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Bainbridge's study aids for corporation law, agency & partnership, and/or business associations courses

Bainbridge on Agency, Partnerships & LLCs:

The emergence of the limited liability company has kindled renewed interest in unincorporated business associations among legal scholars. This revival was further stimulated by the multiple revisions made to the Uniform Partnership Act in the 1990s. By lending new intellectual respectability to the study of unincorporated business associations, these developments stimulated the supply side of the curricular equilibrium. Courses on unincorporated business associations have thus sprung up at many law schools. A number of very fine casebooks compete for that market, including one co-edited by the author of this volume. This text is intended to provide students taking a course in unincorporated business associations with a reader-friendly, highly accessible overview of the law and economics of unincorporated business associations. In addition, students taking a basic course in corporations or business associations may find this volume helpful as a more expansive treatment of the law of agency, partnership, and limited liability companies. The text does not shy away from bringing theory to bear on doctrine. While the text has a strong emphasis on the doctrinal issues taught in today’s unincorporated business associations classes, it also places significant emphasis on providing an economic analysis of the major issues in that course. Agency, Partnership and Limited Liability Companies thus offers not only with an overview of the black letter law of unincorporated business associations, but also a unifying method of thinking about the subject. Using a few basic tools of law and economics — such as price theory, game theory, and the theory of the firm literature — the reader will come to see the law in this area as the proverbial “seamless web.”

Bainbridge on Corporation Law:

Corporations classes present students with two related problems: First, many students have trouble understanding the cases studied because they do not understand the transactions giving rise to those cases. Second, Corporations classes at many law schools are taught from a law and economics perspective, which many students find unfamiliar and/or daunting. Yet, with few exceptions, corporate law treatises and other study aids have essentially ignored the law and economics revolution. 

This book is intended to remedy these difficulties. The pedagogy is up-to - date, with a strong emphasis on the doctrinal issues taught in today’s Corporations classes and, equally important, a mainstream economic analysis of the major issues in the course. As such, the text is coherent and cohesive: It provides students not only with an overview of the course, but also (and more importantly) with a unifying method of thinking about the course. Using a few basic tools of law and economics-price theory, game theory, and the theory of the firm literature-students will come to see corporate law as the proverbial “seamless web.” Finally, the text is highly readable: The style is simple, direct, and reader- friendly. Even when dealing with complicated economic or financial issues, the text seeks to make those issues readily accessible.

 

Bainbridge Books for Business Associations

Taking Business Associations, Corporation law, or the like? Then you need:

Veasey on Bainbridge on In-House Lawyers

In an article in the latest Business Lawyer (68 Bus. Law. 57, 62-63), former Delaware Supreme Court Chief Justice E. Norman Veasey has some very nice things to say about yours truly's book Corporate Governance after the Financial Crisis:

Professor Bainbridge has put his finger on the “go along to get along” problem. In a chapter entitled “The Gatekeepers” in his recent book, he carefully analyzes the tension the corporate lawyer experiences between gatekeeping and job security:

The gatekeepers failed rather miserably during the dotcom era. Enron was primarily an accounting scandal, little different from the 150-plus other accounting fraud cases that the SEC investigates in most years. Indeed, this was true not just of Enron, but also most of the dotcom era corporate scandals ....

.... There is little doubt that lawyers played an important role in the scandals. Sometimes their negligence allowed management misconduct to go undetected. Sometimes lawyers even acted as facilitators and enablers of management impropriety ....

.... The nature of the legal market gives lawyers--both in-house and outside counsel--strong incentives to overlook management wrongdoing. As to the former, even if the board of directors formally appoints the in-house general counsel, his tenure normally depends mainly on his relationship with the CEO ....

.... Both the general counsel and outside lawyers necessarily have access to a wide range of information, including but hardly limited to information relating to law compliance by the organization. Because the management-attorney relationship tends to become the focus of the attorney's relationship with the firm, however, lawyers have strong incentives to help management control the flow of information to the board of directors. Worse yet, attorneys may be tempted to turn a blind eye to managerial misconduct or even to facilitate such misconduct .... 

While these excerpts highlight the anxieties and temptations that may face in-house counsel, the entirety of Professor Bainbridge's book paints a balanced picture of the temptations as well as the integrity of in-house lawyers.

Who is Delaware’s favorite corporate law scholar?

Modesty precludes me from naming names, of course.

ProfessorBainbridge.com again named to ABA top 100 blawg list

I'm delighted to once again have been named to the ABA's top 100 law and lawyer blogs. I'm especially gratified by Francis Pileggi's kind remarks, which the ABA quoted in the announcement:

“Professor Bainbridge is often cited by the Delaware courts in their opinions due to their recognition of his expertise in corporate law. In addition to citations to his books and articles, the court also has cited to his blog posts. [UCLA prof Stephen Bainbridge’s] blog is required reading for those who want the most current insights on corporate law developments from one of the foremost corporate law scholars in the country. His perceptive posts on culture and current events are also enjoyable.” —Francis Pileggi, Delaware Corporate & Commercial Litigation Blog

This is the 5th time in the 6-year history of the award that I've made the list.

"Corporate Governance After the Financial Crisis" reviewed

Karen I. Heusel in Keeping Up with New Legal Titles, 104 Law Library Journal 579 (2012):

¶1 In his latest book, Corporate Governance After the Financial Crisis, Professor Stephen M. Bainbridge asserts that, in the wake of the significant economic setbacks of the past decade, Congress abandoned its traditional reticence on the matter of corporate governance, yielded to emotionally charged mainstream political demands, and enacted a deeply flawed set of corporate reforms. Specifically, Bainbridge objects to the various corporate governance provisions included in the Sarbanes-Oxley Act of 20021 and in 2010’s Dodd-Frank Act.2 Soundly denouncing both laws, he rejects these purported reforms as “quackery . . . lack[ing] strong empirical or theoretical justification” (p.15) and submits that the offending “provi- sions erode[] the system of competitive federalism that is the unique genius of American corporate law by displacing state regulation with federal law” (id.).

¶2 A prolific author and blogger and a self-proclaimed “Burkean conservative,”3 Stephen M. Bainbridge serves as the William D. Warren Distinguished Professor of Law at UCLA where he teaches courses on business associations, corporations, and corporate governance. In the past few years, Bainbridge has written several law review articles and books addressing the law and governance of public corporations.4

¶3 In Corporate Governance After the Financial Crisis, Bainbridge argues that Congress blundered badly with both of its recent efforts to regulate in these areas, in each case reacting hastily to a postcrisis atmosphere dominated by anticorpo- rate sentiment and passing legislation that usurps state corporations laws (most critically those of Delaware) and effects federal control over significant aspects of corporate governance. In the late 1990s and early 2000s, the bursting of the dot- com bubble and the massive corporate and accounting fraud uncovered at companies like Enron and Worldcom prompted populist pleas for federal intervention, pleas that soon led to the Sarbanes-Oxley Act. In 2007–08, as the collapse of the housing bubble and the subprime mortgage meltdown were followed in quick succession by the failures of Bear Stearns and Lehman Brothers and the ensuing credit crisis, federal legislators received similar pleas and reacted again, this time with the Dodd-Frank Act. Bainbridge sees a pattern here: “scandals and economic reversals” (p.38)5 regularly mark the aftermath of economic boom times, leading Congress to intervene in corporate governance with reactive bubble laws that are passed quickly under rising political pressures provoked “by populist anti-corpo- rate emotions” (p.16). This cycle, according to Bainbridge, “tends to result in flawed legislation” (id.).

¶4 Bainbridge presents his argument in a straightforward fashion, defending his position chapter by chapter and provision by provision, and he employs a scholarly style well suited for legal and academic audiences with preexisting knowledge of basic corporations law and economic theory. The book’s title, Corporate Governance After the Financial Crisis, however, is something of a misnomer; Bainbridge devotes far more space to detailing the faulty corporate governance provisions in Sarbanes-Oxley than he does to discussing Dodd-Frank, legislation actually passed in response to what is commonly known as “the financial crisis.” (As Bainbridge admits, it may yet be too early to fairly assess the full effects of Dodd-Frank.) Throughout the book, Bainbridge assiduously champions the views of Roberta Romano, a Yale law professor who maintained in a partisan 2005 article that the federal legislative process typically—in the case of Sarbanes-Oxley, specifically—produces “quack corporate governance.”6 Bainbridge specifies in rather redundant terms how both Sarbanes-Oxley and Dodd-Frank meet the cri- teria that define such legislation, but his arguments are less than completely per- suasive, and his persistent allusions to “quack” governance impart a polemical tone to what is otherwise a thoughtful treatise.

¶5 Bainbridge’s analysis of federal legislative responses to economic crises is generally well presented, and his position is bolstered by a variety of academic studies. However, many of Bainbridge’s arguments can be and are countered by authors with similar credentials citing equally credible studies in support of their assertions. Columbia law professor John C. Coffee, who dubs Bainbridge, Romano, and similarly disposed academics the “Tea Party Caucus,”7 suggests in a recent article that even flawed federal legislation is better than nothing and proffers, in direct response to the caucus, that with time and reflection most statutory defects will be corrected.8 With respect to Sarbanes-Oxley, scholars Robert A. Prentice and David B. Spence, both with the University of Texas at Austin’s McCombs School of Business, reject the notion that the act interferes unduly with state authority, argu- ing convincingly that it more accurately represents “a congressional attempt to shore up a federal system of securities regulation that has generally served the nation well.”9 They further assert that the very “empirical evidence that [Sarbanes- Oxley’s] critics believe Congress ignored strongly indicates that vigorous securities regulation is necessary for capital markets to reach their potential.”10

¶6 Ultimately, it is Bainbridge’s evident concern over the “creeping federalization of corporate governance” (p.19) that delineates his position within the wider political context. Federal versus state, reform versus free market, shareholder versus management, main street versus Wall Street—these are the constructs that make up the overarching themes of this book. These topics are also particularly relevant in light of today’s highly divisive political climate, and despite some weaknesses, Cor- porate Governance After the Financial Crisis is a worthy contribution to the debate. It is recommended for academic libraries, particularly those associated with schools of law or business, and to anyone interested in corporate governance practices. 

1. Sarbanes-Oxley Act of 2002, Pub.L.No.107-204,116 Stat. 745 (codified as amended in scattered sections of 15 & 18 U.S.C.).

2. Dodd-Frank Wal Street Reform and Consumer Protection Act,Pub.L.No.111-203,124Stat. 1376 (2010) (codified as amended in scattered sections of 7, 12, 15, 18, 22, 31 & 42 U.S.C.).

3. Stephen Bainbridge@ProfBainbridge, Twitter, http://twitter.com/profbainbridge (last visited Aug. 14, 2012).

4. Stephen M. Bainbridge, Response, Director Primacy and Shareholder Disempowerment, 119 hARv. L. Rev. 1735 (2006); Stephen M. Bainbridge, Dodd-Frank: Quack Federal Corporate Governance Round II, 95 Minn. L. Rev. 1779 (2011).

5. Quoting MarkJ.Roe,Washington and Delaware as Corporate Lawmakers, 34DeL.J.Corp.L. 1, 8 (2009).

6. Roberta Romano, The Sarbanes-Oxley Act and the Making of Quack Corporate Governance, 114 Yale L.J. 1521 (2005).

7. John C. Coffee, Jr., The Political Economy of Dodd-Frank: Why Financial Reform Tends to Be Frustrated and Systemic Risk Perpetuated, 97 Cornell L. Rev. 1019, 1024 (2012).

I make Rod Dreher's "list of conservatives/GOP public personalities we don’t hear enough from"

Really

No brag, just fact: My SSRN rankings

An email from SSRN.com:

Dear Stephen M. Bainbridge,

Social Science Research Network (www.ssrn.com) is sending you information on your papers in the eLibrary as of 10/29/2012.


AGGREGATE STATISTICS ON YOUR PAPERS

Your Publicly Available (Scholarly and Other Papers) and Privately Available Papers on SSRN as of 10/29/2012 have:

89,181 TOTAL DOWNLOADS
9,992 DOWNLOADS IN THE LAST 12 MONTHS
541,474 TOTAL ABSTRACT VIEWS

(Note: The totals above are calculated specifically for this author letter as of 10/29/2012 for all your papers on SSRN (summing the data on both your publicly and privately available papers) and therefore may differ slightly from the numbers on the SSRN site.)


Your Author Statistics as of 10/02/2012 (out of 209,432 authors in SSRN, based only on Publicly Available, Downloadable Papers)

33 is your AUTHOR RANK, based on 88,409 TOTAL DOWNLOADS.
56 is your AUTHOR RANK, based on 9,958 DOWNLOADS IN THE LAST 12 MONTHS.
2,209 is your AUTHOR RANK, based on 222 TOTAL CITATIONS.

You can find the complete table of the Top Authors Ranking by Downloads and Citations at http://hq.ssrn.com/rankings/Ranking_display.cfm?TRN_gID=7

You can access my papers on SSRN at: http://ssrn.com/author=16596

Q&A on Corporate Governance After the Financial Crisis Part 6: "The past decade has witnessed a gradual narrowing of the scope of boards of directors and an increasing reliance on director independence"

The latest issue of the UCLA Lawyer magazine has a series of Q&As with yours truly about my book Corporate Governance after the Financial Crisis. I'm reprinting the Q&As in this series of blog posts. As the article intro explains, the book argues "that federalizing corporate governance impinges on state sovereignty, hobbles corporate efficiency and shortchanges both investors and the American taxpayer .... Professor Bainbridge offers an incisive analysis of the landscape-altering Sarbanes-Oxley and Dodd-Frank acts, responses to the near-cataclysmic economic downturns of the last decade," which "advances a critical dialogue about the limits of crisis-driven public policy."

Q: The past decade has witnessed a gradual narrowing of the scope of boards of directors and an increasing reliance on director independence. Why is this not a panacea for the ills of corporate governance?

A: This is such an important question that I devoted an entire chapter to the ever-increasing reliance on independent directors. In it, I argue that director independence rules not only failed to prevent the financial crises of the last decade, but may well have contributed to them. I admit that’s a provocative claim, but I’m confident it’s correct.

The strict conflict of interest rules embedded in the new definitions of independence made it difficult for financial institutions to find independent directors with expertise in their industry. A survey of eight U.S. major financial institutions, for example, found that two thirds of directors had no banking experience. Given the inherent information asymmetries between insiders and outsiders, the lack of board expertise significantly compounded the inability of financial institution boards to effectively monitor their firms during the pre-crisis period. More expert boards could have done more with the information made available to them and, moreover, would have been better equipped to identify gaps therein that needed filling.

In addition, the need to find independent directors put an emphasis on avoiding conflicted interests at the expense of competence. In other words, the problem was not just that the new definition of independence excluded many candidates with industry expertise. It was also that the emphasis on objective indicia of conflicts dominated the selection process to the exclusion of indicia of basic competence and good judgment. The financial crisis thus appears, in part, to have been an unintended consequence of the Sarbanes-Oxley Act. 

Q&A on Corporate Governance After the Financial Crisis Part 5: "What is the link between shareholder involvement and corporate performance?"

The latest issue of the UCLA Lawyer magazine has a series of Q&As with yours truly about my book Corporate Governance after the Financial Crisis. I'm reprinting the Q&As in this series of blog posts. As the article intro explains, the book argues "that federalizing corporate governance impinges on state sovereignty, hobbles corporate efficiency and shortchanges both investors and the American taxpayer .... Professor Bainbridge offers an incisive analysis of the landscape-altering Sarbanes-Oxley and Dodd-Frank acts, responses to the near-cataclysmic economic downturns of the last decade," which "advances a critical dialogue about the limits of crisis-driven public policy."

Q: What is the link between shareholder involvement and corporate performance? Does an increase in the former always trigger an improvement in the latter?

A: Actually, the bulk of the evidence is that shareholder involvement does not—outside a few special cases—improve firm performance. I review the evidence at length in Chapter 7 of Corporate Governance after the Financial Crisis. While there is little evidence that activism has benefits for investors as a class, there is considerable evidence for the proposition that activist shareholders can profit through private rent seeking.

This result is not surprising, of course. First, the high costs and low success rate of activism suggest that its net gains are substantially lower than many proponents of shareholder activism claim. Second, if activism increases the target firm’s stock price, all of its shareholders can free ride on the activist’s efforts. It makes no sense for an activist to expend substantial resources when the bulk of the gains from doing so will be captured by others. Instead, we would expect activists to pursue an agenda of private rent seeking rather than altruistic public service. And that’s exactly what we tend to see. 

Q&A on Corporate Governance After the Financial Crisis Part 4: "In what ways does an expanded federal regulatory role in corporate governance potentially exacerbate the very problems it purports to solve?"

The latest issue of the UCLA Lawyer magazine has a series of Q&As with yours truly about my book Corporate Governance after the Financial Crisis. I'm reprinting the Q&As in this series of blog posts. As the article intro explains, the book argues "that federalizing corporate governance impinges on state sovereignty, hobbles corporate efficiency and shortchanges both investors and the American taxpayer .... Professor Bainbridge offers an incisive analysis of the landscape-altering Sarbanes-Oxley and Dodd-Frank acts, responses to the near-cataclysmic economic downturns of the last decade," which "advances a critical dialogue about the limits of crisis-driven public policy."

Q: In what ways does an expanded federal regulatory role in corporate governance potentially exacerbate the very problems it purports to solve?

A: Bubble laws like Sarbanes-Oxley and Dodd-Frank tend to be adopted in a hurry. As we have seen, the pressure of time tends to give advantages to interest groups and other policy entrepreneurs who have prepackaged purported solutions that can be readily adapted into legislative form. Hence, for example, many of both statutes’ provisions were recycled ideas that had been advocated for quite some time by corporate governance “reformers.” Unfortunately, because these so-called reformers tend to be critics of markets and corporations, both statutes imposed regulations that penalize or outlaw potentially useful devices and practices and more generally discourage risk-taking by punishing negative results and reducing the rewards for success. 

Q: When it comes to regulating corporations, what is the problem with a one-size-fits-all approach?

A: Anybody who has ever shopped for a Speedo knows that “one size fits all” simply isn’t true. Like people, not all corporations are the same. 

Q&A on Corporate Governance After the Financial Crisis Part 3: "You argue against the conventional wisdom that problems of corporate governance led to the financial crisis of 2008. Why?"

The latest issue of the UCLA Lawyer magazine has a series of Q&As with yours truly about my book Corporate Governance after the Financial Crisis. I'm reprinting the Q&As in this series of blog posts. As the article intro explains, the book argues "that federalizing corporate governance impinges on state sovereignty, hobbles corporate efficiency and shortchanges both investors and the American taxpayer .... Professor Bainbridge offers an incisive analysis of the landscape-altering Sarbanes-Oxley and Dodd-Frank acts, responses to the near-cataclysmic economic downturns of the last decade," which "advances a critical dialogue about the limits of crisis-driven public policy."

Q: You argue against the conventional wisdom that problems of corporate governance led to the financial crisis of 2008. Why? 

A: There is little evidence that poor corporate governance practices contributed to either the economic turmoil of the last decade in general or the declining competitiveness of U.S. capital markets. In the wake of the tech stock bubble, Bengt Holmstrom and Steven Kaplan published a comprehensive review of U.S. corporate governance that concluded the U.S. corporate governance regime was “well above average” in the global picture. Even when the fallout from the bubble was taken into account, returns on the U.S. stock market equaled or exceeded those of its global competitors during five time periods going back as far as 1982. Likewise, U.S. productivity exceeded that of its major Western competitors. In general, the trend with respect to major corporate governance practices had been toward enhanced management efficiency and accountability. Pay for performance compensation schemes, takeovers, restructurings, increased reliance on independent directors and improved board of director processes all tended to more effectively align management and shareholder interests.

As far as the economic crisis following the bursting of the housing bubble, “[a] striking aspect of the stock market meltdown of 2008 is that it occurred despite the strengthening of U.S. corporate governance over the past few decades and a reorientation toward the promotion of shareholder value.” A recent report commissioned by the New York Stock Exchange reached the same conclusion, finding that “the current corporate governance system generally works well.”

I make the Directorship corporate governance 100 list for the third time

The National Association of Corporate Directors today announced that:

Each year, NACD Directorship identifies the most influential people in the boardroom community, including directors and officers, as well as corporate governance experts, journalists, regulators, academics and counselors. Reviving economic growth remains a priority for policy makers and directors alike. Therefore, our programs strive to offer a balance between those who do actual board work and those who influence how that work is done. Click here to learn more about each honor.

This list is not intended to encapsulate all the career accomplishments of the D100 but rather to highlight at least one noteworthy position. More complete bios will appear in the November/December 2012 issue of NACD Directorship.

In the category Governance Professionals and Institutions, we find:

Stephen Bainbridge
William D. Warren Distinguished Professor of Law
UCLA School of Law

I was also named to the list in 2008 and 2011.

It is an honor to be included among such leading corporate governance figures. 

Q&A on Corporate Governance After the Financial Crisis Part 1: "How do you define 'quack' corporate governance laws or regulations?"

The latest issue of the UCLA Lawyer magazine has a series of Q&As with yours truly about my book Corporate Governance after the Financial Crisis. I'll reprint the Q&As in this series of blog posts.

In his new book, Corporate Governance after the Financial Crisis (Oxford University Press, 2012), William D. Warren Distinguished Professor of Law Stephen Bainbridge proves expert at turning conventional wisdom on its head. His argument—that federalizing corporate governance impinges on state sovereignty, hobbles corporate efficiency and shortchanges both investors and the American taxpayer—advances a critical dialogue about the limits of crisis- driven public policy. Professor Bainbridge offers an incisive analysis of the landscape-altering Sarbanes-Oxley and Dodd-Frank acts, responses to the near-cataclysmic economic downturns of the last decade. By crystallizing the connection between federal intervention and bad public policy, he makes a strong case for the need for smart corporate governance reform.

Professor Bainbridge, who joined the UCLA Law faculty in 1997 and has been named one of the 100 most influential people in the field of corporate governance, is a renowned teacher and scholar whose expertise includes the law and economics of public corporations.

Q: How do you define “quack” corporate governance laws or regulations?

A: Unwise federal laws or SEC rules that meet these criteria: (1) The law was supported by a powerful interest group coalition, which used a financial crisis such as the post-Lehman Bros. credit crunch in 2007-2008 to achieve longstanding policy goals essentially unrelated to the causes or consequences of the financial crisis. (2) The new law or rule lacks strong empirical or theoretical justification. To the contrary, there are theoretical and empirical reasons to believe that each is bad public policy. (3) The new law or rule erodes the system of competitive federalism that is the unique genius of American corporate law by displacing state regulation with federal law.