August 16, 2014
Ownership and Control in Startups
Posted by Gordon Smith

Since reading Barbarians at the Gate in the early 1990s, I have been a huge fan of business histories. Although I have read scores (perhaps hundreds) of business histories, my list of "must reads" is still long. Recently, I decided to read one of the books on that list, The Soul of a New Machine, Tracy Kidder's account of Data General's efforts to build a minicomputer in the 1970s. This book was published in 1981, and it deals with events during my high school years, so it is a great trip down memory lane.

Here is an observation about the founders of Data General early in the book:

Some notion of how shrewd they could be is perhaps revealed in the fact that they never tried to hoard a majority of the stock, but used it instead as a tool for growth. Many young entrepreneurs, confusing ownership with control, can't bring themselves to do this.

Hmm. The distinction between ownership and control is a familiar one in corporate law circles, but this Berle-Means concept is typically applied to large corporations. What does it mean in the startup context?

Chuck O'Kelley examines the connection between entrepreneurship and the Berle-Means corporation in his 2006 article, The Entrepreneur and the Theory of the Modern Corporation, 31 J. Corp. L. 753, but I am curious about viewing this from the other direction. As noted by O'Kelley, the separation of ownership and control is used by Berle and Means to describe firms after the decline of the classical entrepeneur, so it seems somewhat surprising to see Kidder use those terms to describe a startup.

Founders often exert a tremendous influence on a company, even when shares are held by other employees and investors. This control may emanate from their formal positions within the company (CEO, CTO) or perhaps from the respect they are paid from other employees. But I think it is fair to say that ownership matters a great deal in the startup context because it is more concentrated than in the public company context. Thus, to a large extent, ownership is control in a startup.

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June 12, 2014
Posted by Usha Rodrigues

Near the end of Brigid Schulte's Overwhelmed: Work, Love and Play When No One Has the Time (about which I blogged last month) the author talks about "pulsing." The idea is that humans are designed to work in intense and punctuated bursts.  Schulte contrasts this model with the 10-hour-day, work-harder work-longer grind that the ideal worker of the 21st century is supposed to emulate.

What a relief! 

I've been a closet pulser for years.  I always described it as "getting bored easily," but I can't seem to work at one thing--particularly a writing project--for much more than an hour at a time,.  I'm much better off with a 2-hour window of time to get something done rather than a 5-hour window.  My peers often lament not having long stretches of time to get some "real writing done", and I nod knowingly, because that's what you're supposed to do.  I'm faking, though--in my heart I know I work best in concentrated bursts, and that I inevitably fritter away long blocks of time when I do have them.  I always chalked it up to lack of focus, but I guess I work best in pulses.

Schulte also shares that Anders Ericsson's study of young violinists--the basis for the theory that it takes 10,000 hours of practice to be expert at something--actually had as much to say about quality of practice as quantity. 

Ericsson's study found that not only did the best violinists practice more, they also practiced more deliberates: They practiced first thing in the morning, when they were freshest, they practiced intensely without interruption in typically no more than ninety-minute increments for no more than four hours a day.  And, most important...the top violinists rested more.  They slept longer at night and they napped more in the day. 

The law firm world wasn't as compatible to pulsing as the academic one, but I would slog away at something for hours, then finally leave my desk late at night only to have a breakthrough when on the way home.  American culture increasingly values always being available, always being on--but maybe that's not the way towards better quality output--not to mention life.

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May 30, 2014
Posted by Usha Rodrigues

I do most of my pleasure reading as I drift off to sleep, which is a large part of why I go to bed so early.  It so happens that 2 nights ago our younger dog, Sweet Pea awoke me at 12:30 am with some inexplicable yet insurmountable need to huffle at the bedroom door until I let her out in the backyard, where she spent an hour charging around, eating grass, and doing important other things. 

I have 3 children under 7, but sometimes it's the dog that wakes me up at night.

Anyhow, as I lay on the kitchen futon (yes, we have a futon in our kitchen; yes, it's awesome), I decided to start on the next book on my list, courtesy of a book club: Brigid Schulte's Overwhelmed: Work, Love, and Play When No One Has the Time.

Big mistake.

Schulte sucks you into her harried Washingtonian life, where she's late to a meeting where the grey-haired male academic tells her she has at least 30 hours of leisure a week.  Yeah, right.  It's a good read, I'm only partway through--largely because even after Sweet Pea emerged from the night and I was ensconced back in bed, thoughts about the book kept whirling through my head.  For 2 hours. Not a good book to drift off to.

My reactions thus far are two-fold and completely contradictory.  One part is: "sing it, sister."   I too spend large amounts of time harried and trying to catch up with everything work-wise, house-wise, child-wise.  Here is Schulte on page 2 "I am always doing more than one thing at a time and feel I never do any one particularly well.  I am always behind and always late, with one more thing and one more thing and one more thing to do before rushing out the door."  Mmm-hmm.

The second, and contradictory reaction is "there but for the grace of God..."  Unlike Schulte, I do have leisure time, and I know it.  I credit my job, my town and my husband for that. 

This is not to say I'm slacker lawprof kicking back with mai-tais while my students toil.  I work hard at teaching, and I'm pretty sure my students know that.  This summer I am planning on revising an article I sent out in the spring, writing a spin-off essay from that article, and writing a new article.  That's a lot.  Yet I do have leisure time.  I exercise often.  I sit down with the paper over breakfast for 15 minutes every day.  I have lunch with colleagues sometimes, or take 15 minutes out of my day to lunch, again over the paper.  I chose to leave DC and its frantic lifestyle and head to Athens, Georgia, where the pace is slower and nothing is more than 15 minutes drive away.  I've never regretted that choice, and Schulte only made me feel better about it.

Oh, and my husband.  Here's another quote from Schulte:

As I began to think more about leisure time, I realized that I kept putting it off, like I was waiting to reach some tipping point: If I could just finish picking all the weeds, chopping the invasive bamboo, cleaning out the crayons and shark teeth and math papers and toys and bits of shells and rocks and too-small clothes in the kids' closets, buy more cat food, fix the coffeepot, complete this story assignment...

Well, you get the drift.  Again, I found myself nodding.  There's always something more to do, if you're willing to do it.  And I probably would try, except that my husband is good at leisure.  And he reminds me, by word and by action, that there will never be an end to the work of life.  So at around 8, after the kids are in bed, we open up a bottle of wine and have dinner and talk.  Just about every night.

So far I'm 3 chapters into Overwhelmed, and I don't know when I'll finish it, since apparently I can't read it at bedtime.  The last chapter is titled Toward Time Serenity, so Schulte clearly has more in mind than just diagnosing overwhelmedness. If she's figured out an answer, I'll let you know.

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A Recommendation Of Young Money, By Kevin Roose
Posted by David Zaring

Eric's post on Harvard MBAs as bubble predictors references Young Money, by Kevin Roose, and reminded me that I'd never written about it.  The book's a good one, following undergrads who take Wall Street jobs and are essentially made miserable by them.  I'd put it in the One-L category of books, in that it's meant to be a humanized tell all about what will happen to you if you do this thing.  In One-L, the this thing was Harvard Law School.  In Young Money, it's analyst at Goldman Sachs.  

The book's well-reported, though it wasn't completely easy to care about well-paid people disliking their jobs, which members of the legal profession will hardly find boat-rocking.  But certainly there are some home truths there; I do sense that Roose is right when he says, as he told Ezra Klein:

in a lot of schools it's these scared organization kids going to Wall Street. One thing Wall Street does that's really smart is they actually tell you way earlier than other industries if you got a job. They'll let you lock the job down in the fall of your senior year. So you can take that job on Wall Street or you can gamble on getting something after you graduate....[But] you don't have to pay people a ton of money to come to your program after college if what you're giving them still offers prestige and structure and the sense that they're not signing up for something forever. Teach for America has really approximated the banking model without the money. If what you're seeking is short-term rewards there's no way you'd choose teaching in the Mississippi Delta over working at Goldman Sachs but there's something calling people to do work they find meaningful.

It does ring an interesting bell.

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May 14, 2014
Business Persons, By Eric Orts
Posted by David Zaring

My colleague Eric Orts has just come out with Business Persons: A Legal Theory of the Firm, and I must give it my highest recommendation.  Eric's argument is that the independent legal status of the firm is critical to making sense of it - and that its legal personhood does a better job of explaining what firms are doing than do reconceptualizations of them as nexuses of contracts, or as a set of principal-agent relationships.  "Without the social technology and 'forms' provided by law, business firms would be indistinguishable from informally organized social groups, clubs, or gatherings of people pursuing similar interests," he writes.  The books then tours the many ways that law makes firms distinctive.

Well worth adding to your collection - and available here and here.

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May 01, 2014
Received Recently: Negotiating Your Investments, by Steven Blum
Posted by David Zaring

My colleague Steve Blum has a nice book out on the financial services that can be facilitated through negotiation skills.  It is 

  • a primer on negotiation skills (that's part 1 of the book)
  • a creative application of those skills to investment management (that's part 2)
  • a reminder of some of the business school basics of investing (that's part 3)

A nice overview in a couple of different ways, plus some sound advice on dealing with investment professionals (or becoming one, an increasingly popular choice for graduates of some law schools).  Anyway, it's available here and here.  And you can see Steve's blog here, if you want more.

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March 10, 2014
Posted by Joseph Yockey

Hello, everyone. Many thanks to my hosts for the opportunity to post, and to Christine for the kind introduction. I’ll get to the meat and drink of my research interests soon, but tonight I want to talk about a less formal subject. Here in Iowa City we are a week away from Spring Break. That means our third-year students are inching ever so close to graduation. One such student recently put an interesting question to me: what book should he read in the transition summer between law school and the start of private practice?

I thought this question should be easy, but the more I thought about it the more uncertain I became. Should I recommend fiction or non-fiction? Something fun, legal, educational, or practical? I read Alan Dershowitz’ The Best Defense during my gap summer on the advice of my favorite law professor. I’m glad I did, and I found it very helpful in my early days as a litigator. But I’m not sure if it’s everyone’s cup of tea, especially for someone planning to do corporate transactional work.

Eventually my thoughts kept coming back to Hemingway, and in particular to my favorite of his short stories:"A Clean, Well-Lighted Place". It ticks several of my boxes. First, it’s all about change. The author takes less than 1,500 words to run the gamut of human transitions: youth to adulthood; work to retirement; love to loneliness; life to death. Second, it’s so short that it fits easily within a bar review study schedule. Finally, and perhaps most significantly, I think it’s important for every new lawyer to ponder the value of clean, well-lit bars, cafés, and restaurants—especially ones that stay open past 3:00am.

Yet I’m still not sure. It’s a fantastic story, but I'm told it strikes many as depressing, and that’s not the feeling I’m going for.

So, I think I need your help. What book or books would you recommend for someone leaving academia behind to enter the world of corporate law practice? Is there a text or two that you found uniquely helpful, inspirational, or transformative when making the same move?

I look forward to your thoughts, as well as to your company during the next two weeks.

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January 15, 2014
My new book: Law, Bubbles, and Financial Regulation
Posted by Erik Gerding

After over four years of work, my book Law, Bubbles, and Financial Regulation came out at the end of 2013.  You can read a longer description of the book at the Harvard Corporate Governance blog.  Blurbs from Liaquat Ahamed, Michael Barr, Margaret Blair, Frank Partnoy, and Nouriel Roubini are on the Routledge’s web site and the book's Amazon page. The introductory chapter is available for free on ssrn.

Look for a Conglomerate book club on the book on the first week of February!

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November 11, 2013
Should Business Writing Be Good?
Posted by David Zaring

Dwight Garner at the Times thinks so, per his review of The Frackers, Greg Zuckerman's paean to the new energy boom:

If you care at all about the considered use of the English language, you will probably wish to remain at least 10 paces from this book. Its sentences arrive as if prefrozen at a warehouse, and picked up by the author after they’ve fallen from the back of a Sysco truck.

Executives here are “honchos” or “bigwigs.” Wealthy people are “moneybags.” Restaurants are “eateries.” Interiors are “swanky.” A death is a “passing.” The author, a journalistic Will Rogers, has never met a cliché he did not like.


How good does nonfiction writing have to be? It’s a complicated question; there are so many variables. One answer, though, is: better than this. Isn’t there cliché-isolating software publishers can put to use? If not, why not? We need an app for this.

Second-rate writing and second-rate thinking tend to arrive in tandem, like the Captain & Tennille. “The Frackers” has little of nuance to say about geology or engineering. You will not come away with a more sophisticated notion of how hydraulic fracturing or horizontal drilling works.

I've been reading some energy literature of late, and, other than The Son, it's pretty grim going.  Oil still awaits its Melville (though it may already have its Burrough, I haven't read that one yet), it appears, though do inform me if you disagree in the comments.  



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August 06, 2013
The Son & The Post
Posted by David Zaring

If you'll excuse two barely business-related observations:

  • The Son, by Philipp Meyer, might do as a novel about business - it's about 170ish years of a Texas family, with a basic theme that getting frontier-rich required fraud and evil-doing.  But it's not an anti-business book at all.  Recommended, if you like your epics dark.
  • When I was a sprightly young lawyer in Washington in the late nineties, I got the Washington Post and New York Times delivered to my door every morning ... and I read the Post first, because it was more fun than the Times.  I knew Post reporters, too, young, interesting, and not at all embarrassed that they weren't lawyers (we hadn't really heard of finance back then in DC).  It is amazing how much that paper changed, and changed for the worse - and yet it's still the best single source on how business regulation gets done.  I'm hoping it has a rennaisance with new ownership.

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May 20, 2013
Buffett Symposium At Concurring Opinions
Posted by David Zaring

Coinciding with Con-Op's Larry Cunningham's book of essays on Warren Buffett, said blog has put together a pretty stellar set of contributions about the investor and his world.  It has Berkshire insiders:

● Carol Loomis, authors of Tap Dancing to Work, a collection of her and Buffett's writings in Fortune

● Simon Lorne

● Robert Mundheim, who worked with Buffett and Lorne at Salomon and is now of counsel at Shearman & Sterling

 Donald Graham, Chairman and CEO of The Washington Post Co.

And it has professors

● Kelli Alces (Florida State)

 William Bratton (Penn)

 Deborah DeMott (Duke)

● Jill Fisch (Penn)

       ● Steven Davidoff (OSU)   

Among others, too.  It's off to a great start, so do give it a look.

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April 29, 2013
Bruner’s Corporate Governance in the Common-Law World
Posted by Erik Gerding

Hot off the presses comes a stimulating way to start the summer for corporate law professors. Cambridge recently published Christopher Bruner’s new book Corporate Governance in the Common-Law World. The book builds on his earlier law review work, including Power and Purpose in the “Anglo-American” Corporation and Corporate Governance Reform in a Time of Crisis.

Bruner lays patient, meticulous siege to functionalist accounts that have occupied center stage in comparative corporate law scholarship. The key moves in his gambit:

¶ Disaggregating the idea of “Anglo-American” corporate law by arguing that British, Australian, and Canadian systems give far more power to shareholders than does the U.S. approach;

¶ Arguing that a functional approach (which has led to predictions that differing social welfare and social democracy concerns explains a divergence between continental European systems and Anglo-American systems) fails to account for the differing approaches among these four common-law countries;

¶ Articulating the further differences among the U.K., Canadian, and Australian approaches; and

¶ Providing evidence that politics, not functional concerns, provides a better explanation for the diverging paths within the common-law world.

Bruner also looks at how the crisis has affected these four common-law countries to different degrees. Harder hit, the U.K. and United States have moved to increase shareholder power within corporations. Although in the introduction Bruner sets out to navigate middle course between “functionalism” and “contextualism,” the book hews much closer to the latter. In doing so, he stages a serious challenge to comparative scholarship that poses grander economic arguments to explain differences and similarities among corporate law regimes.

To my mind, the book also raises a challenge of whether a similar political approach might explain divergences within continental Europe.  Moreover, might a politics focus provide an explanation for divergences and convergences well before the latter half of the 20th Century?

Bruner’s Introduction is available on ssrn.

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March 27, 2013
Guest Review: Larry Cunningham's The Essays Of Warren Buffett, by Pamela Holmes
Posted by David Zaring

Over the transom comes this review of one of Larry Cunningham's two business memoirs, from seasoned reviewer Pamela Holmes.  Nice to get a different perspective on the book:

What you see is what you get with Warren Buffett.  When he writes to his shareholders, he talks about not just the numbers in their annual report, but about himself, what he thinks, and how Berkshire Hathaway has come to be where it is today.  The book is a compilation of Warren Buffett’s annual letters to Berkshire Hathaway shareholders from 1979 to 2011, and reads as sound investment strategy and business practices, with abundant offerings of good horse sense.   He believes if "you can't understand a footnote or other managerial explanation, it's usually because the CEO doesn't want you to."

The first edition of The Essays of Warren Buffett: Lessons for Corporate America was the focus of a symposium held twenty years ago and was the standard textbook for a specialized course taught by the author, Professor Lawrence A. Cunningham of George Washington University Law School.  It has since been adopted by many law and business schools for study in investment, finance and accounting.  Investment firms have used this book in their staff and investor training programs.  However, the layman should not be put off by these credentials as the book is an approachable guide to understanding investment.  Buffett quotes Twain, Churchill and even Woody Allen.  If it's a matter of faith in Warren's wisdom, you may be reassured by the sprinkling of Biblical references used to illustrate his points.

A sampling of Buffett's sage advice to shareholders includes, "Beware of companies displaying weak accounting."  If you question what you see, "it is likely they are following a similar path behind the scenes.  There is seldom just one cockroach in the kitchen."  Berkshire Hathaway's board of directors do not receive company stock as part of their compensation, they "purchased their holdings in the market just as you did...I love such honest-to-God ownership.  After all, who ever washes a rental car?"  Another gem, "...lemmings as a class may be derided but never does an individual lemming get criticized."

Organized by topic rather than chronologically, the words of Mr. Buffett are the words of every man - there is extremely little corporate lingo and no baffling verbiage.  His plain-speak is valuable guidance to learning the history of investing in the U.S., the good and the bad, and to understanding how you can make an intelligent investment decision if effort is put into researching the integrity and focus of company and management behind the investment.

The table of contents is well organized and the book includes a concept glossary and a disposition summary to help readers familiar with the previous editions of this book.

Berkshire Hathaway Inc. is a holding company owning subsidiaries involved in business activities including insurance and reinsurance, freight rail transportation, utilities and energy, finance, manufacturing, services, and retailing.  They hold interests in 28 newspapers, even with the overwhelming influence today of the Internet.

I typically review biographies and lifestyle publications, and have been an admirer of Warren Buffett for many years so, naturally, I wanted very much to read this book.  Clearly, is it a valuable tool for training anyone in anyway connected with handling the money of others, and I would highly recommend this book to investment clubs and to anyone giving serious thought to planning their retirement portfolio, be they in their 20's or their 60's.

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February 04, 2013
The AIG Story, By Hank Greenberg And Larry Cunningham
Posted by David Zaring
Hank Greenberg's memoir of his time at AIG is out, and friend of the Glom Larry Cunningham has helped him craft it.  I had a chance to look at an early copy, and I think it's well worth your time.  Larry has done this sort of collaborative writing before, with Warren Buffett, and the subject of this story - a company that grew large with a famous executive, lost said executive via Eliot Spitzer's investigations, and then epically collapsed during the financial crisis - is unsurpassed.  Greenberg also, as we've had occasion to note, is, through his takings claim against the United States, is pursuing one of the few actions that might lead to a judicial evaluation of what the government did during the financial crisis.  It's great to see the book on sale and great to see it getting press

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November 24, 2012
2012 Books for your Favorite Corporate and Financial Law Aficionado
Posted by Erik Gerding

Here are a few gift suggestions culled from books published this year if your special someone is a lawyer who associates Modigliani and Miller with capital structure and not paintings with elongated faces and the Tropic of Cancer:

Even the non-lawyers and non-academics in your life might enjoy Frank Partnoy’s Wait: The Art and Science of Delay. Of course, the target audience might never get around to buying the book.

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