Legal Operations 101

 

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I fought the law and the law won.

I fought the law and the law won.

Buddy Holly

 

Legal operations emphasizes the effective and efficient delivery of legal services in-house. This relatively new discipline addresses a number of organizational issues. Counsel should no longer fight against the organizational assimilation, but they should instead work at becoming part of it.

 

Admittedly, Legal Operations even sounds cool. Someone going to the Legal Department sounds a bit like going to the old style department stores to look at furniture with your parents.

 

The best part of being in-house involves being part of an organization. The most difficult part of being in-house appears to be being part of an organization. LO helps with the effectiveness of being part of that organization.

 

We need to identify some of the issues that LO can alleviate. Dealing with organizational activities comes with the territory, AKA Willey Lowman. Some of this can be great when you are off to a retreat to do some strategic planning. Even if this involves going even further north during the winter since its off-season and there can be some great buys.

 

Another issue recognizes that in-house counsel require updates as to what is happening outside of their own department or function. The watercooler used to help with that, but now we have the ethereal coffee shop that we use for Microsoft Teams. This seems to lack the same level of integration and networking, but the coffee at home tastes better.

 

With limited resources, the next issue involves trying to educate your clients ahead of time. This really means being involved with the planning process.

 

Counsel need to demonstrate the value of the legal department or function. One must resort sometime to counting all of the icebergs or landmines the organization missed because of your risk management activities.

 

Sometimes the organization asks you to do tasks or projects outside of your area. This recognizes your abilities outside of your law degree, shows additional value and facilitates your engagement in other areas of the organization. Leading the business planning process can be a great way to demonstrate value and learn about other areas of the organization. Some refer to this as scope creep. I actually refer to this as ‘chipping in’.

 

The final and potentially greatest issue involves the need to reduce overall legal costs. Moving from a cost center to a profit centre can be a great achievement, so long as in creating profits you still have time to avoid that iceberg. The collision is what people generally remember, not that great business plan you put together.

 

LO competencies solve or alleviate some of the above issues. For example, learning the budgeting system goes far to learning the business and keeping on the CFO’s good side.

 

A major competency includes document management. Bringing in or learning how the DM operates can go far in alleviating time and costs. You waste a great deal of every day searching for a document, or searching for a document that never existed. DM search mechanisms can quickly bring you up to speed when it comes up with the ‘document not found.’ If you have every tried to prove a nullity, you can appreciate how an electronic search can substantially reduce the amount of grief.

 

Document management includes increased knowledge management. KM seems to be another term that comes and goes in favor. You can have all of the facts and information, but you need context for these two things in order to reach the knowledge plateau. Ultimately, you want the wisdom plateau when you accumulate all of the necessary institutional knowledge. Hopefully this occurs before retirement.

 

Another part of DM includes standardized contracts. Most organizations already have this. So if you do, then add it to your ‘to do list’ so that you can check it off. There is no greater feeling when it comes to setting out to accomplish something you have already accomplished.

 

Paperless policies form an integral part of document management. Previously people would scan a document but still keep the paper copy in another file. You simply have to face the situation and shred the original. Unless it is a negotiable instrument. You should keep those for a few days to make sure the scan to the bank works. I have scanned in personal cheques and shredded them immediately. This practice will catch up with me some day, but right now, I am just living on the edge.

 

Another competency involves project management. When taking my MBA, I went for a two-day seminar on PM. I spent a week cramming on using Microsoft Project software thinking that this would be the emphasis. However, we spent the two days learning to talk to one another and to listen to what the other person was saying. I did not learn anything significant about software, but it improved my relationship with my significant other. Good win there.

 

During the PM seminar, we all met up in the banquet hall. The large crowd waited at their tables, mostly patiently, for dinner. The seminar leader announced that if anyone could tell a project management joke, their table would be first in line for the buffet. I immediately stood up and asked ‘Why did the chicken cross the road?” Dramatic Pause here. “Because it was a critical path.” (Which is a major project management term that one needs to learn.) It was a groaner, but my table got to eat first. Or at least I did. The rest of my table wanted to put a bit distance between them and me.

 

The benefit of these LO techniques, excluding the lame joke telling, facilitates an effective in-house legal department and reduces the amount of legal work sent outside of the organization. Reducing outside legal work can result in reduced budgets, alternative fee arrangements or retention agreements.

 

Another LO benefit allows focus on higher priority and more strategic work. There appears to be a synergistic and not a sum zero effect. By spending more time on legal operations, this allows the remaining time spent more effectively on the legal function.

 

This is not quite the same thing as doing more with less since you need the LO expertise. You do more legal work but you need a bit more LO at the same time. If you are single legal officer worker (SLOW), then you need to become a FAST (Following A Strategic Tempo) legal operator. Yes, the acronyms sound contrived, but all business articles require several.

 

Becoming involved in other aspects of the business can be a bit of a cultural shift. Picking a few areas where you can provide value quickly and effectively would show other parts of the organization your value. Focusing on how you can help others achieve their business objectives provides the greatest value.

Incorporating Machiavelli into the mergers and acquisitions department

Niccolò Machiavelli

 

Niccolò di Bernardo dei Machiavelli was the Renaissance-era politician, writer, philosopher and name-sake of the adjective “Machiavellian,” frequently used in political discourse to refer to achieving power through cunning, manipulative, cynical, ruthless and immoral means.

“So Nick, thanks for coming in for an interview. We are very interested in having you join our M&A department. I understand that you have been in practice for a number of years. Prior to this, you were an Italian historian, statesman, and political philosopher. Your legal tactics epitomize cunning and duplicity. Even your name conjures up negative thoughts. To be called a Machiavellian lawyer can be the worst form of insult.”

“It is much safer to be feared than loved,” Nick replies.

“Interesting, I see. It really seems that you have one of those ‘rags-to-riches’ type of story. Did that impact you in anyway?”

“He who has relied least on fortune is established the strongest,” Nick says.

“What does not kill me makes me stronger. Yes, I have always liked that approach,” the interview continues. “You became quite active in mergers and acquisitions. Do you have an eye for businesses ripe for a takeover?”

Nick briefly considers the question. “He who does not properly manage this business will soon lose what he has acquired.”

“So looking for a poorly run business seems a good approach. I understand that when you helped your client, Mr. Prince, for your last acquisition, it was a hostile takeover. Did you have to clean house a bit? The directors may have been upset.”

“The prince, with little reluctance, takes the opportunity of the rebellion to punish the delinquents, to clear out the suspects, and to strengthen himself in the weakest places,” he answers.

“Yes, I read that you moved out most of the directors who opposed you. Was this ‘shock and awe’ tactic pivotal?”

“Hence it is that all armed prophets have conquered and the unarmed ones have been destroyed,” he says.

“Well, that is a bit dramatic, but I take your point. I hear you managed to reverse some declared but unearned options for the individual directors. That must have hurt.”

“Men ought to be well treated or crushed, because they can avail themselves of lighter injuries, of more serious ones they cannot; therefore the injury that is to be done to a man ought to be of such a kind that one does not stand in fear of revenge,” Nick declares, crossing his arms with self-assurance.

“Sounds a little harsh, but seemed to work. The new board certainly believed in your new direction. Do you think they will stand behind the new CEO?”

“And thus it is necessary to take such measures that, when they believe no longer, it may be possible to make them believe by force,” he replies.

“Get on the bus, or get under it. That is really tough leadership. And you helped implement some new business plans I understand. How did you view the staff who remained?”

“Because this is to be asserted in general of men, that they are ungrateful, fickle, false, cowardly, covetous, and as long as you succeed, they are yours entirely,” Nick says matter-of-factly.

“You are saying that as long as you are reaching your goals, people are happy. Did you have any problems with management and the new strategies you were suggesting?”

Nick took a deep breath, exhaled and looked at the ceiling, before replying, “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.”

“I’m with you on that. Boy, we implemented this new accounting package and the backlash caught everyone off guard. How did the rest of the staff respond to the fast paced changes?”

“In seizing a state, the usurper ought to examine closely into all those injuries which is necessary for him to inflict, and to do them all at one stroke so as not to have to repeat them daily,” Nick says.

“Yes, if you are pulling off a band aid, better to do it all at once … ”

Nick interjects, “For injuries ought to be done all at one time, so that being tasted less, then offend less: benefits ought to be given little by little, so that the flavour of them may last longer.”

“What sort of leadership qualities did the new CEO Mr. Prince have that really stood out?”

“It is unnecessary for a prince to have all the good qualities enumerated, but it is very necessary to appear to have them,” he says.

“Fake it till you make it. Got it. But to be a good leader, do you agree that credibility is one of the most important criteria?”

“It is necessary to know well how to disguise this characteristic, and to be a great pretender and dissembler; and men are so simple,” Nick says, “and so subject to present necessities, that he who seeks to deceive will always find someone who will allow himself to be deceived.”

“I hear you. A leader has to put on a front for staff and can be himself for family and friends. Do you have an open-door policy, you know that speaking truth to power thing?”

“But when everyone may tell you the truth, respect for you abates.”

“I see. Did you implement some sort of bonus retention plan to keep the key staff?”

“He who believes that new benefits will cause great personages to forget old injuries is deceived,” Nick says.

“Ok, so money may not smooth over past slights. Do you have particular ways to discipline staff that may not be following your directions?”

“Leave affairs of reproach to the management of others and keep those of grace in their own hands,” he says.

“Seems like a good idea to pass out the roses yourself, and leave the real dirt to someone else. I know this is confidential. But what can you tell me about any future takeovers?”

“He ought never, therefore, to have out of his thoughts this subject of war, and in peace he should addict himself more to its exercise than in war,” Nick replies.

“Yes, business is like war, and all is fair in love and war. Do you have any guidelines you follow to make your clients a fortune with M&A?”

“Fortune, who shows her power where valour has not prepared to resist her,” he says. “And thither she turns her forces where she knows that barriers and defenses have not been raised to constrain her.”

“Got it. Go for the weakest underbelly. I read something like that in Art of War or something. Thanks for your time Nick, and we will let you know. People certainly are talking about your working approach.”

“Hatred is acquired as much by good works as from bad.”

“Good to know. Have a nice day!”

 

Everything you wanted to know about Cannabis But thought it too illicit to ask.

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Canadians absorbed and inhaled the new Cannabis Act without any major societal destabilization. Now that the initial debris settled, the overall haze may increase. What should you know about cannabis before the haze obscures your vision?

 

The Act proposes to reduce illicit activities in relation to cannabis and provide for the licit production of cannabis. One does not see the word licit very often, or ever. Apparently, everything appears licit unless described somewhere else as illicit. This column shall make prodigious use of the word licit.

 

One of the main licit activities listed in the legislation includes the licit possession of 30 gms of dried cannabis. This compares favorably to the licit possession of the 35 gms of sugar found in your regular coke. Interesting aside, upcoming legislation will make it no longer licit (meaning illicit) to market unhealthy food and beverages to children.

 

The Cannabis Act allows up to four cannabis plants in a dwelling. The growing regulations previously limited plant growth to no more than one metre, but the feds removed this restriction. My previous plant growing experience would seem to indicate that an oversized plant would not have been a problem, and would rather be quite unlikely. I normally rely on the Darwinism approach that only plants that can survive in the drought environment I normally provide, followed by an occasional torrential drenching.

 

Cannabinoids comprise the psychoactive substance in cannabis, and THC is the main drug at issue. Cannabis also contains, cannabidiol, CBD, but this has no psychoactive properties on its own. CBD may assist in the body’s metabolism of THC. Sort of a digestive aid perhaps.

 

One company’s stock skyrocketed once the stock market heard that Coke was waxing philosophically about incorporating CDB into one of its lifestyle drinks. Coke may be considering getting back to its roots by adding other drugs into its mix since it already includes caffeine. And perhaps even more mind expanding: Sugar. Admittedly, this is more body expanding than mind expanding. But perhaps Coke wants to get back to its original roots when the formulation included trace amounts of cocaine according to Snopes.Com.

 

CBD seems to provide other positive attributes, but its oily quality may make a liquid formulation unpalatable. And CBD leaves a bitter taste in your mouth comparable to that opportunity/investment/person that you did not follow-up on but still see around occasionally.

 

 

 

Not surprisingly, the LA Times provided a helpful guideline on the recommended gms of THC usage. Raw cannabis contains vey little of the active THC psychoactive compound. Heating triggers a chemical process called decarboxylation, which facilitates the chemical conversion into THC. More than half of the THC can be lost in this process. Therefore, a standard joint of .3 gms can deliver 12 mg THC through toking and the rest is lost. A vaporizer can deliver 17 mg. Perhaps Vaping should be renamed Voping in this situation.

 

No less than Business Insider conducted some experimentation and discovered that a ‘few hits’ would provide the ideal ‘goldilocks’ state of relaxation. Participants at this level did better in job interviews and other calculations. More than this amount resulted in greater stress with the participants. The study did not clarify if the higher-level THC participants’ increased stress arose from having trouble finding the interview rooms.

 

THC possesses psychoactive properties, which mean it changes brain function by altering perception, mood, consciousness, cognition or behaviour. As dire as this sounds, other chemicals such as alcohol, nicotine and caffeine reside in this psychoactive category. Apparently, these last three chemicals cause greater levels of addiction.

 

We can neatly categorize these drugs into two categories, agonists and antagonists. THC falls into the agonist category, which is responsible for increased activity in the brain’s neurotransmitters. Those that partake minimally apparently see an increase in philosophical thinking. Caffeine, nicotine, and alcohol fall within antagonist category and these drugs interfere with synthesis or block postsynaptic receptors. These people develop an intolerance for philosophical speaking if it delays them from getting their dose. The first two are stimulants while the last is a depressant.

 

THC also assists in the metacognition. Knowing about knowing. This includes knowledge about when and how to use particular strategies for learning or problem solving. This may have some interesting applications when trying to divine new legal strategies for a particularly complex situation. We would only suggest perhaps testing a very senior partner under very controlled circumstances not within the office. So only try this at home kids. Of course, get the proper medical, legal and insurability advice before attempting anything like this.

 

If THC increases metacognition, we may start to see cannabis in situations requiring creative thinking. I overheard a senator asking about how to turn off the smoke detectors. There may be a connection.

 

One of the other major factors giving the federal government more of a natural high would be the potential $618 million in tax revenue coming from the sale of cannabis. This would likely expand to a billion or more in the future.

 

For drivers, the feds operate on a zero-tolerance policy. You would be better off being nowhere near your car when partaking considering we are talking about THC detection in nanograms, which is a billionth of a gram. In comparison, a grain of salt is 58,000 nanograms. Once you get your A.I. billing program, you might start billing at this infinitesimally small level.

 

The federal THC limit is 2-5 ng, which results in up to $1,000 fine and tests showing greater than 5 ng results in a $1,000 mandatory fine and prison sentences for subsequent convictions. Drivers with .05 mg alcohol and greater than 2.5 ng have the same penalty as over 5 ng.

 

So don’t be a dope and drive.

 

 

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HR Cannabis Policy and Watching the Watchers

blur-bud-cannabis-1466335.jpg‘Got to Get You into My Life’[i]

Paul McCartney’s love song to pot

With the legalization of cannabis, employers, companies and employees now wonder how to deal with this new chemical in the workplace. Although HR departments already deal with alcohol, nicotine and other recreational drugs, (and I refer to HR staff using these drugs to handle stress) cannabis challenges them even further.

 

The provinces intend to pass their own cannabis legislation. The Ontario Cannabis Act (soon to be renamed) prohibits recreational cannabis within the workplace. And unlike medical cannabis, there is no ‘workplace cannabis’ category exception.

 

Some federal departments passed their own requirements. The RCMP members cannot use cannot use cannabis within 28 days of a shift while some police use a fit for duty criteria. The Armed Forces use much more specific terms. Here members must not partake 8 hours before performing any duty. This increases up to 24 hours if they are handling explosive ordnance. I naively thought that all ordnance was explosive, but ordinary ordinance includes things like jeeps. Explosive ordnance includes things like ordnances that explode.

 

For the rest of the provinces one of the main criteria involves a safe work environment. Companies need to ascertain what THC levels would be appropriate for their particular type of work. However, we must add a note of caution as to watching the watchers. Legal counsel must ascertain if cannabis policies slant more towards enabling cannabis use by particularly hard working, overly stressed and easily swayed HR departments. And staff in general.

 

  1. Look for memos containing chaotic numbering systems.

If the cannabis memo from the HR department starts with a rambling introduction, and the rest of memo includes numbering systems similar to

Firstly…

Nextly….

Thirdly…..

Finallidly……,

then rest assured the duty to draft the memo should be sourced out to another department.

 

  1. Unusual Training Locales

Training seminars in tropical locations are nothing new. However, if HR insists upon going to local tropical greenhouses and conservatories, then the business planning sessions may not deal with your particular business and may deal more with hydroponics. Insist upon the rooms with no windows and open doors for informative PowerPoint presentations instead.

 

  1. The HR department becomes overly familiar with legislation

In this situation, not only does the HR department know the federal and provincial cannabis legislation better than the legal department, but HR also knows far more about regulations regarding neonics pesticides and fertilizer licensing procedures. Once again facilitating hydroponics.

 

  1. Occupational Health and Safety Compliance increases substantially

Normally, the proper use of safety glasses, white work overalls and plastic gloves should be encouraged as this increases workplace safety. However, if you see such a person wearing all this equipment in your downtown law office, and you know someone already removed all the asbestos from the ceiling, then you must investigate for a potential grow op.

 

  1. All of the Alcohol and Drug Policies have been reviewed and expanded

 

A review of existing policies needs to cover the proper and legal use of cannabis. If the next policy iteration includes new a process, various unknown ingredients and ends with the words “bake at 350 for 45 minutes”, then rest assured this is not a work related process. This could be a chocolate brownie cannabis delivery system process.

 

  1. Staff Benefits have been amended

Increasing staff benefits provide organizational motivation. If your organization includes a cafeteria, then be observant for subtle changes. A cafeteria express line which only handles ‘munchies’ enables cannabis use.

 

  1. International Travel

Needless to say, travel to the US with cannabis would be prohibited, as would admitting to using cannabis, investing in cannabis companies or even having a Bob Marley song  on your smart phone. However, be on the lookout for new travel costs under the designation of ‘Mule reimbursement”.

 

  1. Cannabis Use within certain limits

Other organizations have a range of 8 hours, being fit for duty, or 28 days depending upon the function. If the rule then becomes more like no partaking within 28 feet of the front door, then the rules may be a bit too lenient.

 

  1. Discriminatory Use

 

Continued use of medical cannabis depends once again on the job function. If the cannabis impacts on the person doing the job are unknown, then the employer only has to go so far in the duty to accommodate. However, look out for any discrimination if the HR policies mandate cannabis use for those in highly stressful, unpredictable and treacherous roles such as dealing with people constantly. Like HR staff. You may have a discriminatory policy.

 

 

 

[i]  “‘Got to Get You into My Life’ was one I wrote when I had first been introduced to pot,” Paul McCartney told Barry Miles for the 1997 book Paul McCartney: Many Years from Now.

 

The Cannabis Act

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Sittin’ downtown in a railway station

One toke over the line.

Brewer and Shipley

 

Things surely change. Or at least circle back to where they first started. Of course, I refer to the Cannabis Act, which allows the legal use of marijuana subject to various conditions and regulations. I suggest reading the act before celebrating any newfound freedoms since you need to focus. Speaking of which, this now allows the federal government to focus its legislative powers against an even more addictive, notorious and dangerous drug. Sugar.

 

How will cannabis legalization affect Canadian Society? Recent stats suggest that five million Canadians use cannabis at least once a month. We could expect perhaps a 20% increase after legalization.  This column intends to examine this question over a four part series, more or less depending upon how the home grow-op works out. However, by maintaining focus, we intend to cover the history, the legislation, the potential impacts, and some guessing on what the future might hold.

 

Firstly, how did most of us become so conservative (old-fogie)? Cannabis can be found in various forms throughout various millennia. Cannabis use dates back to at least the third millennium BCE when the plant was valued for its use for fiber, food, medicine and for its psychoactive properties in recreation and religion. Hemp fibers could be found in 10,000-year-old Chinese pottery. For the record, industrial hemp contains far less of the psychoactive drug THC. So like members of the senate, cannabis has been around for a while.

 

In Canada, drug regulation started back in 1908. Here Mackenzie King, then DM of Labour, produced a report, which culminated in the Opium Act. This same King instead partook in spiritualism and mediums to stay in contact with the deceased. Once again showing that drugs were not required for mind-expanding exercises.

 

Shortly after this, a type of moral panic began. Emily Murphy contributed to this panic somewhat through her writing The Black Candle. Some of her writings under the pen name Janey Canuck made their way into McLean’s. Including some dubious stereotypes and questionable anecdotes, she pushed for the cannabis ban. Under the chapter “Marahuna-A New Menace” she points out there are three ways out from the regency of this addiction:

“1st-Insanity, 2nd-Death, 3rd-Abandonment. This is assuredly a direful trinity…”

 

She leaves us on the triceratop’s three-pointed horned dilemma. We would only point out that this appears to be have been written before Canada imported the letter ‘J’ from other members of the commonwealth, and the title bears a striking IP infringement by a later contender…Lucas’ “The Phantom Menace”. We assume no cause of action exists since at least 20 years have passed since its release. Mind you, some still harbour the thought of a legal process to eliminate Jar Jar Binks.

 

Other historians such as Catherine Carstairs question Murphy’s ‘contribution’ towards the war on drugs. More than likely the prohibition came from when the Director of the Federal Division of Narcotic Control returned from the discussion for control of the drug at the League of Nations. This should not be confused with the DC Justice League. Although those superheroes would have a tough time since the drug use problem would appear to be so diffuse. Beyond Superman. Perhaps Wonder Woman?

 

Cannabis finally made the big leagues by being included on the restricted list with the 1923 Narcotics Drug Act. As with all legislation, you would think that this then solved the problem, but use of cannabis continued to grow along with the number of prosecutions.

 

Of course, no discussion of an ethical dilemma would be complete without acknowledging “Tell Your Children!”, or even more regretfully known as “Reefer Madness”. Produced by a church group in 1936 as a morality fable, Dwain Esper purchased the film, and by adding some additional salacious scenes, showed it on the exploitation circuit. Admittedly, I did not even realize that this was a thing until I looked it up. But in any event, critics ranked it as the worse movie ever made. The movie dramatizes how marijuana use leads to madness, murder and mayhem. The movie resurfaced as a satire for cannabis policy reform. The new colorized version now has color of the exhaled smoke reflecting the emotion of the person, green, purple etc. Pretty awesome.

 

In the 60’s, the drug culture surged owing to the hippie psychedelic ethos at time. This conclusion sprung from the Senate Special Committee on Illegal Drugs. Considering what the senate probably looked liked at the time, sprung probably does not capture the situation. You should insert whatever verb comes to mind when a rusty machine attempts to move forward on something. Crank perhaps.

 

The medical case for cannabis made its way in the Ontario Court of Appeal in R v. Parker. The Supreme Court in R v. Malmo-Levine and R v. Caine in 2003 confirmed that the federal government had the authority to criminalize cannabis. This was unanimous which is equivalent to the court saying ‘Of course the feds can legislate this. What have you been smoking?’

 

The decriminalization initiative crept forward with the LeDain report in 1972 suggesting removing criminal penalties. In 2003, Chrétien did attempt to decriminalize possession by legislating that 15 gms and under would only result in a fine. However, this doobie attempt eventually went out. Dubious. I meant dubious.

 

On a bit of a somber note, we need to mention Huxley’s Brave New World. Written in 1931, he writes about a dystopian future based on technology and drugs, particularly Soma. “The perfect drug. Euphoric, narcotic, pleasantly hallucinant, All the advantages of Christianity and alcohol; none of their defects. Take a holiday from whatever reality you like, you come back without so much as a headache or a mythology. Stability was practically assured.” That is great writing. I wish I paid more attention in high school. Sorry Mr. Pratt.

 

In any event, Huxley was not so much writing about cannabis, as about humankind’s ability to be distracted from looking out for tyranny. So perhaps in between partaking, we should keep watching Trump and keep a firmer bloodshot eye on Ford. Notwithstanding.

 

photo by Michael Fischer

 

#cannabis

 

 

The facts, they are a changin

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It was a dark and stormy night. Or rather, the night darkness concealed the source of the intense storms. That seems much better. My wife and I waited for the storm to pass that evening before setting off to walk the dogs. The reflection of the street lights glistened off the wet streets.

All down the street, I could see small ridges. Upon closer examination, I could see that there were literally hundreds of night crawlers stretched out perpendicular to the road. The road friction made them stretch out to a tortured length of about a foot and a half. Normally plump, this condition thinned them out considerably. Night crawlers are earth worms on steroids.

Feeling some form of compassion for this Lumbricus terrestris, I started to scoop them up and toss them back on to the grass. Some worms can survive being cut in half but being half squashed flat by a truck did not seem very survivable to me.

Now, under normal conditions worms produce a fair bit of mucus. Adding torrential rains to that seems to add to mucus production as the worm exodus continued. I started to regret my misplaced compassion and tried to distance myself from my emotions. My wife just simply distanced herself.

I assumed the common knowledge that during intense rain storms worms attempt to escape drowning in their burrows. However, they breathe through their skin which needs moisture. So there may be a number of other reasons why they engage in such risky behavior of stretching themselves out on a busy road.

One good reason would be migration. Lots of rain would allow them to move great distances. However, half of them moved from the south to the north, while the other half moved from north to south. But, hey, they’re worms. The grass always seem more organic filled on the other side of the street it is said.

An interesting phenomena occurs when you experience a situation and learn some new facts about it later. I learned that another good reason worms travel is that they want sex. My recollection of the event now includes an added ‘ewww’ quality to it. And what better time to find a mate than when everyone else is stretched out in the same area. We have a beach here that seems to serve the same purpose for humans.

Although worms are hermaphrodite, male and females together, they cannot reproduce solely by themselves. They need a mate. I must have cast aside, and severely disappointed, several dozen night crawlers. Destined now to remain virgins they’re probably bitter. Unless that was going to be their choice anyway, and so that is perfectly ok.

This sex migration behavior can bring down planes. After a rain, worms like to stretch out wherever they can, including airport runways. Worms do not get sucked into turbines, but the birds coming to eat the worms can be. Particularly the flocking birds like gulls which tend to ignore whatever happens around them when they fight over food. So airport authorities tend to use fungicides to reduce worm populations.

Night crawlers contribute to the US current account deficit! Some politician should complain about this. If nothing more than the neat optics it provides. “Congress needs night crawler NAFTA negotiations!” Apparently $20 million of night crawlers are exported to the US each year with little or no USA content. A few years ago, the price leapt from $35 per thousand worms to $80 per thousand. Economics 101. Supply was tight, and owing to inelasticity of demand, prices skyrocketed. Worm futures may not have the panache of Tesla stock, but you would have made a fortune otherwise.

Fact

 

Federal tax reform debates suffer from the Rashomon effect

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The film Rashomon won an Academy Honorary Award in 1952 and is considered now one of the greatest films ever made. The film uses a plot device that involves various characters providing subjective, alternative, self-serving and contradictory versions of the same incident.

One can see the theoretical application of this plot device to the multi-varied perception of the liberal government’s changes to the taxation of Canadian controlled private corporations. Let’s just deal with the one plot device — the sprinkling of income.

The government takes the position that these tax advantages are in place to help Canadian businesses reinvest and grow, find new customers, buy new equipment and hire more people. Not surprisingly, people evidently use these corporate structures to reduce taxes by paying dividends to those family members at a lower tax bracket and not involved in the business. Mea culpa. The government perceives that these people are avoiding paying their fair share of taxes as opposed to investing in their business and maintaining their competitive advantage.

Of course, sprinkling income provides dividends to family members who may not have much to do with the corporation in the first place. The tax policy intended to spread income more among those involved with the corporation.

The government states that when the rules are used for personal benefit, they are not contributing to growing the economy. Rather, such practices undermine confidence in the economy by selectively giving away tax advantages and producing an unfair result.

The Canadian Bar Association takes umbrage to the government’s use of the term “loophole.” Loopholes are inherently legal, but they circumvent the policy intent of the legislation when corporations legally use tax advantages to make professionals more whole as compared to salaried employees. So let’s just call these advantages “loopwholes” instead.

We can use the Rashomon approach to examine taxes paid in Finance Minister Bill Morneau’s CCPC comparison discussion paper. Susan, an employee, earns employment income of $220,000 and pays her fair share of taxes totalling $79,000. We compare this to our business owner Bob earning a professional income of $220,000 and, through the sprinkling of tax loopwhole-ness, pays only $44,000 in taxes. Susan pays about 36 per cent of her income in taxes while Bob only pays 20 per cent, a $35,000 difference. One could easily think that there is only a 16-per-cent difference, but through the magic of Rashomon, we can see that Susan pays about 44 per cent more in taxes (35/79). If the loopwhole is lost, Bob becomes even more upset as his tax bill would increase 80 per cent (35/44).

The CBA, to the consternation of some members and now some former members, takes a political position against the removal of the tax loopwhole. The main argument appears to be that the loopwhole allows the corporate professional to earn the same amount as an employed individual since a corporate professional does not have paid vacation or an employer pension. The pension argument has an iceberg quality to it since fewer companies are providing pensions in any event, down to around 37 per cent of employees.

In comparing total compensation, HR professionals use a rough guideline that benefits can total 20 per cent of income once you include vacation, health and pensions. If we get back to fun with ratios, we can see that Bob’s tax savings of $35,000 comes close to this 20-per-cent premium ($44,000 normally).

A major argument for allowing professional corporations a tax break is the risk premium. A business owner has no guaranteed income, job security, paid vacation, sick days or retirement program. In addition, the owner must personally guarantee debt obligations and pay the entire cost of the Canada Pension Plan. Therefore, an owner should be entitled to a risk premium. As an example, the risk premium for stocks is arguably about five per cent, but this does not appear high enough for Bob considering the risk.

So, in a straight comparison, Bob should pay less tax in order to have close to the same total compensation as Susan, a salaried employee. Unfortunately, we drifted away from the actual question, dreamed about a logical fallacy and refuted an argument that was never made. The question is not how the tax system should make Susan and Bob have the same total compensation but rather how to limit the tax exemption for what it was intended, mainly using dividends to compensate those involved in the business and to help businesses reinvest and grow.

If we use sprinkling dividends as a loopwhole in order to make Bob’s total compensation the same as salaried employee Susan, we have passed the risk premium over to be paid by Susan by way of tax revenue foregone by exempting Bob. The risk premium should belong to Bob to be mitigated by higher revenue paid by Bob’s clientele or by reduced expenses, not lower taxes at the expense of Susan.

If a tax break is truly yours, then let it go. If it returns, then it belongs to you. If it doesn’t, then it never was.

 

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From a previous Canadian Lawyer Article.