ProfessorBainbridge.com

Delaware Vice Chancellor Laster cites yours truly

In Firefighters' Pension System of the City of Kansas City v. Presidio, Inc., CV 2019-0839-JTL, 2021 WL 298141, at *29 n.13 (Del. Ch. Jan. 29, 2021), Vice Chancellor Laster cited my article, Stephen M. Bainbridge, Unocal at 20: Director Primacy in Corporate Takeovers, 31 Del J. Corp. L. 769, 788–89 (2006), in a long string cite about how mergers involve final period problems. 

Later in the opinion (at *49 n.28) he cites, Stephen M. Bainbridge, Director Primacy: The Means and Ends of Corporate Governance, 97 Nw. U.L. Rev. 547, 605 (2003), for the proposition that directors are not agents of the shareholders.

More evidence that banning short selling makes no sense

Alderighi, Stefano and Gurrola Perez, Pedro, What Does Academic Research Say about Short-Selling Bans? (April 29, 2020). WFE Research Working Papers, World Federation of Exchanges, Available at SSRN: https://ssrn.com/abstract=3775704

As a reaction to higher market volatility due to the global COVID-19 pandemic, in March 2020 some financial regulators imposed short-selling bans on equity markets. Their argument is that short-selling exacerbates downward price movements, thus being responsible for heightened volatility and reduced market confidence. This paper reviews the academic literature on short-selling and short-selling bans, comparing the arguments against banning short-selling with the arguments in favour. We find that the evidence almost unanimously points towards short-selling bans being disruptive for the orderly functioning of markets, as they are found to reduce liquidity, increase price inefficiency and hamper price discovery. In addition, short-selling bans are found to have negative spillover effects on other markets, for example option markets. According to the literature, during periods of price decline and heightened volatility, short-sellers do not behave differently from any other traders, and contribute less to price declines than regular ‘long’ sellers. As research has shown that short-selling bans are more deleterious to markets characterized by a relatively high amount of small stocks, low levels of fragmentation, and fewer alternatives to short-selling, emerging markets should be particularly wary of bans on short-selling

"Cajun" Pasta with Chicken, Sausage, and Shrimp

This is an effort to replicate the Cajun pastas from California Pizza Kitchen's and Cheesecake Factory.

• 6 ounces cavatappi (I like De Cecco but I've tried Banza's gluten-free chickpea version and it's pretty good)
• 1 poblano peper, seeds and ribs removed, diced
• 2 stalks celery, diced
• 1 large shallot, diced
• 4 green onions, sliced into ¼ inch circles, white and green parts separated
• 4 ounces cremini mushrooms, trimmed and diced
• 1 ½ tablespoon tomato paste (I use Cento)
• 2 garlic cloves, minced
• 2 boneless and skinless chicken thighs, each cut into 4 or 5 chunks, seasoned with salt, pepper, and ½  teaspoon seasoning mix
• 1 andouille sausage, cut in half lengthwise and cut into thin slices
• 8 peeled and deveined medium shrimp (or, if you can get them, 4 ounces of cooked crawfish tails; I get mine from Louisiana Crawfish), seasoned with salt, pepper, and ¼ teaspoon seasoning mix
• 1 14.5 ounce can whole San Marzano tomatoes, drained and chopped
• 1 teaspoon of Better Than Bouillon Roasted Chicken base dissolved in 1 cup of hot water
• 1 tablespoon fish sauce (I prefer Red Boat)
• Cajun or Creole seasoning mix
• Hot sauce (I'm a Tabasco man but Helen prefers Frank's)
• salt and pepper

Bring 3 quarts of water to a boil in a large pot. Add 1 tablespoon of salt. Add pasta and cook according to package directions, subtracting 2 minutes from the cooking time. Reserve 1 cup of the pasta cooking water. Drain pasta and set aside.

Heat a 12-inch skillet (I recommend the All-Clad D3 skillet) over medium heat. I prefer a stainless steel skillet here to either a nonstick or a cast iron skillet. Add a tablespoon of olive oil to the skillet.

When the oil begins to shimmer, add the poblano pepper and celery. Sauté for about 5 minutes or until the diced pieces start to soften. Add the shallot and white parts of the green onions. Sauté for a couple of minutes. Add mushrooms. Season with salt, pepper, and seasoning mix. 

After the mushrooms release their liquid, begin to sizzle, and start to take on some color, add the tomato paste and sauté for 30 seconds. Add garlic and sauté for another 30 seconds.

Add the chicken.  Cook for about 4 minutes, stirring often.

Add the sausage and the shrimp. Cook for two minutes.

Add the tomatoes, fish sauce, and chicken stock. Raise the heat to maximum, bring the sauce to a boil, reduce the heat to low and let simmer. Add the cooked pasta and allow to cook for a couple of minutes. Taste and add hot sauce, salt, pepper, and seasoning mix to taste.

Divide into large pasta bowls. Top with the reserved green parts of the green onions.

Note: The classic Cajun trinity consists of onions, celery, and green pepper. I really dislike the taste of green pepper, so I swap it out for a poblano. Alternatively, I sometimes use red or yellow bell pepper. A regular yellow onion is too big for two servings, which is why I use a shallot and the white parts of the green onions instead.

Option: I’ve made this with a bunch of different types of pasta and had success with all. One of my favorite ways is to use fideo.  If you make it with fideo, cook the vegetables and meat—but not the shrimp—as per recipe. Remove meats to a plate. Add a tablespoon of olive oil to the skillet and warm over medium-high heat. Add 6 ounces of fideo and fry until the pasta begins to turn brown. That should take about 2 minutes. But be very careful not to let it burn or blacken. Instead of using whole tomatoes, use diced or crushed tomatoes and do not drain them. Instead, add the tomatoes with their juices, fish sauce, and stock. Bring to a boil, reduce to a simmer and cover. Let cook for about 5 minutes and then check the pasta. If the liquid had mostly been absorbed, add half a cup of water. Return cover and let cook 3 minutes. Remove the cover and add the vegetables, meats, and shrimp. If the pasta is too dry, add another half cup of water. Cook uncovered, stirring often, until the shrimp is pink and the pasta is al dente.

A rose wine makes a nice match.

Orecchiette with Mushrooms and Sausage in a Creamy Tomato Sauce

• 8 ounces orecchiette (I prefer De Cecco)
• 6 ounces mild Italian sausage (either bulk or links with their casings removed)
• 4 ounces cremini mushrooms, trimmed and roughly diced
• ½ ounce dried porcini mushrooms
• 1 medium shallot, diced
• 2 cloves garlic, minced
• 1 tablespoon tomato paste (I used to be a Muir Glen guy, but lately I've been using Cento)
• ½ cup dry white wine
• ½ cup heavy cream
• 1 ounce burrata with black truffles, diced small
• 1 ounce cream cheese
• 1 ounce grated Parmesan cheese (I use a microplane, which also makes a nifty zester)
• 1 tablespoon truffle butter
• 1 tablespoon chives cut into small pieces
• salt and pepper

Put the porcini mushrooms in a small bowl and add ⅔ cup of boiling water. Let the mushrooms steep for 45 minutes. Drain, reserving the reconstituting liquid, rinse, and dice. Set the mushrooms aside. Put a coffee filter in a funnel set on top of a large glass. Pour the reconstituting liquid through and reserve. 

Bring 3 quarts of water to boil in a large pot. Add 1 tablespoon salt. Cook orecchiette according to package directions, but subtract 2 minutes from the cooking time. Reserve 1 cup of pasta water. Drain the pasta and set aside.

Heat a large skillet (I recommend a 12-inch All-Clad D3 skillet) over medium heat. Add a tablespoon of olive oil to the skillet and cook the Italian sausage, breaking it up with a wooden spoon as it cooks. When the meat starts to turn brown, remove the sausage with a slotted spoon to a paper-towel lined plate to drain.

Lightly blot any excess fat remaining in the pan with a paper towel, so as to not disturb any fond that has developed. Add the truffle butter and as it melts add the shallot. Cook the shallot for a couple of minutes. When the shallots start to turn translucent, add the mushrooms. Season with salt and pepper. Cook about 6 minutes or until they soften and start to take on color. Add tomato paste and sauté for about 30 seconds. Add garlic and sauté for another 30 seconds. Add the wine. Increase heat to high and bring to a boil. Scrape up the fond with a wooden spoon. Once the wine has reduced to a glaze consistency, return the sausage to the pan, reduce the heat to medium and add the cream and the reserved mushroom reconstituting liquid.

After the sauce has reduced slightly and begins to thicken, add the pasta, the mozzarella, and the cream cheese. Cook for about two or 3 minutes until the pasta is al dente. If the sauce gets too thick, thin it out by adding pasta water by the tablespoon until it is as runny as you like. (I like it pretty thick.) 

Taste and add additional salt or pepper to your taste. Sometimes I add a dash of Tabasco or a big pinch of red pepper flakes. If you'd like the sauce a little bit pinker, add more tomato paste.

Serve in large pasta bowls. Top with Parmesan and chives. I like to also garnish with a couple of grinds of black pepper.

Option 1: Reduce sausage by two ounces. Finely chop 2 ounces of Salami al Tartufo in a mini-food processor and add it when you add the mushrooms.

Option 2: Steam some broccoli rabe or broccolini and add it to the pasta just before service.

We drank a Pahlmeyer Chardonnay (Napa Valley) 2018. Pahlmeyer makes big wines and, frankly, I was expecting an oak bomb that might not work with the meal. I was pleasantly surprised to find that the oak was restrained, balanced, and well integrated. It’s still a rich and hefty wine, of course. It suggested buttered toast, white peach, Meyer lemon, and vanilla. This ended up being one of the best Napa Chardonnays I’ve ever tasted. I predict this will age well. Got to find more.  Grade: A

"Selling the stock market short"

Kevin Haeberle has a very interesting op-ed in The Hill on the social functions of the stock markets prompted by the recent GameStop frenzy (for lack of a better word). I particularly enjoyed his discussion of the market's function of facilitating "gambling." Recommended reading.

Lund and Pollman on The Corporate Governance Machine

I had the privilege of reading this article when it was in a draft stage. It was excellent then and a fast look suggests that this version is even better.

The conventional view of corporate governance is that it is a neutral set of processes and practices that govern how a company is managed. We demonstrate that this view is profoundly mistaken: in the United States, corporate governance has become a “system” composed of an array of institutional players, with a powerful shareholderist orientation. Our original account of this “corporate governance machine” generates insights about the past, present, and future of corporate governance. As for the past, we show how the concept of corporate governance developed alongside the shareholder primacy movement. This relationship is reflected in the common refrain of “good governance” that pervades contemporary discourse and the maturation of corporate governance as an industry oriented toward serving shareholders and their interests. As for the present, our analysis explains why the corporate social responsibility movement transformed into shareholder value-oriented ESG, stakeholder capitalism became relegated to a new separate form of entity known as the benefit corporation, and public company boards of directors became homogenized across industries. As for the future, our analysis suggests that absent a major paradigm shift, advocacy pushing corporations to consider the interests of employees, communities, and the environment will likely fail if such effort is not framed as advancing shareholder interests.

Lund, Dorothy S. and Pollman, Elizabeth, The Corporate Governance Machine (January 28, 2021). U of Penn, Inst for Law & Econ Research Paper No. 21-05, Available at SSRN: https://ssrn.com/abstract=3775846

Recommended Reading

Are providers of market indices investment advisors?

Paul Mahoney and Adriana Robertson engage in some outside the box thinking and end up making a provocative and persuasive argument:

The rise of index funds has reshaped the modern American capital markets. Like mutual fund managers, indices now direct trillions of dollars of investor capital. Although it regulates mutual fund managers as investment advisers, the SEC has chosen not to treat the providers of market indices similarly.

In this Article, we argue that many index providers are not merely like investment advisers; under the relevant statutory and regulatory regimes, they are investment advisers. The SEC’s failure to recognize this fact reflects an inaccurate and antiquated view of the index fund market.

Having established that certain index providers are presently acting as unregulated investment advisers, we propose a regulatory solution. The SEC should create a nonexclusive, conditional safe harbor giving index providers guidance on what activities will and will not make them investment advisers. This would close the regulatory gap in a way that is consistent with the governing statutes and case law without unduly burdening market participants.

Mahoney, Paul G. and Robertson, Adriana, Advisers by Another Name (January 15, 2021). Virginia Law and Economics Research Paper No. 2021-01, Available at SSRN: https://ssrn.com/abstract=3767087

 

Recommended reading

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.