ProfessorBainbridge.com

Shareholder Agreement Overview

I spend a day on the enforceability of shareholder agreements in my Business Associations class. So I was pleased to find this useful report on the legality and enforceability of such agreements. It's a little disconcerting that none of the cases in our casebook are even cited in the report, but our cases are still good law and I figure there's no need to make adopters learn a new case just because it's more recent.

How to drive a law review editor insane

John Holbo points out something interesting:

I can’t footnote [to] a Kindle edition. No pages. What will the world come to? Bibliography has gotten a bit old and odd in the head in the age of the internet, but the [absence] of pages themselves is kind of a watershed.

Given how badly the editors of the Bluebook screwed up the first rounds of internet citation forms, I can't wait to see what they do with pageless ebooks.

Martin Lipton on why he invented the poison pill

The father of the poison pill discusses his baby in a video interview.

If the systematic biases identified by behavioral economics ...

... really are culturally determined, instead of being hard wired by evolutionary psychology, a lot of the field's utility disappears.

Happy 100th Birthday to Ronald Coase

Ronald Coase is 100 years old today. The Economist's Schumpeter recently offered an appreciation of Coase's vast importance for those of us who study law from an economic perspective:

The economics profession was slow to recognise  Ronald Coase’s genius. He first expounded his thinking about the firm in a lecture in Dundee in 1932, when he was just 21 years old. Nobody much listened. He published “The Nature of the Firm” five years later. It went largely unread.

But Mr Coase laboured on regardless: a second seminal article on “The Problem of Social Cost” laid the intellectual foundations of the deregulation revolution of the 1980s. Eventually, Mr Coase acquired an army of followers, such as Oliver Williamson, who fleshed out his ideas. In 1991, aged 80, he was awarded a Nobel prize. Far from resting on his laurels, Mr Coase will publish a new book in 2011, with Ning Wang of Arizona State University, on “How China Became Capitalist”.

Schumpeter goes on to concisely summarize Coase's contribution to the economic analysis of corporate governance. It's a good read. For even better reads (IMHO, of course), however, check out my posts:

Ronald Coase, The Firm, the Market, and the Law

and

Ronald Coase Does Not Explain Howard Dean

Does Proxy Access violate the First Amendment

Larry Ribstein discusses the Chamber's brief arguing that it does.

Should HP have fired Mark Hurd for cause?

CEO compensation contracts often include radically different severance packages depending on whether the CEO is terminated for cause or not for cause. Here's an interesting analysis of whether HP's termination of Mark Hurd qualified for the not for cause severance payment under his contract.

Chancellor Chandler Interviewed

Directorship has an interesting appreciation of Delaware Chancellor William Chandler by former Vice Chancellor Stephen Lamb followed by a very interesting interview of Chandler himself (HT: Pileggi). Money quotes:

• an equity judge “owns” the decision because he is personally responsible for the result, rather than a jury, for example, which is not accountable and not really personally responsible for the decision in the same way a judge in a court of equity is.
• Our fiduciary law is a floor for director conduct, essentially a standard below which they may not fall without risking liability.
• What I was hoping to say in Disney is merely that it’s highly unlikely that they would ever be found liable if directors followed a path of best practices. You could look at these best practices similar to a safe harbor provision. But best practices in any endeavor constitutes an aspirational norm rather than a requirement, which hopefully will inspire as well as guide and inform directors in their decision-making.
• We don’t allow hindsight bias to influence us by judging what they did by facts or circumstances that came to light later and then use those to judge someone based on things they didn’t know about at the time.
• I’ve talked to a lot of directors who tell me that they spend more time worrying about the influence of proxy advisors like ISS, Glass Lewis and Governance Metrics, rather than the risk of liability. They complain that a director must constantly figure out how such proxy advisory firms are ranking their company and what they’re going to say about their company.

Most Admired of 2010: I'm an Outlier

ad·mire/ədˈmī(ə)r/Verb

1. Regard (an object, quality, or person) with respect or warm approval.

Here's Gallup's list of the 10 most admired men of 2010:

And here's the top 10 women:

Among the men, I'm 3 for 10 in warm approval (Mandela, Graham, Benedict). Among the women, I'm doing even worse: 2 for 10 (Rice and Thatcher). My attitude towards the rest on both lists ranges from tepid approval to indifference to abhorence. Indeed, some of the names on the list give me serious concerns about my fellow Americans.

Tim Tebow

I'm beginning to believe

PB.com Ranked as Top Business Law Prof Blog

A ranking of the 50 best business professor blogs included 6 business law blogs, with my humble blog ranked first among them (in what appears to be a non-alphabetical listing).

Do Investors Really Think the Playing Field is Level?

BLPB asks:

Would you invest in the stock of publicly traded companies if you knew that every time insiders became aware of market-moving information they would first trade on it themselves, then share it with their quid-pro-quo "friends" who would then also proceed to trade on it, and only then release the information publicly?  Sure, by the time you sold (assuming it's bad news) your stock could well be very accurately priced--but how much consolation is that?  And even if a bunch of really smart people could present you with some nifty arguments about how you're actually not hurt (heck, you're actually better off) by allowing this sort of activity--are you really rushing off to pay to play this sort of game?  How much of a discount is sufficient to make this sort of playing field level for you?

To which I would answer: If you're an investor who thinks that the playing field is level today, with draconian insider trading penalties and massive enforcement efforts, you are too stupid to be allowed to go out in public let alone put money in the stock market.

Look, any investor with the common sense God gave gravel knows that insider trading is rampant. Not every trade, of course, but you are regularly going to be on the opposite side of an insider with better knowledge. Despite this certainty, investors continue to invest eagerly.

As I have argued elsewhere:

In the absence of a credible investor injury story, it is difficult to see why insider trading should undermine investor confidence in the integrity of the securities markets. As Bainbridge (1995, p.1241-42) observes, any anger investors feel over insider trading appears to arise mainly from envy of the insider’s greater access to information.

The loss of confidence argument is further undercut by the stock market’s performance since the insider trading scandals of the mid-1980s. The enormous publicity given those scandals put all investors on notice that insider trading is a common securities violation. If any investors believe that the SEC’s enforcement actions drove insider trading out of the markets, they are beyond mere legal help. At the same time, however, the years since the scandals have been one of the stock market’s most robust periods. One can but conclude that insider trading does not seriously threaten the confidence of investors in the securities markets.

Macey (1991, p. 44) contends that the experience of other countries confirms this conclusion. For example, Japan only recently began regulating insider trading and its rules are not enforced. The same appears to be true of India. Hong Kong has repealed its insider trading prohibition. Both have vigorous and highly liquid stock markets.

Warm wishes to our Jewish readers who are probably eating Chinese food on Christmas

A very Merry Christmas to all

Merry Christmas From The TSA

HT: Mataconis