Conscious Contracts for Conscious Business
by Linda Alvarez (www.cuttingedgelaw.com)
“Conscious Business” is a phrase used to identify companies that operate according to the fundamental principle that business can be a force for positive change in the world. These companies believe (and have demonstrated) that creating value for all stakeholders–customers, employees, society, the environment, and future generations–brings greater success than putting primary focus solely on generating profits. 1
Conscious capitalists take seriously Gandhi’s admonition to “be the change you want to see in the world.” In their dedication to creating positive value for all, they not only seek to offer products and services that serve a higher purpose, but also to integrate social, environmental, moral, and even spiritual values into the goals, operations, strategies and cultures of their companies.
But conscious companies must operate within the larger conventional business culture and the established legal system that permeates every aspect of business. The existing culture and system were formed by the conventional mindset and act to perpetuate that mindset. They exert counter-pressure on conscious practices by orienting perspectives and defining the logic of decision-making in terms of conventional norms rather than higher purpose.
This counter-pressure is readily apparent when parties (and their lawyers) negotiate a contract. Businesses want their contracts to provide safety, predictability, and optimum benefits. Lawyers are trained to see deal making as a competitive, adversarial process. Their job is to ‘win’ the deal for their client and they understand their role as representing the client ‘against’ the other party.
In this way, traditional practices pit contracting parties against one another, laying a foundation of mistrust and sowing seeds of dissent at the outset of the relationship. Typically, once signed, a contract becomes ‘dead letter.’ The document goes in a drawer and the parties move forward doing what makes sense in the moment until there’s a problem. Then, the contract is pulled out, consulted and the duel over interpreting terms begins.
Aggressive backward-looking analysis focused on laying blame and allocating loss consumes energy and attention, often at the expense of the underlying business imperatives. The contract that was meant to ensure safety, predictability, and optimum benefit now is used as a weapon – damaging (often destroying) the parties’ relationship and undermining the beneficial purpose that they envisioned when they entered the deal.
Conscious businesses need a way to interrupt the habits and logic of the conventional mindset – a way for them to stay aligned with their higher purpose and core values without sacrificing power or safety in the negotiation and in the ultimate contractual relationship.
Conventional Logic of Contract Negotiation
When we take a clear-eyed look at conventional negotiation and drafting practices, what do we see?
Attempts to predict all possible problems and then control potential outcomes – pre-allocating the imagined burden of loss. But realistically, how’s that working for us? How good are we at predicting and controlling the future? And what is the cost to the relationship of taking this posture of ‘future enemies’ at the outset?
Conventional thinking understands power and safety as the ability to control or coerce the actions and choices of others. The orthodox approach is to try and draft a contract so that its terms will give us the ‘win’ if we ever have to try and force the other party to behave in a certain way. Perversely, this approach places all the power in the document and casts the parties as supplicants who must petition a third-party (government, courts, arbitrator) to interpret their contract language and tell them how that document will impact their business and circumstances in times of conflict.
Conventional dispute resolution has a backward focus, laying blame and allocating loss. The typical conversation focuses on interpreting contractual language rather than on solving the parties’ problem. The conventional process is slow, expensive and destructive.
It is possible, however, for conscious businesses to create ‘conscious contracts’ that harness the power of the existing system to support and sustain their commitment to positive change. Applying the precepts of contract law from a conscious-business perspective, parties can design their ideal relationship, and set in place their own values-oriented structures and systems for addressing change, engaging conflict and managing crisis. The parties can use the contract and the power of the larger system to support and sustain their commitment to the core values and beneficial purpose that brought them together in the first place. They can draft a contract that will serve to evoke a new, positive logic for responding to change, conflict, and crisis.
Consciously Shifting Perspectives and Creating Support Structures
The conventional system sees the contract as the parties’ ‘private law’ that they’ve agreed will govern their relationship. So long as the terms of the contract do not conflict with the laws of the larger system, that system will enforce the terms of the contract – holding the parties to their agreed commitments. As the parties’ private law, the contract can be used to establish a proprietary system for sustaining and regenerating the parties’ alignment and to establish their own private ‘justice system’ for dealing with disagreement.
Instead of trying to predict and control the future, conscious negotiators use the bargaining and contract drafting process to set in place a navigational system designed to help the parties sense and respond to arising tension and unexpected change. Using consciously drafted provisions, the parties can retain the power of self-determination and provide themselves with effective structures for co-creative problem-solving in the face of crisis.
When I work with a client using a ‘conscious contract’ approach, I call it “Discovering Agreement” – because my client is not negotiating for advantage and concessions. Instead, they explore whether and where they are in agreement with the other party, and how they might design a working relationship that will bring greater benefits than either could achieve alone or with a different partner.
We start with a conversation about what really matters–the Vision of a better world that forms the conscious business’ higher purpose, and the Mission that the parties are joining forces to accomplish (in service of their Vision/s). We also consciously consider and articulate the parties’ core business Values, Constraints and Imperatives. By doing this, we establish what are the keys to satisfaction for each party in entering and continuing the relationship and the endeavour.
The parties put their Vision/s, their shared Mission, and their core Values, Constraints and Imperatives in writing, creating a “Recitation” that serves as a touchstone during negotiations and throughout their ongoing relationship. They use this touchstone to assess the quality and integrity 3 of a given proposal, plan, or course of action. The conversation and the resulting Recitation provide the foundation for a conscious, intentional, productive working relationship.
In addition to creating the Recitation, the parties decide on a structure for how they’ll conduct conversations dealing with unexpected change, conflict, and crisis in the future. In essence, they determine how they will engage crisis and disagreement consciously. Rather than merely designating a third-party adjudicator who will have the power to assign blame and allocate loss, the parties establish their own system for handling conflict. They set out in the contact language a conversational structure designed to reorient them away from conditioned responses and adversarial posturing and, instead to focus their efforts towards creative, side-by-side problem solving.
A key component of this ‘conscious conflict’ provision is language affirming the parties’ express commitment that, should they find themselves in disagreement, they will engage in conversation according to the described structure and focused on bringing themselves and their shared endeavour back into alignment with the Vision, Mission, Values, Constraints and Imperatives expressed in the Recitation.
With the Recitation as touchstone, negotiation shifts from being a competitive adversarial process to a conversation in which the parties calibrate their alignment and establish the framework for maintaining integrity. By linking their conscious conflict structure to the Vision, Mission, Values, Constraints and Imperatives laid out in the Recitation, the contract provides a frame for their conversation, as well as a structural framework for evoking in the parties a co-creative, problem-solving response to crisis and conflict.
Now the parties have a contract that is not a weapons cache – but a navigational tool. They’ve retained the power of self-determination in the face of crisis or conflict, and they’ve pre-qualified one another based on a meaningful conversation about what really matters and what really drives their actions and choices.
From the outset, their relationship is based on mutual comprehension, self-responsibility, and a co-created, agile action plan that gives them the power and capacity to respond creatively and productively to crisis, change and conflict.
- Sisodia, Rajendra, David B. Wolfe, and Jagdish N. Sheth. Firms of Endearment: How World-class Companies Profit from Passion and Purpose. Upper Saddle River: Wharton School Pub., 2007. Print;
2013 NACD Board Leadership Conference — Raj Sisodia, Keynote: Conscious Capitalism. By Rajendra Sisodia. Perf. Rajendra Sisodia. YouTube. NACD, n.d. Web. 20 Oct. 2013. http://www.youtube.com/watch?feature=player_embedded. ↩
- “What Can I Learn?” Conscious Capitalism. N.p., n.d. Web. 20 Oct. 2013. http://www.consciouscapitalism.org/. ↩
- “Integrity” as used here means, conscious alignment of actions with deeply held values.