Academic journal article Texas International Law Journal

Legal Complexity in Cross-Border Subsidiary Management

Academic journal article Texas International Law Journal

Legal Complexity in Cross-Border Subsidiary Management

Article excerpt


Law plays a central role in business operations and decision making. A recent study, based on evaluations from over 900 senior managers who attended university-based executive programs, concluded that learning about law ranks third in value, behind organizational behavior/human resource management and finance, among the required subjects in MBA programs.' As Constance Bagley has succinctly observed: "[M]anagers need to understand how the law can minimize risk and create value.,,2

When managers assume international responsibilities, they frequently encounter especially complex legal challenges. Business decisions that normally involve the analysis of one country's law now require multiple, and sometimes conflicting, legal analyses. As a result, managers must have the ability to understand and act on the legal advice provided by corporate counsel. Corporate counsel, in turn, must understand the business concerns faced by managers in a global business environment.

The purpose of this article is to examine, by means of a business case, the complexity inherent in an expatriate assignment. In the case, a manager on her first international assignment (as an officer of a U.S. company's German subsidiary) faces a number of management concerns that have legal overtones. These management/legal concerns include intellectual property and insider trading issues relating to the launch of a new product, an age discrimination claim, the hiring and dismissal of employees, and the development of company policies on childcare leave. Two exhibits accompany the case. The first exhibit is a memorandum from outside counsel analyzing the company's liability exposure in an age discrimination lawsuit. The second exhibit is an e-mail exchange between the manager and her in-house counsel.

Because this article employs an unusual methodology-the use of a business school-- style case-Part 11 provides an overview of the differences between the case method used in business schools and case study in law schools. Part III presents the case and the two exhibits.3 In Part IV, the issues raised in the case are discussed,4 and in Part V, conclusions are drawn from the case study.


Part III of this article presents a fictionalized account, in the form of a business school case, of several business and legal dilemmas faced by an international manager. As the case illustrates, there are fundamental differences between the nature and use of cases in law and business schools.

In U.S. law schools, the study of litigated, decided cases is considered to be the primary method of instruction.5 The lecture method originally was popular in the private law schools that dominated early legal education. When legal education migrated to colleges and universities, the textbook method (which combined lectures by instructors with quizzes based on material that students memorized from textbooks) replaced the lecture method and this in turn was superceded by the case method.

Although individual professors had previously used cases to teach law, the case method became dominant as a result of the influence of Christopher Columbus Langdell, who was elected dean of the Harvard Law School in 1870.8 To Langdell, the purpose of legal education was not merely to educate lawyers, but to provide all students with "the same facilities to investigate the science of human law, theoretically, historically, and thoroughly as they have to investigate mathematics, natural sciences, or any other branch of thought."9 He viewed law as an inductive science, the principles of which could be derived from primary source materials-legal cases.10 As Arthur Sutherland noted:

To [Langdell] proper study of the law, like the study of chemistry, physics, zoology, and botany, consisted in the careful observation and recording of many specific instances, and then from these instances derivation of general conclusions that the qualities of the phenomena or specimens observed would hold constant for other instances of the same classes. …

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