ProfessorBainbridge.com

Introducing The Profit Motive

2/ Since the title of the book is "The Profit Motive: : Defending Shareholder Wealth Maximization," there doesn't seem to be much point in hiding the ball behind a pretense of academic objectivity. So here's what I've got. Thoughts? #lawtwitter #academictwitter #corpgov pic.twitter.com/5mMk0UVA1h

— Steve Bainbridge (@PrawfBainbridge) December 23, 2021

Note to adopters of Bainbridge's Business Associations Cases and Materials

The book's website has an update memo with UFCW v. Zuckerberg and notes, which updates the Delaware law of demand excusal.

Francis Pileggi said some nice things about yours truly

I very much appreciated his kind words:

Professor Stephen Bainbridge, a leading corporate law scholar whose many publications are cited in opinions of Delaware’s Court of Chancery and Supreme Court, recently provided learned commentary about the latest guidance by the SEC on Rule 14a-8 regarding shareholder proposals.

 

Look what came in today's mail: The 11th edition of my Business Associations casebook

Longtime users will notice a major change to the cover of this edition. My friends and coauthors Bill Klein and Mark Ramseyer have decided to retire from working on our books. It has been an honor and privilege to work with them these many years. Going forward, I will be solely responsible for editing the books.

I do not plan any significant changes to the editorial style. In editing this book, I will continue to follow the six basic but apparently widely ignored principles that have informed the book since Bill’s first edition. Each principle is one that I think helps produce a book that teaches students the gist of the law they need to know; that trains them to apply it; and that (perish the thought) almost makes them enjoy the process.

A personal book plug

Now available—"Business Associations: Cases and Materials on Agency, Partnerships, LLCs, and Corporations, 11th" by @UCLA_Law Prof. @PrawfBainbridge. Learn more at https://t.co/0elwnAywzU (https://t.co/k5jHRGpkFF). #WestAcademicAuthor pic.twitter.com/MMn9RL7uXl

— West Academic for Faculty (@WestAcademic) November 17, 2021

I am the Ninth Most Cited Corporate Law Academic of All-Time

Fred Shapiro (Yale Law School) periodically published citation counts. He has just published a new one in The Most-Cited Legal Scholars Revisited, 88 U. Chi. L. Rev. 1595 (2021). As far as corporate law goes, he has me ranked ninth:

Unlike the Leiter-Sisk rankings, which look at citation counts over a recent span of years, Shapiro's count looks at all-time counts.

The 11th Edition of what is now Bainbridge's Business Association's casebook is now available for Spring 2022 adoptions

Foundation Press today announced that the 11th edition of my Business Associations casebook is now available for Spring 2022 adoptions. Go here to order.

The Fourth Edition of Bainbridge's Mergers & Acquisitions (Concepts and Insights) is now out and ready to ship

The Fourth Edition of my Mergers and Acquisitions (Concepts and Insights) treatise arrived today. It's up to date and considerably expanded in coverage at almost 140 pages longer than the prior edition. Practitioners and students will find it useful.

 

The old chapter on mergers and sales of substantially all assets has been split into three chapters: Mergers and Asset Sales; The M&A Deal Process; M&A Contracts. These new chapters clock in at a total of 165 pages, compared to 64 in the old edition. The material on M&A Contracts is especially more detailed, with many more sample clauses and discussion of drafting alternatives.

 

Major new cases like MFW and Corwin get extended coverage, as do important statutory developments like DGCL 251(h).

My third video on business valuation is now up on YouTube

This one focuses on the Capital Asset Pricing Model (CAPM), Beta, and using them to calculate discount rates.

Getting to know yours truly

At the law school, now that we're easing back into being at work in person that colloquium committee thought it would be a good idea to have a series of talks in which several members of the faculty introduced themselves by describing how we got into law teaching and saying a few words about our teaching and scholarship.

I was very pleased to be asked to speak at yesterday's session. So there are my notes.

I went to college in 1976 as a pre-med. In the summers after my sophomore and junior years, however, I worked in a pathology lab. I quickly discovered I didn't like being around dead people. I didn't like being around sick people. And I found bodily fluids icky. This seemed incompatible with a career in medicine. But by then I was locked into a Chemistry major.

So in 1980, I enrolled in Chemistry grad school. After a series of laboratory accidents that were not entirely my fault, my research advisor suggested I bail out with an M.S. and seek a job that did not involve dangerous substances and extremely valuable equipment.

So in 1982, I enrolled at UVA Law.

My plan, as I explained to my somewhat dubious parents, was to pursue a career in patent law where I could put my science training to good use. But then I met Mike Dooley.

In the summer after my first year, I was Mike’s RA.

I thought Mike had the coolest job in the world. People actually paid him to sit around thinking great thoughts about those fascinating things called corporations.

Admittedly, it was an odd trigger for a transformative experience, but that’s exactly what I had that summer. By the time the fall semester rolled around, I wanted to be a corporate lawyer. More precisely, I wanted to be a corporate law academic.

After a few years in practice, I got hired at UIUC law (where Mike Dooley had started). In 1996, I joined the UCLAW faculty.

As a scholar, I’ve made two primary contributions to the literature. I was one of the first people who argued that insider trading is not really a securities law issue. But rather an issue about who owns information. I developed an approach to insider trading that was designed to protect corporate rights in information, which I still believe better explains some aspects of the law and makes more sense than our fraud-based system.

Then I developed a model of corporate governance that I called director primacy, to contrast it to the prevailing shareholder primacy model. The model built on work Mike had done, which in turn had built on work economist Kenneth Arrow had done. It’s probably what I’m best known for. The gist is that there is an inherent tradeoff in corporate law between deference to the board’s authority and the need to hold the board accountable. Because the power to review is the power to decide, authority and accountability are ultimately inconsistent. This tension drives and explains much if not most of corporate law.

One thing I learned early on was that you need to keep banging away on an idea. After my fourth article on insider trading, Mike Dooley told me that what the world did not need was another article on insider trading by yours truly. Since then I’ve written a book on insider trading, two book chapters, and three more articles. I like to think all make contributions, as do the dozen or so articles and three books I’ve written about aspects of director primacy, but as the saying goes, quantity has a quality of its own.

As for teaching, I think legal education pervasively sends law students the message that corporate lawyering is a less moral and socially desirable career path than so-called “public interest” lawyering.  The corporate world is viewed as essentially corrupting and alienating, while true self-actualization is possible only in a Legal Aid office.

In my teaching, I have chosen to unabashedly embrace a competing view. I tell my students about Nicholas Murray Butler, president of Columbia University and winner of the Nobel Peace Prize, who wrote in 1912 that: “The limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important than the limited liability company.”

I tell them about journalists John Micklethwait and Adrian Wooldridge, whose magnificent history of the corporation contends that the corporation is “the basis of the prosperity of the West and the best hope for the future of the rest of the world.”

And so I put it to my students this way: You want to help make society a better place? You want to eliminate poverty? Become a corporate lawyer. Help businesses grow, so that they can create jobs and provide goods and services that make people’s lives better.

The goal isn’t just to make my students feel better about themselves. I firmly believe that too many of our students, when they get out in practice, may be more willing to act in ways that are ethically gray—to act as facilitators rather than gatekeepers—if they’ve been told repeatedly that they’ve already “sold out.”

Also, I don’t use the Socratic method but that’s a story for another day.

Revised Version of "Don’t Compound the Caremark Mistake by Extending it to ESG Oversight" Now Online

Bainbridge, Stephen Mark, Don’t Compound the Caremark Mistake by Extending it to ESG Oversight (October 11, 2021). Business Lawyer (September 2021), UCLA School of Law, Law-Econ Research Paper No. 21-10, Available at SSRN: https://ssrn.com/abstract=3899528

Since the foundational decision in In re Caremark Intern. Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996), Delaware corporate law has required boards of directors to establish reasonable legal compliance programs. Although Caremark has been applied almost exclusively with respect to law and accounting compliance, the original Caremark decision contemplated applying the oversight duty to the corporation’s “business performance.” Accordingly, there is no doctrinal reason that Caremark claims should not lie in cases in which the corporation suffered losses, not due to a failure to comply with applicable laws, but rather due to lax risk management.

The question thus arises as to whether Caremark should be extended to board failures to exercise oversight with respect to environmental, social, and governance (ESG) factors. Obviously, where existing legislation or regulations impose compliance obligations in ESG-related areas, such as human resources, the environment, or worker safety, Caremark already applies. As such, boards must “ensure that compliance and monitoring systems are in place” to oversee corporate compliance with those laws.

Many ESG issues are not yet the subject to legal requirements, however. The question addressed in this Article is whether the board’s Caremark obligations should be extended to encompass oversight of corporate performance with such issues. In other words, should the board face potential liability not just for failing to ensure that the company has adequate reporting and monitoring systems in place to insure compliance with ESG-related legal requirements, but also to monitor ESG risks in areas where corporate compliance would be voluntary or aspirational.

A little self-promotion

.@PrawfBainbridge's take (https://t.co/WJ9wmhUWCz) on Sen. @marcorubio's "Mind Your Own Business Act" is cited by @jonsskolnik in @Salon. https://t.co/nEa7Kclqi3

— UCLA School of Law (@UCLA_Law) October 4, 2021

My post on the SEC steeping out of its wheelhouse by investigating Activision's employment practices got noticed

Keith Bishop at @JDSupra also picked up my post on Activision and the SEC's stepping outside its wheelhouse.https://t.co/FNUC3AfrfB

— Steve Bainbridge (@PrawfBainbridge) September 22, 2021

The Cambridge Handbook on Compliance is Out

I just got my copy of The Cambridge Handbook of Compliance. It includes a chapter by yours truly on insider trading compliance programs.

The advertising tells us that:

Compliance has become key to our contemporary markets, societies, and modes of governance across a variety of public and private domains. While this has stimulated a rich body of empirical and practical expertise on compliance, thus far, there has been no comprehensive understanding of what compliance is or how it influences various fields and sectors. The academic knowledge of compliance has remained siloed along different disciplinary domains, regulatory and legal spheres, and mechanisms and interventions. This handbook bridges these divides to provide the first one-stop overview of what compliance is, how we can best study it, and the core mechanisms that shape it. Written by leading experts, chapters offer perspectives from across law, regulatory studies, management science, criminology, economics, sociology, and psychology. This volume is the definitive and comprehensive account of compliance.

We are third

From Brian Leiter's blog: