The Status of Law in Academic Business Study:

1998 Report of the President’s Task Force

 

One meaning of status is relative relationship within a group or organization. Considering this meaning, we might observe that within academic business study larger disciplines enjoy higher status than smaller ones, more quantitative ones possess higher status than less quantitative ones, and disciplines that are paid more have higher status than those paid less. In another sense, however, status means "state of," and it is from this broader sense that the Academy of Legal Studies in Business Task Force on the Status of Law in Academic Business Study undertakes the work charged by President Caryn Beck-Dudley. The following report examines the state of legal studies within the departments, schools, and colleges of business where ALSB members teach and research.

The status of law in academic business study intertwines with several factors internal and external to higher education itself. For purposes of organization, the Task Force Report divides these factors into several major groups. First, it analyzes the theoretical and actual importance of law to private enterprise and the market system, including a content analysis study of the wall street journal. Next, it considers the history of legal studies of business within the academic setting, outlining developments during this decade to the ALSB itself and identifying the presence of legal study in the "Perspectives" of the American Assembly of Collegiate Schools of Business. Third, it examines current changes in legal studies course offerings and research and presents a survey of representative ALSB schools. Finally, it explores developments concerning declining ALSB membership. The report concludes that the future status of legal studies faculty requires ALSB members to be involved and proactive regarding the rapidly evolving landscape of higher education generally and academic business study in particular.

The Task Force acknowledges the influence on its work of two prior reports that were issued at the beginning of the decade: "The Role of Law in the Business Curriculum" authored by committee chair John R. Allison of the University of Texas at Austin, and "The Status of Law Faculty in Business Schools" authored by committee chair Michael B. Metzger of Indiana University. In an effort like ours, standing on the shoulders of giants always provides the preferred perspective.

 

 

The Importance of Law to the Private Enterprise System

 

Academic business study tends to be professional and career-centered in orientation. The disparate functional areas - marketing, accounting, management, finance, information systems, production - reflect the organizational structure of the business enterprise. At the same time, academic business study seeks to supply overarching unifying theory, primarily through the social sciences, and particularly economics, and to a lesser extent psychology and sociology. Because understanding how the market system works provides students insight into a major social ordering force, economics is thought of as the most widely-regarded unifying discipline in academic business study.

At the same time, however, law is almost as significant as economics in theoretical terms, and its applied importance to business spans the functional areas even more broadly than does economics. To the daily practice of accounting, finance, information systems, management, and marketing graduates, law is inescapable and omnipresent. It supports, facilitates, and regulates successful business practice in all the functional areas.

Nobel economist Frederich von Hayek describes the theoretical importance of law to private enterprise. According to Hayek, law that secures property rights in modern society is prerequisite to private enterprise. Without the order of law enforcing private property ownership and facilitating the transfer of property rights, business enterprise in a complex, heterogeneous culture is simply infeasible. A more basic underpinning for academic business study is difficult to imagine.

The importance of law to the conduct of private enterprise is evident in economic developments in the former Soviet Union and the Republic of China. In moving from state-controlled to private enterprise, these countries have faced substantial difficulties arising from lack of a legal system that would secure property ownership and the contractual transfer of property rights. Reports from Russia indicate continuing economic turmoil due largely to the absence of adequate legal institutions and the absence of social experience in observing legal rules securing the marketplace. Not law, but extortion, intimidation, and violence today control much private enterprise in Russia. That Russian leaders appreciate the predicament is reflected in an account that as a group of political leaders planned for a new order following the Soviet Union’s collapse, they had in hand only one academic resource, reported by the wall street journal as a "business law textbook."

In contrast to the economy of the former Soviet Union, China’s economy has grown steadily in recent years. Minxin Pei, a political scientist at Princeton University, explains law’s contribution to that growth: "Legal reform has become one of the most important institutional changes in China since the late 1970. . . . Within China, the changing legal institutions have begun to play an increasingly important role in governing economic activities, resolving civil disputes, enforcing law and order, and setting the boundaries between the power of the state and the autonomy of society." Dr. Pei reports that the number of lawyers in China grew threefold between 1986 and 1996 and that the number of commercial disputes adjudicated by the courts grew from about 15,000 annually in the early 1980s to some 1.5 million annually in the mid-1990s. Although Dr. Pei recommends further extensions to the rule of law in China, he explicitly acknowledges its central importance in the current economic growth of that country.

Of course, the importance of law to private enterprise goes far beyond its initial support as an institutional framework guaranteeing ownership rights. As the market system grows more complex both nationally and internationally, the legal recognition of promise keeping becomes increasingly significant in facilitating business. A condition for emerging economies entering international trade is learning how to keep promises to strangers, and whether enforced through litigation or arbitration, promise keeping in business requires the ordering presence of contract law.

In a democracy, law is important to business for another reason quite separate from its function in establishing ownership rights and facilitating the promise keeping necessary to their transfer: it provides the formal expression of democratic social will. That expression implicates private enterprise in a plethora of ways, including regulation of the environment, employment laws, securities regulation, consumer protection statutes, and products liability. As contemporary society becomes increasingly diverse, law grows, not diminishes, in its importance to private enterprise, and in spite of valid concerns about the impact of law on efficiency, future business managers will need to know more, not less, about how law affects business operations. No evidence suggests any other conclusion.

A content analysis study undertaken by the Task Force specifically examined the importance of law to private enterprise as found in the business press. The study looked at coverage of legal issues in the wall street journal, the most widely read organ of the business press, as a measure of the importance of law to private enterprise, analyzing articles on the front page, editorial and opinion page, and B-1 business page of each wall street journal issue for the month of April 1998. Only articles of several paragraphs were considered.

The study revealed that 11.6% of the front page articles, 25.6% of the editorial and opinion page articles, and 16.2% of the B-1 page articles were about law, i.e., a description of a specific legal issue was the major focus of the article. An additional 35% of the front page articles, 19.8% of the editorial and opinion page articles, and 23.9% of the B-1 page articles contained legal subject matter highly salient to the articles, subject matter that would be likely covered in legal studies of business. In total, 130 of the 298 articles examined, or 46.4%, either specifically concerned law or else contained law-related subject matter, a figure strongly suggesting the significant import that business journalists find law holds for business.

Both the theoretical and applied importance of law to private enterprise warrant its inclusion in academic business study. Omission of legal studies courses from such professional study would have serious real-world impacts on future business managers as well as leaving them with a large void in their understanding of how law sustains private property ownership, facilitates property transfer, and formally expresses social will regarding business operations. Concern over specific laws and the need for legal reform only underscore the important status of law to colleges, schools, and departments of business responsible for educating business leaders. Business leaders who lack adequate legal education are hardly in a position to appreciate the substantial impact of law on business or to work toward needed legal reform. They also risk being featured in the wrong kind of article in the wall street journal.

 

 

Legal Studies Within Academic Business Study

 

Legal studies history is key in appreciating the current status of law in academic business. In this report, however, the discussion of legal studies of business history intentionally focuses on only certain aspects of that history. Furnishing a more complete historical perspective is Frederick G. Kempin, Jr.’s, A History of the American Business Law Association (1974), which, incidentally, the Task Force recommends be made available, along with this and other reports, through ALSB web pages.

From the inception of academic business studies, law has been highly regarded. With the establishment of the Wharton School of Finance and Commerce in 1881, Joseph Wharton specified that the curriculum should include five subjects, one of which was law. The other subjects were "accounting and bookkeeping," "money and currency," "taxation," and "industry, commerce and transportation." Reflecting his highly applied concept of academic business study, Wharton outlined the teaching of law as comprehending the Constitution, commercial and mercantile law, partnership and corporate law, "so-called international law," the law of common carriers, and insurance law. With keen farsightedness in an area still debated today in tort reform, Wharton also called for the study of "the present status of commercial legislation and the directions in which improvements may be hoped and striven for, particularly as to harmonizing or unifying under United States laws, the diverse legislation of the several states of this nation . . . ."

Absent by name from Joseph Wharton’s 1881 list of business law topics was contract law, a topic that was to become the organizing focus for business law study in the twentieth century. Wharton’s contemporary Christopher Columbus Langdell of the Harvard Law School was largely responsible for developing the modern study of contract law with the insistence that his selected principles of such law furnished a "scientific" basis for legal study. Certainly, promise keeping as grounded in contract law is necessary for the adequate functioning of a complex marketplace, and promise keeping as both a legal and ethical construct is theoretically central to the private enterprise system. Kempin observes that by 1904 Professor John J. Sullivan was teaching a business law course at the Wharton School that covered "contracts, negotiable instruments, and agency," a course not far different in content from what some first business law courses still cover in the late 1990s.

Nevertheless, the increasing importance of legislation as an expression of democratic social will and the consolidation of federal power during the Great Depression, the New Deal, and World War II indicated a new dimension for academic business study. By the 1950s critics were calling for changes not only in law but also in business study generally. In 1959 the Ford Foundation report by Gordon and Howell Higher Education for Business described the traditional business law emphasis on the principles of contract as "narrow" and recommended replacing the traditional course with a new course on the "legal framework of business" would examine such topics as law in society, the U.S. legal system, and the changing relations between business and government.

Following the Gordon and Howell report, a ferocious debate broke out in the ranks of the American Business Law Association concerning the nature and scope of business law, a debate still not totally resolved. Numerous panels at ABLA meetings and a volume of literature that grew steadily through the 1980s argued over the appropriate approach to and content of the initial business law course, which, increasingly, was recognized as the only law-related course that many business students would ever take. Camps formed within the ABLA that championed either traditional contract law or a new "legal environment" approach that emphasized public law and the legal process.

After 1990, however, the furor seemed to subside, if not end. To some extent there appeared a blending of the two predominant approaches to academic study of law in business, but following the American Assembly of Collegiate Schools of Business’s description of academic legal study as the "legal environment of business" and its 1990 embrace of "legal and regulatory" issues as part of business study perspectives, the required business law course often became titled "The Legal Environment of Business," whatever its content. In 1991 the American Business Law Association, which had begun in 1924 as the Association of Instructors of Law in Collegiate Schools of Business, became the Academy of Legal Studies in Business, further reflecting the legal environmentalization of the academic study of law in business.

Around the time of its name change, the Academy of Legal Studies in Business began to change institutionally as well. In 1985 the Journal of Legal Studies Education, which focuses on legal studies pedagogy, began publication to provide accompaniment for the research outlet of the American Business Law Journal, then in its twenty-third annual volume. The Newsletter of the ALSB, which had been occasionally published for many years, became a slick, thrice-annual issue in 1992, edited by the Executive Secretary’s office. Further reflecting the environmentalization of the legal studies of business, the ALSB started adding specialized sections to its membership, sections predominantly representing social issues and the public law regulation of business. First came the section on ethics in 1991, followed by the section on international law. Then in rapid succession have come sections on feminist issues, environmental law, employment law, and marketing law. By 1998 a significant fraction of the entire ALSB membership are also section members.

 

 

Legal Studies Course Offerings and Research

 

As the proliferation of ALSB sections suggests, the status of law in academic business, concerning both the types of courses offered by legal studies faculty and the subject matter (and to some extent the methodology) of legal studies research, has evolved in recent years. In the waning years of the twentieth century, these developments portend significantly for the future of ALSB members.

To examine current course offerings of ALSB members, the Task Force surveyed legal studies programs at ten research universities and a similar number of programs in the California State University System. Both surveys yielded the same insight: in the last ten to fifteen years there has been a proliferation of legal studies courses and in almost no instance a contraction in the number of courses. In addition to traditional business law and legal environment courses, courses in ethics, international law, employment law, estate planning, real estate law, technology law, marketing law, and others have been added to the legal studies of business curriculum. Perhaps, the most dramatic curricular development has been the expansion of legal studies faculty into the teaching of ethics. A study in the Journal of Business Ethics found that 22.9% of business ethics courses were being taught by legal scholars, almost as high a percentage as were being taught by philosophy and religion Ph.Ds, and a higher percentage than were being taught by faculty holding doctorates in management.

ALSB members should take the proliferation of legal studies courses, including ethics, as a positive sign for the future status of our discipline. In the rapidly evolving curriculum of business schools, legal studies must also evolve, and must be perceived as evolving by other disciplines, in order to secure courses and faculty in the academic business study of the next century. On the other hand, legal studies faculty who refuse to add new offerings to largely traditional programs are those at the highest risk of being considered irrelevant by their colleagues in other disciplines. Fortunately, the Task Force does not detect such curricular intransigence in most legal studies programs.

Worthy of note is the proliferation of law courses in schools and colleges other than business. In agriculture, consumer science, engineering, ecology, journalism, and elsewhere across the university, new law courses are being offered to students. Although the proliferation attests to the fundamental value of law in collegiate studies, it also may draw enrollment away from the business program, and when faculty in other disciplines lack adequate legal training, new law courses tend to have an inappropriate "rules only" orientation. Legal studies of business faculty should involve themselves in the development of law courses outside the business program, including the development of general law offerings for collegiate study.

The nature of research done by ALSB members certainly affects the status of law in academic business study. Whereas the dominant research paradigm within business schools derives from what one business school dean referred to unflatteringly as "aping the social sciences," legal research has roots in the analytical approach of history and philosophy. The fact that legal research largely lacks quantitative methodology, however, makes legal scholars different in the eyes of other business school disciplines, and difference in this regard proves no advantage to ALSB members.

Legal studies of business faculty, however, can often educate their colleagues in other disciplines, many of whom have never read a law review article, about the nature of legal research and the contributions it makes to the research mission of the business school. Regarding the nature of legal research and its contributions, the Task Force recommends "The Role of Legal Scholarship in the Business School," an ALSB committee report authored by John R. Allison that appeared in the Journal of Legal Studies Education and is cited in the chronological bibliography of this report.

The Task Force takes impressionistic notice of the fact that ABLJ and other law review articles increasingly employ statistical and quantitative methodologies as at least an adjunct to the traditional analytical method of legal research. One way to improve the status of law in academic business study is for legal scholars to show they use social science methodology when relevant to legal research. Certainly, our discipline currently offers sufficient outlets for new styles of research by ALSB members, and in addition to the ABLJ, which first was published in 1963, law journals are published now by a number of the ALSB’s eleven regional academies, several of which have sponsored new journals since 1990.

 

 

Declining ALSB Membership

 

Over the last decade, ALSB membership has declined by approximately twenty percent. This decline affects the status of the ALSB and could be construed as indicative of a systemic general decline in the status of law in academic business study. Certainly, the membership drop-off taps into some of the most primal fears of ALSB members regarding their discipline.

Changes to AACSB standards in the 1990s have encouraged curricular diversity and innovation. Although the AACSB "Perspectives" mention appropriate coverage of "legal and regulatory" issues, no particular law course is actually required in academic business study, and in one scenario accounting for declining ALSB membership, schools are perhaps eliminating legal studies programs and integrating law throughout business study. Alternatively, or in addition, deans may be addressing the attrition of full-time legal studies faculty, who are likely to be ALSB members, with readily available part-time replacements who are not. Or schools may not be replacing legal studies faculty at all. For legal studies faculty who view themselves unlike their academic colleagues in research, training, and their largely service role in academic business study, the decline in ALSB membership makes them feel vulnerable at best and at worst subject to fin de siècle professional depression.

The Task Force recognizes the service role of legal studies faculty in the business curriculum and acknowledges the occasional horror story about what some dean has said about or even done to legal studies, but it emphasizes to the ALSB membership from its collective experience of over a century in the discipline that these are the facts of professional existence that legal studies faculty have always confronted. The ALSB’s current problems, though they are our problems, are really no worse than or different from the difficulties encountered by other legal studies faculty since the founding of the Wharton School.

During the 1990s there has been a national decline in undergraduate business school enrollment coupled with dwindling state support for higher education and a national decrease in tenure track positions as a percentage of total collegiate faculty, developments that likely have had some impact on legal studies faculty. However, collegiate enrollments overall are expected to grow twenty percent in the next fifteen years, and an almost inevitable economic down-turn could again send students clamoring for business classes. Considering the growing focus on teaching quality in higher education coupled with the excellence of legal studies faculty as teachers, the Task Force sees positive as well as negative indications for the status of legal studies in business.

The gradual decline in ALSB membership may be due in significant part to nothing more than that there has been no major sustained membership drive in the 1990s, and, consequently, the Task Force urges that the ALSB undertake fresh initiatives to attract more members. Of the 2,500-3,000 teachers of legal studies in business, only around a third are ALSB members, leading to the recommendation that the ALSB take a tiered approach to membership dues in order to attract current non-members. One possibility would keep dues for faculty at four-year schools at $60, but drop the dues to $30 for community college faculty and $20 for part-time faculty. At the lower dues levels, members might receive the JLSE and the ALSB Newsletter, but not the ABLJ. In addition, the ALSB should appoint a highly motivated volunteer to the position of National Membership Chair, taking the responsibility of recruiting members from the current elected officers and the overworked Executive Secretary and placing it on a highly visible and valued individual whose sole duty is recruitment.

 

 

Conclusion

 

As the twentieth century closes, both the theoretical and applied importance of law testify to its status. As a framework sustaining property ownership and facilitating promise keeping, the rule of law is indispensable to modern business. As an expression of democratic social will rather than as a framework, the rule of law proves less conducive to efficient business practice, but in the foreseeable future, the inevitability of social control makes a grasp of law’s contours and content a vital part of successful business education. Generalizing the important status of law to the larger culture, Woodrow Wilson asserted: "Every citizen should know what law is, how it came into existence, what relation its form bears to its substance, and how it gives to society its fibre and strength and poise of frame."

From the inception of the Wharton School, the historical involvement of legal studies in departments, schools, and colleges of business bears further witness to the status of law in academic business study. Throughout this history, there may have been times when a narrow teaching emphasis on the common law worked against the standing of legal studies faculty with their non-law colleagues, but the proliferation of new legal studies courses during the 1990s suggests that excessive fondness for the traditional approach has been left behind. The recent formation of the largely public law sections within the ALSB supports this observation.

ALSB members need to remain concerned with the effect on status of the difference between law review-style research and the dominant social science research paradigm in academic business study. In an academic setting where the lack of business majors in law disadvantages law faculty vis-à-vis their colleagues in other disciplines as to alumni support and fund raising, our members also continue to be especially sensitive to variations in business school enrollment, the vagaries of public financial support of higher education, and the general threat to the future of tenure. These concerns suggest that to secure their status ALSB members should follow closely the trends sweeping higher education, whether pedagogical or technological, computer techniques for the classroom, distance learning, interdisciplinary teaching, new business courses, or courses for the general undergraduate population.

The price of law in academic business study demands eternal vigilance, but it has been a price paid throughout the century-long history of our discipline. It is a price worth paying.

 

Chronological Bibliography

 

John R. Allison, "The Role of Legal Scholarship in the Business School," 10 jlse 131 (1992) (an ALSB committee report authored by chair John R. Allison).

John R. Allison, "The Role of Law in the Business School Curriculum," 9 jlse 239 (1991) (an ALSB committee report authored by chair John Allison).

Michael B. Metzger, "Report of the Committee on the Status of Law Faculty in Business Schools," (1990) (an ALSB committee report authored by chair Michael B. Metzger).

O. Lee Reed et al., "The Role of Contracts in the Introductory and Only Law Course That Most Business Students Will Ever Take," 9 jlse 1 (1990) (an article edited by Lee Reed based on a panel held at the 1987 National Meeting; other contributors included David Reitzel, Elliot Klayman, George Siedel, Tom Dunfee, Chuck Shepherd, Gary Moore, and Mike Phillips).

O. Lee Reed, "King Contract Wears No Clothes: The Volume of Judicial Decisions, Scholarly Legal Literature, and Business Trade Publications as Suggesting the Importance of Various Business Law Subjects," 9 jlse 31 (1990).

John W. Yeargain and John R. Tanner, "Alumni Perspectives on the Business Law Curriculum," 9 jlse 37 (1990).

William H. Daughtrey, Jr., & Peter L. Gibbs, "Survey of Collegiate School-of-Business Deans Concerning Business Law Faculty," 8 jlse 53 (1989-1990).

S. Scott Massin, "Corporate Perspectives on Business Law Curricula: An Empirical Study," 8 JLSE 71 (1989-1990).

O. Lee Reed & John N. Lewis, "Importance of Contract to the Curriculum: Going, Going…" 4 JLSE 30 (1986).

Janine S. Hiller, "Business Law in the MBA Program: A Survey and Comparison," 23 Am. Bus. L. J. 299 (1985).

Gary A. Moore & Stephen E. Gillen, "Managerial Competence in Law and the Business Law Curriculum: The Corporate Counsel Perspective," 23 Am. Bus. L. J. 351 (1985).

John D. Donnell, "Redesigning the Required Undergraduate Law Course," 2 JLSE 1 (1984).

Thomas W. Dunfee, "The Future Of Legal Studies: Prospects And Problems," 2 JLSE 23 (1984).

Robert N. Corley, "The Teaching Of Business Law In The 1990s," 2 JLSE 32 (1984).

Elliott Klayman & Kathleen Nesser, "Eliminating the Disparity Between the Business Person’s Needs and What Is Taught in the Basic Business Law Course," 22 Am. Bus. L. J. 41 (1984)

George J. Siedel, III, et al., "An Executive Appraisal of the Importance of Business Law," 22 Am. Bus. L. J. 249 (1984).

John D. Donnell, "Business Law Textbooks: A Retrospective Exploration," 22 Am. Bus. L. J. 265 (1984).

Thomas W. Dunfee, "The Business Law Curriculum: Recent Change and Current Status," 18 Am. Bus. L. J. 59 (1980).

"Special Issue: Teaching and Curriculum," 15 Am. Bus. L. J. 1 (1977).

Frederick G. Kempin, Jr., A History of the American Business Law Association (1974).