure that the change initiative is understood.

  • Does the communications program include clear answer to key member questions such as “why are we making this change” and “what will happen if we don’t make this change”?  Members may find the broader vision of organization leaders to be interesting; however, they are usually most concerned about what it all means for them personally—another implicit question that each member has is “what’s in it for me”.  An effort should be made to preserve and honor the good things of the past even if changes are now thought to be necessary.

  • Have managers and supervisors been involved in development and implementation of the change management program?  Managers and supervisors are crucial to success of any change program because they have close relationships with those that report to them and are best situation to manage how their direct reports experience and respond to the proposed changes.

  • Does the change management program include adequate training for managers and supervisors?  The important role of managers and supervisors has been described above and it is essential that they be given the tools necessary to become and remain effective advocates of the change process.

  • Does the change management program include strategies and plans for handling resistance that may arise from within the organization?  A distinction can and should be made between proactive strategies—which involve anticipating in advance which issues will be raised by members and crafting responses before the program is initiated—and reactive strategies—which include pre-established policies for reacting to unforeseen objections that arise once the program has begun.

  • Has the organization established systems that will facilitate collection and analysis of feedback and measurement of progress toward the initial goals of the change program?  Before the program is launched the goals should be clearly defined in ways that permit objective measurement and feedback tools should be created and tested.

  • Does the change management program include plans for continuous reinforcement of the proposed changes?  Any change in the way that things are down within an organization takes a long time to be absorbed particularly when the change related to deeply embedded values and norms.  The program must take a long-term approach and include strategies for reinforcing the new values and norms that the leaders wish to implement.

This material will appear in Alan Gutterman’s publication entitled “Business Transactions Solutions” and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.  Alan Gutterman is the Founder/Principal of Gutterman Law & Business (, which publishes the Emerging Companies Blog and the Business Counselor Blog, and a Partner of The General Counsel LLC (





California’s Trademark Registration Law

Doing business in California?  Don't forget opportunities to protect your valuable brand through registration of trademarks under California's own trademark law.


California Affirms Narrow Enforceability of Noncompetition Agreements

The California Supreme Court has affirmed that noncompetition agreements, even if written narrowly enough not to deprive persons of their right to pursue their profession, are invalid under California law unless they fall within one of the few statutory exceptions.  See Edwards v. Arthur Andersen LLP, 189 P.3d 285 (Cal. 2008).

Raymond Edwards II (“Edward”) was a CPA of Arthur Andersen LLP (“Andersen”). When he was hired by Andersen, he signed a noncompetition agreement which prohibited him from working far or soliciting certain Andersen clients for limited periods following his termination. In June 2002, Andersen went out of business and announced that HSBC USA, Inc. (“HSBC”) would acquire a part of Andersen’s business, including Edwards’ section. HSBC offered Edwards employment on condition that he sign a “Termination of Non-compete Agreement” (“TONC”). The TONC required Edwards to, among others, (1) voluntarily resign from Andersen, and (2) release Andersen from “any and all” claims, including claims that in any way arise from or out of, are based upon or relate to Edwards’ employment by, association with or compensation from Andersen. In exchange, Andersen would agree to accept Edwards’s resignation, agree to Edwards’ employment by HSBC, and release Edwards from the noncompetition agreement.

Edwards signed the HSBC offer letter, but refused to sign the TONC because he was afraid that he would lose his right to request Andersen to indemnify his cost that may arise from the government investigation and civil lawsuits against him in connection with Andersen’s involvement in the Enron scandal. Andersen terminated Edwards’ employment and withheld severance benefits. HSBC withdrew its job offer to Edwards.

Edwards sued Andersen and HSBC for intentional interference with prospective economic advantage under the California statute. Edwards alleged that the noncompetition agreement violated California Business and Professions Code § 16600’s prohibition on restraining a lawful profession, trade, or business, and it constitutes one of the elements of the cause of action, i.e., a wrongful and intentional act by the defendant, designed to disrupt the relationship. In addition, Edwards alleged that the TONC was designed to have Edwards waive his indemnity right protected by California Labor Code Section 2804 making all contracts that waive an employee’s right to indemnification invalid, and thus unlawful. The California Court of Appeals agreed with Edwards’ view regarding the both allegations.

The Supreme Court of California agreed with Edwards’ first allegation only. Business and Professions Code § 16600 prohibits noncompetition agreements except for those in the sale or dissolution of corporations, partnerships, and limited liability corporations. The noncompetition agreement in this case did not fall within this exception. Andersen argued that the Ninth Circuit once ruled that another exception is available when a noncompetition agreement is drafted narrowly enough not to deprive the employee’s right to pursue his or her profession, and this case would be covered under this exception. However, the Court held that the Ninth Circuit misunderstood California law and California's strong policy in favor of open competition and employee mobility, and thus did not constitute a precedence. For Edwards’ second allegation, the Court interpreted the TONC narrowly so that it would not violate Section 2804. Under the Court’s interpretation, the waiver required TONC would not encompass Edwards’ right to request indemnity against Andersen, and thus not unlawful.

As a conclusion, the Court held that Andersen’s noncompetition agreement was unlawful and invalid, but the TONC was not unlawful and thus would not support Edwards’ tort claim.

This material will appear in Alan Gutterman’s publication entitled “California Business Transactions” and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.  Alan Gutterman is the Founder/Principal of Gutterman Law & Business (, which publishes the Emerging Companies Blog and the Business Counselor Blog, and a Partner of The General Counsel LLC (



Characteristics of Organizational Effectiveness

Every organization seeks to design and maintain the most effective structure and culture to support pursuit and achievement of the organization’s mission, goals and strategies.  Organizational design is a complex undertaking and this checklist focuses on major issues such as the vision of organizational leaders; the existence and clarify of an organizational mission statement; creation and implementation of a formal strategic plan; organizational governance procedures; organizational communications; definition of organizational tasks and responsibilities; and organizational procedures for training, rewards and resolution of problems.

  • Is there a clear statement of the vision of the organizational leadership as to where the organization aspires to be in the future?  A vision statement provides stakeholders with an image of what a successful organization would look like and serves as an important motivator for organizational members.

  • Is there a short, clear and concise mission statement for the organization that describes what the organization does, why the organization exists, how the organization seeks to achieve its mission and the persons who will be positively affected by the organizational activities?  The mission statement should be regularly reviewed.

  • Does the organization have a written strategic plan as well as an annual operating plan with implementation steps?  The strategic plan should include specific goals and objectives that are related to achievement of the stated mission of the organization and the operating plan should have detailed steps and budgets.  Each plan should be created by the executives of the organization with input from managers and supervisors at all levels.  There should be a regular strategic planning process.

  • Does the organization have a formal process for monitoring progress toward its goals and objectives and making adjustment to the strategic plan as necessary?  A strategic plan has little value unless the organization continuously tracks progress and measures new initiatives against the objectives of the existing plan.

  • Does the organization have a strong and well-organized board of directors or governance body?  The duties of the governance body should be clearly delineated and members of the body should collectively provide experience in each of the areas that are crucial to the success of the organization’s strategic plan.  Procedures should be established for continuously training members of the body and ensuring that they receive adequate information to discharge their duties.

  • Does the organization have a group of strong leaders who believe in the mission and values of the organization and who convey their passion and excitement to the members?  The organizational leaders serve as role models and teachers for the members and should always act in a way that is aligned with the expressed values of the organization.

  • Does the organization have a system for clearly defining the roles and activities of each of the members?  Members need to know their duties, with whom they are expected to communicate with, and how they are going to be evaluated and rewarded.

  • Does the organization have a formal system for communications and sharing of information?  Communication and information sharing is essential for coordinating activities throughout the organization, keeping members informed of news and defining and reinforcing cultural values and norms.

  • Does the organization have a formal system for training members about their job responsibilities and broadening their knowledge base so that they can assume different roles during their career path with the organization?  Training improves job satisfaction and makes it easier for members to work collaboratively with other members.

  • Does the organization has a well defined system for allocating rewards among the stakeholder groups based on their performance in pursuit of the organizational goals and objectives?  Allocation of property rights, including profit-based rewards, is a key issue in determining the culture of an organization and it is important for the reward system to be clear to everyone and encourage behaviors that support the mission, values and norms of the organization.

  • Does the organization have adequate policies and procedures for resolving problems that may arise during the day-to-day activities of the organization?  Things don’t always go according to plan and the mark of an effective organizational structure and culture is the ability to address problems quickly through coordinated effort from all relevant groups within the organization.

This material will appear in Alan Gutterman’s publication entitled “Business Transactions Solutions” and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.  Alan Gutterman is the Founder/Principal of Gutterman Law & Business (, which publishes the Emerging Companies Blog and the Business Counselor Blog, and a Partner of The General Counsel LLC (





Department-Level Technology

Technology is an important factor in designing work activities at the department level.  To learn more read my report on Charles Perrow and department-level technology.



Major Categories of Legal Needs for Technology Companies

In today’s business world, all companies, regardless of the technology-related aspects of their business model and activities, are required to understand and comply with a plethora of laws and regulations, including:

  • Common law legal relationships with employees, creditors, and landlords;

  • Various licensing requirements imposed by federal, state, and local governments;

  • Federal and state securities laws;

  • Intellectual property rights;

  • Employment laws;

  • Federal and state tax laws and regulations, including the reporting obligations imposed under such laws;

  • Domestic and foreign laws regulating technology transfers and the form and content of many common commercial relationships;

  • Federal and state statutes relating to antitrust and unfair competition;

  • Corporate governance rules and regulations;

  • Federal and state laws relating to privacy and data security; and

  • Federal and state statutes relating to consumer protection and other matters.

These requirements apply regardless of whether the business is operated as a proprietorship, a partnership, a limited liability company, or a corporation.  Moreover, each form of entity has its own set of operational rules that must be followed in order to gain the legal benefits from the use of the entity.  For example, in order for the shareholders of a corporation to take advantage of the limited liability offered through the use of the corporate form, they must observe certain governance procedures and operational formalities.


Based on what I have been seeing a list of the major categories of legal needs for technology companies should include the following:

  • Management of existing intellectual property assets and establishment of strategies and procedures for creating and protecting new assets;

  • Compliance with environmental, product testing, health, and safety regulations, including new “green” initiatives;

  • Employment-related issues including compliance with applicable federal and state employment laws;

  • Federal securities laws including Sarbanes-Oxley;

  • International operations including compliance with export/import law requirements;

  • Privacy and data security laws and industry guidelines;

  • Accounting and financial reporting requirements;

  • E-Commerce; and

  • Litigation and e-discovery.

In the last two years increased emphasis has been placed on international operations, as more companies are pushed into global business activities, and e-discovery.  Concerns about Sarbanes-Oxley principles have also expanded to include many private companies.  E-discovery and privacy and data security laws are generally quite a mystery and surprise to executives, and each expansion into new foreign markets typically leads to unforeseen challenges that are not always planned for in advance.  For example, the lack of speed and expected costs associated with obtaining business licenses in new foreign markets often upsets even the best strategic plan for launching new activities in those markets.  Another problem is attempting to enforce legal rights in foreign courts.  The scope, complexity, and costs of litigation continue to rise even as the economy remains flat, and litigation generally takes up a much larger percentage of the resources allocated to the legal needs of technology companies.


Changes in the legal needs of technology companies tend to follow changes in the risk profile associated with their business activities.  In addition to the legal audit and compliance programs discussed later in this chapter, technology companies and their counsel must establish and continuously maintain risk assessment programs that facilitate identification and management of the material business risks faced by such companies.  Any such assessment must address all threats to management achieving its objectives, including those in the areas of operations, financial reporting, and compliance with laws and regulations.  The process of risk assessment includes identifying the risks, estimating the significance of the risks, and then selecting methods to manage them.  Auditors and others have identified a number of factors that they consider strong indications of increased financial risk.  Therefore, management should be aware of their existence and increase its control mechanisms when the following factors exist:

  • Changes in the organization’s regulatory or operating environment;

  • Changes in personnel;

  • New or revamped information systems;

  • Rapid growth of the organization;

  • Changes in technology affecting production processes or information systems;

  • New business models, products, or activities;

  • Corporate restructurings;

  • Expansion or acquisition of foreign operations; and

  • Adoption of new accounting principles or changing accounting principles.

The content in this report has been adapted from material that appears in Alan Gutterman’s publication entitled “Business Transactions Solutions” and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.  Alan Gutterman is the Founder/Principal of Gutterman Law & Business (, which publishes the Emerging Companies Blog and the Business Counselor Blog, and a Partner of The General Counsel LLC (