Legal Guide for Social Entrepreneurs

Thinking about Legal Risk as a Social Entrepreneur

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“when you’re starting something new, everything looks risky...From a legal point of view, you’re best to never do anything new. The less new things you do, the less likely you are to make a mistake.”

Innovation Killers - The Status Quo Police, Adam Hartung (http://www.forbes.com/sites/adamhartung/2011/05/25/innovation-killers-the-status-quo-police/)

“I want a lawyer who advises me not to do something, and when I go ahead and do it anyway will come and bail me out”

Phillip Schmidt, founder of p2pu

Legal advice can often become an innovation killer. Legal advisors often focus only on one kind of risk; legal risk, without considering that an enterprise might fail in its mission because of self imposed constraints adopted in an effort to minimize legal risk. That is not the approach taken here.

Some of the legal risks that social entrepreneurs face are incalculable, nobody knows just how likely they are, nor what effect that might have on an enterprise. Some risks are reflexive, legal development partially depends on the entrepreneur's own own actions. The early manufacturers of cameras simply sold cameras without waiting for the law to be settled on whether they would be liable if someone took a picture that violated the law. Camera's proved very popular so that later on courts refused to impose liability on camera manufacturers.

Some risks are fairly predictable and there are certain well established means for managing these risks. Of course using these has a costs too. Important costs are not so much the need to pay for legal services which is relatively trivial but opportunity costs; time and energy spent complying with laws and implementing a legal strategy.

Managing legal risk requires requires a continues process of observation, orientation, decision and action.

Social entrepreneurs should identify possible legal risks, assess their severity and likelihood, consider the risks in the context of the vision, mission, resources and appetite for risk of the enterprise (and the entrepreneur). Doing so requires some understanding of the issues. The entrepreneur may decide to do nothing about a particular risk at a particular point in time. That is still an important and useful decision that will serve as a good basis for a future decision when action is necessary.

A social enterprise should develop a light weight, low maintenance feedback loop to assess legal risk.