Business Basics for Law Students

Thanks to Dave and the other folks at Concurring Opinions for inviting me to blog this month. I plan to write about two topics close to my heart: corporate law and the law school curriculum.

I want to start with a topic that combines both of my passions. Over the last four years, I have taught many students who develop an interest in corporate law after spending their undergraduate years studying philosophy, political science, or other non-business subjects. These students all worry that they do not have the business knowledge to succeed as corporate lawyers. It is easy to tell them that they will learn on the job, and certainly that is true to some extent, but I wonder if law schools should be doing more to introduce students to basic business and finance concepts.

I have often struggled with how to teach my students these concepts. On one hand, our job is to teach law. Teaching students about venture capital funding or accounting rules is arguably beyond this purview, at least unless a case deals directly with these concepts. On the other hand, I want to prepare my students to be lawyers, a task that requires teaching more than just the black letter law. I would hate to send my students out into the world with a strong understanding of Revlon and Unocal, but with no understanding of the business issues underlying basic M&A transactions.

The conventional approaches to teaching these skills have always seemed unsatisfying to me. Many professors require their students to read the Wall Street Journal every day. I think it is great to get future corporate lawyers into the habit of reading the business press, but I am also not sure that it really teaches them basic business skills. They may learn which hedge funds are making the most money (good information for client development, I suppose), but they still may not understand exactly what hedge funds do.

Other professors try to cover business basics in their traditional law courses. While discussing a case about venture capitalists, you can explain the concept of stage financing. In a case about accounting misstatements, you can discuss revenue recognition and reserve policies. But I am already hard-pressed to cover all of the relevant legal rules in my courses, and there is no way students leave my Corporations class with anything more than a scattershot sense of a few business concepts.

Finally, many schools offer students the opportunity to get a joint JD/MBA. I am not sure, however, that these programs target the business skills that law students most need to know. Full-semester courses on marketing and organizational management may be overkill for most law students.

I wonder about a simpler solution. What if law schools offered business courses geared directly to law students? In many ways, of course, law schools already do this. Most law schools offer corporate finance and accounting, two courses where students may not read a single case or statute, focusing instead on core business concepts. Yet for the political science major who hopes to be a transactional lawyer, these courses leave out crucial information about how the business world works. A course titled something like Introduction to Business Concepts could target this information directly. It could start by introducing the main players and then teach students about different facets of the business world. It could give students a concrete sense of what investment bankers, credit managers, and angel investors do and how different divisions operate in a typical business. It could also include guest speakers from various businesses to give students a real-life perspective on how businesses operate.

Does your school offer such a course? If so, how is it working?

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12 Responses

  1. At BU, we’ve talked about all of these options (and more) without a silver bullet. The faculty teaching corporations (4 professors with 1 section each) and advanced corporate law courses (deals, sec reg, corp fin, M&A) have informally coordinated on the “embedded” approach (teaching business concepts as part of the relevant cases). In the fall, Tina Stark will join us from Emory, to begin a program in transactional law. The “Financial Reporting for Lawyers” class is very popular, but is generally taken after corporations, unfortunately.

    As for written materials, I suggest the WSJ to my corporations students and use it to illustrate business concepts in class. I’d like to have a succinct book to give them covering business basics. Perhaps people can post the business supplement books they’ve used, with strengths and weaknesses. The best one I’ve seen is Klein & Coffee’s Business Org & Finance, now in its 11th edition. I’ve suggested it for 5 years, with mixed results.

  2. dave hoffman says:

    At Temple, we’ve taught a “business basics” course (1 credit) as a mandatory pass/fail 1L course, and (more recently) as an upper year elective. My sense is that works much better as an elective, because the pass/fail, coupled with the 1 credit status, made it a tough sell in the first-year fall.

  3. Hamilton and Booth, Business Basics for Law Students (Aspen, 4th ed. 2006). Problem solved (if they read it)! Seriously, this is a fantastic supplement to lay the business basics groundwork for humanities majors like I was, and I found Klein and Coffee interesting but not as useful for this purpose.

  4. Logan says:

    I’m kinda surprised they don’t already have this given in my business undergraduate course work at Appalachian State I took several business law courses (i.e. law basics for business students).

  5. Lawrence Cunningham says:

    Many teachers, in both law schools and undergraduate A&S departments, teach The Essays of Warren Buffett: Lessons for Corporate America, the collection of WB’s famous letters to shareholders of Berkshire Hathaway.

    I compiled these based on a symposium I hosted years ago at Cardozo Law School, featuring two dozen luminious legal scholars (including Mel Eisenberg, Jack Coffee, Jill Fisch, and Lynn Stout). Helpful teaching notes have been prepared by Leo Chan.

    Any law teacher wishing to consider teaching it, let me know and I’ll send you a free copy. I just happen to have discovered an extra box when cleaning up my office for spring!

  6. A.J. Sutter says:

    I learned about business while on the job as a lawyer. About 10% of what I learned was during more than 10 years of BigLaw transactional practice. I didn’t start to learn anything real until I went in-house after that. So I think it’s all too easy to overestimate what you might be teaching about business if you haven’t really been in it, which describes most law school profs.

    Moreover, I think it’s troubling that law schools should be teaching the dogma of capitalism instead of providing students with a point of view and critical skills that enables them to view that dogma more disinterestedly. If you want to teach students how to think critically about economistic and MBA-style thinking, there might be some value to that — but probably emphasizing some of the values of the law, such as equity, justice, etc., is more within most faculty members’ skill set.

    I realize that there is something quixotic about this comment, given that most faculty, far from decolonizing their minds from the Law & Economics influence, have willingly submitted to it in the hopes of getting tenure. But there are many better things the legal academy could be teaching their students than what can be learned from browsing the business section of any bookstore (assuming there still are any of those in the US these days).

  7. Dave Hoffman says:

    “I realize that there is something quixotic about this comment, given that most faculty, far from decolonizing their minds from the Law & Economics influence, have willingly submitted to it in the hopes of getting tenure.”

    AJ, I think this is pretty unfair & not reflective of what’s happening on the ground. Economically driven analysis remains the exception, not the norm, and I would bet that the majority of what’s actually done is critical or at least not orthodox in applying economic analysis. (Indeed, it’s a common complaint among L&E folks that law professors haven’t seen a market that’s not failing in some way and in need of regulation.)

  8. A.J. Sutter says:

    Dave, I didn’t mean to suggest that all law profs advocate free markets. The complaint that most law school treatments of economics are critical of free markets, though, does sound like the discussion of markets all too often frames the analysis. That was not at all the case when I was in law school (which was within the lifetime of most contributors to this blog), other than in antitrust. And that was more my point. Nonetheless, I’d be happy to hear that even this impression is mistaken. Then the main substance of my comment to the post is less quixotic and, I hope, will be taken more to heart.

    E.g., teaching people from a book by one of the richest men in America, who got that way by investing, may be a way of filtering the teaching of business concepts through an investor’s point of view. Why privilege that? (For that matter, why does “accounting for lawyers” emphasize financial and tax accounting, rather than other forms of accounting, e.g. cost accounting? In my practice, the latter is quite important to my clients.) Why not teach about business from the employees’ POV? Or from a point of view that regards corporate social responsibility as extending beyond shareholders and even beyond stakeholders? Why not teach about CSR based on the notion that any company with annual revenues bigger than the GDP of some country can’t deny having such responsibility? (Includes all the Fortune 500, BTW.) Alternatively, why not let students learn about economic and business concepts on their own? As I suggest, the conventional classroom component of this material is easily gleaned from the business press, and there is plenty of material in the legal sphere that deserves attention.

  9. Lawrence Cunningham says:

    AJ (8): Quite a wounding comment for me, the compiler of Buffett’s Essays and author of the leading textbook on Law and Accounting. My students live in and will work in a capitalist society, of course, neither of those books promotes any “dogma” and those and others I’ve prepared address the perspectives you mention explicitly. It seems unfair to condemn the books or some sense of prevailing teaching content in the way your comments do. –LC

  10. A.J. Sutter says:

    Lawrence, no wounds intended, to you least of all! Since I didn’t want to imply I’d seen your Buffett book, please note that I did say the book “may” promote a certain attitude — though the Amazon blurb does promise “[h]ere in one place are the [sic] priceless pearls of business and investment wisdom.” And I admit I base my ideas about prevailing teaching content on the comments of contributors to this blog and others, and the law review articles and working papers I see coming out of the legal academy. If there is a big disconnect between what law professors write and what they teach, my mind is open to that being a good thing. (Since I myself write professionally for business magazines, teach in executive training courses, and have published a couple of business books myself, though, I suspect my comments are not entirely out of touch with with that field of pedagogy. And while it may be dangerous to judge from the TofC to an early edition of your textbook, if I were a betting man I’d wager you don’t focus much on the sociological approach taken by the Francophone authors mentioned in my comments to this recent post of Frank Pasquale’s. Would I lose?)

    We all live and work in one capitalist society or another. But promotion of dogma isn’t so much what I mean as promotion of basic assumptions and attitudes. The putative relevance of markets (failed or otherwise) to legal analysis being but one example. An even better one is the original post’s suggestion for a course that “could give students a concrete sense of what investment bankers, credit managers, and angel investors do and how different divisions operate in a typical business.” Only a very elite fraction of businesses will ever need to deal with IBs, angels, credit managers or VCs (mentioned earlier) — or have “divisions”. The characterization of these as being pertinent to a “typical” business is perhaps something Uncle Pennybags could relate to.

  11. Lawrence Cunningham says:

    AJ–Thanks very much for your characteristically thoughtful reply. –LC

  12. Jessica Erickson says:

    Thanks for the thoughts and suggestions! A.J., you’re completely right that my suggested topics were skewed toward big business. My ideal course would skew the other way, and I should have made that clear. My practice experience focused on larger companies, and the list in my post simply highlighted a few things I wish I had understood a little better as a new lawyer. But I agree that we should start with the business basics that lawyers in small and mid-sized firms are likely to encounter. As you point out, they will undoubtedly learn much more during their years in practice, but I am not opposed to giving them a head start if we can!