ProfessorBainbridge.com

Book Recommendations About Business and Transactional Lawyering

I frequently get questions from students for recommendations of books that will give them basics about business and finance, as well as being a transactional lawyer. Many of these students come from a non-business background and need something to get up to speed. Some of my favorite book recommendations for these students include:

I also recommend that students read general market books about business and lawyering. It gives them a feel for what the real world's like outside of textbooks. Some of my favorites are out of print, but here's a few recommendations:

And then, of course, there's my books:

My friend and frequent coauthor Todd Henderson has published another legal thriller

Helen and I both tremendously enjoyed Mental State, which was our friend Todd Henderson's first novel. It was a tremendously well done mystery/legal thriller. So we're excited that he's now published a sequel, State of Shock. We've placed our order.

Todd Henderson is the Michael J. Marks Professor of Law at the University of Chicago Law School, where he is prolific author of books, articles, and popular pieces on subjects ranging from business law to the regulation of Wall Street to legal issues involving Native Americans. Prior to becoming an academic, he worked as a business consultant, lawyer, and civil engineer.

From Amazon.com:

When Jante Turner is murdered just days before she takes the mantle as new dean of Rockefeller University Law School in Chicago, Royce Johnson is approached to help solve the murder. But Johnson doesn’t even have an investigator’s license, much less his old job with the FBI. In fact, he’s just been released from prison after serving a year-long sentence for his rogue investigation that led to the impeachment of a Supreme Court justice. Hero to some, a criminal to others, Johnson is hired by the new dean of Rockefeller Law to help clear his name from rumors swirling around the former dean’s unsolved murder.

Soon, Johnson finds himself at the intersection of higher education, Chicago politics, big money, and murder. As he chases down leads across campus and the South Side, the disappearance of an environmental lawyer at the University takes the investigation in a surprising direction. Johnson traces a river of corruption running from deep-pocket donors of the University to North Side developers and a South Side alderman who is heir to the throne in City Hall. In his desperation, he turns to the one lawyer who can help him—the former Rockefeller student whom Johnson mistakenly framed for murder on his last case. Marcus Jones now practices law, and although the relationship is strained for good reason, they team up to catch Jante’s killer.

Wounded and on the run—but able to connect dots that track from a toxic dump to environmental law to the pinnacle of the University—Johnson circles back to his client, the acting dean of Rockefeller Law, and explodes the man’s world by revealing the murderer.

I'm confident this will be another success. 

Cooking with Professor Bainbridge

I started blogging at ProfessorBainbridge.com in 2003. The blog started out with a focus on corporate law, but quickly evolved into a platform for talking about all of my interests: both vocational and avocational.

In the earlier years, the Food and Wine section of the blog consisted mostly of notes on wines Helen and I had tasted. But I had started cooking in my teens and it had eventually evolved into a hobby. Encouraged by Helen, I gradually started writing down some of the recipes I concocted and transcribing them to the blog.

Being bored during the pandemic, I decided to amuse myself by compiling all those recipes into a cookbook. Not to sell but just to share with friends and readers. And now it's ready.

You can download Cooking with ProfessorBainbridge.com here.

I hope you make some of the recipes and enjoy them.

Ben Edwards on GameStop

Professor Edwards posted a detailed analysis of the securities law aspects of the GameStop kerfuffle (is that the right word). Recommended reading.

Guttentag on Chris Collins' Insider Trading

My friend Michael Guttentag just posted this really interesting article:

On June 22, 2017, Representative Christopher Collins called his son from the lawn of the White House to share confidential information about a public company. In tipping off his son, Collins acted despite significant legal risk and a limited payoff.

This article attempts to make sense of Collins’ seemingly inexplicable behavior by turning to the work of criminologists to identify distinctive features of the crime of insider trading. First, James William Coleman’s research on what motivates white-collar criminals suggests that the absence of readily identifiable victims may contribute to the incidence of insider trading. Second, the work of Lawrence Cohen and Marcus Felson on the opportunity structure of crime suggests how the ease with which those in possession of material non-public information can trade facilitates insider trading.

Guttentag, Michael D., "Huh?" Insider Trading: The Chris Collins Story (October 26, 2020). 15 Tenn. J. L. & Pol. 95 (2020), Loyola Law School, Los Angeles Legal Studies Research Paper No. 2020-28, Available at SSRN: https://ssrn.com/abstract=3719551

UCLAW's Jim Park on "From Managers to Markets: Valuation and the Shareholder Wealth Paradigm"

Interesting new paper from my friend and UCLAW colleague James Park:

The shareholder wealth paradigm displaced a managerialist model where investors deferred to managers with the expertise to efficiently allocate resources within the firm. The corporate managers who administered such internal capital markets faced less pressure to generate profits than they do today. The conventional explanation of the transition from managerialism to shareholder wealth maximization points to changes in ideology favoring shareholders. This Article argues that a more significant cause of the decline of the managerialist model was a fundamental shift in the way that investors value companies. As managerial skill improved, companies with strong management teams were viewed as more likely to generate earnings over time. Participants in external capital markets became more confident in forecasting earnings for companies with superior management and stock prices for companies increasingly reflected the present value of the company’s earnings potential. As investors focused on projecting future performance, it became important for managers to signal their ability to produce earnings by consistently meeting market projections of such performance. Rather than ideology, the need to demonstrate earnings potential is the primary reason why public companies generally prioritize shareholder wealth maximization. If the transition to shareholder wealth maximization was driven by changes in valuation, it is possible that shifts in valuation methods could result in a world in which shareholder wealth maximization plays a lesser role in shaping corporate purpose.

Park, James J., From Managers to Markets: Valuation and the Shareholder Wealth Paradigm (November 15, 2020). UCLA School of Law, Law-Econ Research Paper No. 20-09, Available at SSRN: https://ssrn.com/abstract=3731764

Is Caremark evolving and, if so, to what?

Very interesting new paper by Roy Shapira:

What role does corporate law play in holding directors accountable for compliance failures? Until recently, the answer has been “very little.” The prevalent standard for director oversight duties (Caremark duties) was set high, effectively demanding that plaintiffs show scienter without having access to discovery. As a result, derivative actions over directors’ failure of oversight were routinely dismissed at the pleading stage, and many commentators considered Caremark duties largely irrelevant. Yet, starting in June 2019, a string of successful Caremark cases have signaled a new era of enhanced oversight duties. This Article contributes to our understanding of the new Caremark era along three dimensions. First, the Article delineates the contours of the shift in Delaware courts’ approach to oversight duties. The courts now increasingly apply the “mission critical compliance” exception to justify enhanced duties, and lower the threshold for receiving information in order to investigate potential failure-of-oversight claims. Second, the Article identifies the drivers of this “new Caremark era,” with special emphasis on the role of a seemingly disparate development in shareholders’ right to information from the company. Shareholders now enjoy much better pre-filing discovery powers, which they can utilize to plead with particularity facts about how the board never even discussed a critical compliance issue, or how they knew about critical problems but chose to ignore them. Armed with these newfound pre-filing investigatory tools, shareholders can overcome what once seemed insuperable pleading hurdles. Finally, the Article evaluates the desirability of the new Caremark era, spotlighting its likely positive effects on information flows inside companies and the ability of the market to discipline corporate misbehavior (better reputational discipline), as well as the ways in which it nicely compensates for the blind spots of other enforcement mechanisms.

Shapira, Roy, A New Caremark Era: Causes and Consequences (December 10, 2020). 98 Washington University Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3732838

I remain hopeful that Caremark liability will not become routine, for the reasons I articulated in Caremark and Enterprise Risk Management, 34 Journal of Corporation Law 967 (2009), and The Convergence of Good Faith and Oversight, 55 UCLA Law Review 559 (2008) (Coauthors: Star Lopez and Benjamin Oklan). But I think Professor Shapira's analysis may well be right as a descriptive matter.

I blame Leo Strine (in the friendliest possible way). His opinion in Guttman v. Huang recharacterized Caremark as a duty of loyalty case instead of a day of care case. Once the Delaware Supreme Court swallowed that in Stone v. Ritter we faced the potential of a slippery slope in which Caremark could go from being the hardest corporate law claim to prove to a potentially crippling source of liability.

Spaghetti with Asian Mushrooms

This recipe is an attempt to replicate a delicious pasta course I once had at Tetsuya's in Sydney.

• 8 ounces thin spaghetti (I prefer De Cecco's # 11 Spaghetti)
• 3.5 ounces bunapi mushrooms, remove the fibrous base (Hokto Kinoko Company Organic is the brand most available in LA)
• 5 ounces shiitake mushrooms, stemmed and sliced thinly
• 2 cloves garlic, pressed (I like my Oxo garlic press)
• 3 tablespoons sake
• 2 ½ tablespoons mirin
• 1 ½ tablespoons low sodium soy sauce
• 1 ½ tablespoons fish sauce (as always, I prefer Red Boat)
• 1 tablespoon Worcestershire sauce
• 2 teaspoons sesame oil
• ½ cup water from cooking the pasta
• ¼ teaspoon Better than Bouillon chicken flavor base
• ¼ teaspoon Better than Bouillon beef flavor base
• 1 tablespoon chives cut to ~¼ inch length
• ½ tablespoon chives, cut to 1 inch length
• olive oil
• salt and pepper

In a large pot, bring 4 quarts of water to a rolling boil. Add a couple of large pinches of salt. Cook spaghetti for 6 minutes, reserve ½ cup of the pasta water in a small bowl, and drain pasta and set aside. 

While the reserved pasta water is still hot, add the Better than Bouillon and stir to dissolve. Combine the other liquid ingredients in a small bowl and whisk briefly to combine. 

Place a 3 quart sauté pan (I love my All-Clad pan) over medium-high heat. After a couple of minutes, add a large drizzle of olive oil. As soon as it starts to shimmer, add the mushrooms. The mushrooms will exude a considerable amount of water. Allow the water to boil off, stirring frequently. Once the water has evaporated and the mushrooms begin to sizzle, reduce the heat to medium, season with salt and pepper (go light with the salt) and sauté until they have softened and begun to take on some color. Add garlic and sauté for 1 minute.

Add the sake mixture and deglaze the pan, scrapping up any brown bits. Add the bouillon mix and the short chives. Raise the heat to high, bring the sauce, and allow it to reduce for a minute or two.

Add the pasta and let it finish cooking in the sauce for a minute or two (at most) depending on how al dente you like it.

Serve in large pasta bowls, garnish with the long pieces of chives.

Tastes earthy and warming.

We drank a 2018 Tablas Creek Esprit de Tablas (Paso Robles), which is a blend of 40% Mourvèdre, 27% Syrah, 23% Grenache, and 10% Counoise. (Counties is a blending grape best known as part of the Chateauneuf-du-Pape blend.) Deep purple. Big nose of blue and black berries. On the palate, the flavor associations included blackberries, raspberries, pepper, and warm spices. Juicy and a bit jammy. Impression of sweet fruit on the finish.

Pappardelle with Tomato-Cream Sauce

This recipe was an attempt to recreate Louise Trattoria’s Pappardelle with Spicy Sausage. I’ve made it with both spicy and mild Italian sausage, boneless and skinless chicken thighs, crawfish tails and andouille sausage, and meatballs. It’s always turned out great.

• 8 ounces pappardelle pasta (I prefer De Cecco)
• 8 ounces Italian sausage (buy in bulk or buy links and remove casings)
• 1 28-ounce can whole peeled San Marzano tomatoes, drained (optional: reserve juice), and roughly chopped (I usually opt for Cento)
• 6 basil leaves, cut chiffonade
• 2 cloves garlic, minced
• ½ tablespoon tomato paste
• ¾ cups heavy cream
• Red pepper flakes (optional)
• Olive oil
• Salt
• Black pepper freshly ground
• 6 ounces Pecorino Romano, grated

Bring large pot of well salted water to a boil and cook the pasta for 4 minutes, reserve ¾ cup of pasta water, drain.

Heat a large sauté pan over medium-high heat. Add a drizzle of olive oil, add the sausage and brown. Break up the sausage as it cooks. When the sausage is browned blot with paper towels to take off excess fat. Add tomatoes, 2/3 of the basil, pepper flakes, and salt and black pepper to taste. Sauté for 2 minutes. Add garlic and tomato paste; sauté for a minute. Add cream, bring to a boil, reduce heat to a low simmer and allow sauce to thicken slightly. Add pasta and cook for a minute or two to al dente. Add half the cheese and combine. If the sauce has thickened up too much, add pasta water by the tablespoon until it is as runny as you like it. Alternatively, if you like a redder sauce, use the reserved tomato juice.

Serve in pasta dishes. Garnish with the remaining cheese and basil.

You can control how spicy the dish turns out by varying whether you use spicy or mild sausage and controlling the amount of pepper flakes you add (if any). If you make it with crawfish and andouille sausage, swap out a Cajun seasoning mix for the red pepper flakes.

Senator Warren Plus Business Roundtable Plus Vanguard, State Street, and Blackrock = Green Washing

1/ Very interesting paper by @AfraAfsharipour on #corporatesocialresponsibility #CSR https://t.co/L7LMqOAbi3 pic.twitter.com/4itRTRr1aT

— Steve Bainbridge (@PrawfBainbridge) January 21, 2021

2/ @AfraAfsharipour concludes "where politics and business are deeply intertwined, and where powerful controlling stockholders have an outsized role, stakeholderism may make little headway." Think about intersection of progressive politics and concentration of share ownership.

— Steve Bainbridge (@PrawfBainbridge) January 21, 2021

3/ In sum, crossing @BusinessTable @Vanguard_Group @blackrock @StateStreet with @SenWarren-style politics mainly results in green washing rather than socially "responsible" actions.

— Steve Bainbridge (@PrawfBainbridge) January 21, 2021

ESG Investment Screens versus Green Innovation

#ESG screens's political biases may be causing ESG funds to be missing out on innovation, including green innovation.https://t.co/0BgtUQT54M pic.twitter.com/VWLb2PH0be

— Steve Bainbridge (@PrawfBainbridge) January 21, 2021

Yours truly on the Federalization of Corporate Law from a 2009 Federalist Society Program