Dear readers: Please consider the following as a discussion point for every investor, board member, or any participant in any endeavor that may require a legal system to resolve any dispute. Thank you for taking a few minutes time to read.
Now, let’s begin with a two-minute quiz. Here’s a quote.
We enjoy a form of government that does not emulate the institutions of our neighbors; indeed, we ourselves are more often the model for others than their imitators. Democracy is the name we give to it, since we manage our affairs in the interests of the many not the few; but though everyone is equal before the law in the matter of private disputes, in terms of public distinction preferment for office is determined on merit, not by rank but by personal worth; moreover, poverty is no bar to anyone who has it in them to benefit the city in some way, however lowly their status. A spirit of freedom governs our conduct, not only in public affairs but also in managing the small tensions of everyday life, where we show no animosity at our neighbors’ choice of pleasures, nor cast aspersions that may hurt even if they do not harm. Although we associate as individuals in this tolerant spirit, in public affairs fear makes us the most severely law-abiding of people, obedient to whoever is in authority and to the laws, especially those established to help the victims of injustice and those laws which, though unwritten, carry the sanction of public disgrace.
Who said it? Biden? Trump? Lincoln? Jefferson? Oliver Wendell Holmes? Please guess if you do not recognize the quote.
For those who do not recognize the quote, we will reveal the source at the end of this essay.
Now let’s get to the Rule of Law and its importance for businesses and investors and board members.
My friend of many years Peter Gold wrote the following as part of an internal memorandum and has given me permission to quote him.
Fortunately, over the centuries the invisible hand has been given a hand – a big one – by the Rule of Law (ROL). Historically the ROL has, whether expressly and/or tacitly, provided “rules” which have created expectations and protected individuals, organizations, and their actions from economic and social disruptions and, in fact, have prevented free actors from becoming agents of harm. It has also provided guidelines to recognize and incentivize positive activities, gain and remarkable improvements to quality of life. Perhaps in Adam Smith’s parlance, the ROL provides a framework or system within which the invisible hand functions. The ROL results in promoting business and the rational deployment of global capital. It is, I contend, indispensable for the efficient organization of an economy and its ability to sustain a socially acceptable quality of life.
Here are Peter’s credentials and how to contact him. Peter A. Gold, Esquire is admitted to the Bar of the Supreme Court of the United States of America, the Supreme Court of Pennsylvania, the Supreme Court of New Jersey, and various other federal and state courts. He was a law clerk, United State Court of Appeals for the Third Judicial Circuit, and an instructor at the Wharton School, University of Pennsylvania. He was also Senior Associate Dean, School of Business, Associate Provost for Economic Initiatives, and President of the Business Incubator Corporation, Rutgers University. He also served several terms as Board Vice Chair of the Global Interdependence Center and was the Founding Chair of GIC’s College of Central Bankers, which comprises the leadership of 20 central banks from around the globe. He is the principal of TheGoldGroup, LLC, and can reached at [email protected]. 609-923-8690.
Peter is involved in a special project called the Rule of Law Discussion Community. This group, which is in the formative stage, is composed of distinguished international thought leaders whose mission is to assist with understanding the importance of the Rule of Law and how adherence to such principles affects economic and physical well-being, the quality of life, and democratic order and freedoms. This project has material implications for decision makers in board rooms to operating rooms to federal and state legislative caucus rooms and to courtrooms.
The group’s purpose includes getting this topic onto the agendas of boardroom and business conferences. That is why I have decided to devote this commentary to the subject. For investors, managers of financial operations and corporate decision makers, the discussion of legal issues and legal risks is a daily occurrence. At Cumberland, we deal with legal interpretations and legal risks to securities and to municipalities daily. In American commerce and finance, legal elements are a component part of nearly every transaction or decision.
But how much do we invest in the understanding of the Rule of Law? How much conversation is devoted to the underlying philosophy of the system we all look to when we want that system to protect us and to render fair and equal justice? In explaining the purpose of this “discussion community,” Peter notes the threats to our legal system and the ROL that are extant in today’s environment. He and I have discussed our tendency in the business world to take the ROL for granted and to assume the court system will operate in the traditional, functionally efficient American way that we learned about in business school and law school. We studied cases. And contracts. And dispute resolution. I recall my own courses in law and the financial aspects of law. But all that is based on a trusted system with well-grounded principles.
Our challenge is not to take those principles for granted. Peter’s idea is to add the defense of those principles and the understanding of them to our business and entrepreneurial agendas. I think Peter is right, hence today’s missive.
Let me add a disclosure. My colleague John Mousseau is a member of this discussion community. He contributes to the conversation and brings his experience and perspective in municipal finance to their discussions. This ROL Discussion Community is not only lawyers; it is quite diverse; it is apolitical, nonpartisan – Republicans, Democrats, liberals, conservatives, independents, libertarians, and non-identified others. The litmus test is believing in the importance of adhering to the ROL. Current membership includes the following sectors: banking, healthcare, insurance, financial services, academia, general business, military, and others. It is expanding in numbers. For further information contact Peter Gold directly.
Now to the conclusion of this missive and the answer to the quiz about who was quoted at the beginning.
The speaker was one of the very first leaders to advocate for the functioning of a democratic society and for operating with the rule of law. In those days, law was an organizational structure that included only men. And they were mostly prominent and wealthy. The quotation is from the famous “Pericles's Funeral Oration”, when Pericles spoke in honor of the first Athenians to die in the initial year (431 BCE) of the Peloponnesian War.
That was a war fought over regional hegemony. Included in that contest was a test of the first democracy (Athens), which was trying to practice the Rule of Law. The source is The Peloponnesian War, by Thucydides. My copy of the translation from Greek to English is by Martin Hammond, published by Oxford World Classics.
For more information about the international status of the Rule of Law, see https://worldjusticeproject.org. They publish a Rule of Law Index here: https://worldjusticeproject.org/rule-of-law-index/global. The US now ranks 26th out of 142 countries. Seems to me that Peter and his colleagues are involved in a very important issue for all of us who depend on the Rule of Law to protect us. Please feel free to contact Peter directly if you have serious interest in this subject.
David R. Kotok
Co-Founder & Chief Investment Officer
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