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Corporate Governance Regulation: How Poor Management Is Destroying the Global Economy



Corporate Governance Regulation: How Poor Management Is Destroying the Global Economy

Nicholas V. Vakkur, Zulma J. Herrera

ISBN: 978-1-118-49636-7 January 2013 288 Pages


Why U.S. corporate governance regulation has lost its way, and what must be done to improve it

Modern history persuasively demonstrates the inexorable link that binds comprehensive regulation to the global economy. This important book, rather than simply recount a litany of corporate governance failures, persuasively explains why, despite policymakers' best intentions, regulation has failed in the modern era. An objective study intended for a diverse readership, Corporate Governance Regulation unveils the underlying, root causes of regulatory failure. The result: A compelling and original analysis, broadly suited for a global audience of all backgrounds.

  • Written by published, subject-area experts, the authors carefully delineate how U.S. corporate governance regulation, beginning with Sarbanes Oxley, lacks an adequate rational basis, as may be attributed to a non-existent policy dialogue
  • The witnessed result: A conspicuous lack of regulatory efficacy, enormous costs, coupled with paltry benefits
  • The focus is upon reigniting a stalled, non-productive policy dialogue, by eschewing stale, overly-polemicized arguments, as needed to develop a common ground

Drawing from an eclectic, analytic framework, governance experts Nicholas Vakkur and Zulma Herrera offer both the professional and global citizen alike a multi-dimensional understanding of issues critical to global economic health. Nuanced and persuasively argued, Corporate Governance Regulation represents a formidable catalyst in the elusive, ongoing quest for global economic stability.

Preface ix

Introduction xiii

CHAPTER 1 Virtue Lost 1

Introduction 1

Methodology 4

Methodological Limitations 4

The Modern Corporation and Virtue 5

The Policy Framework 26

Conclusions 41

CHAPTER 2 An Introduction to WorldCom: A Policy Primer 47

Introduction 47

WorldCom 48

The Source of Conflict 50

Rules versus Laws 51

The Case for Intentionality 53

Regulatory Contribution 55

WorldCom as a Basis for the Sarbanes-Oxley Act 56

CHAPTER 3 The Enactment Process 59

Introduction 59

The Enactment Process 62

The Law’s Effects 69

Current Arguments in Favor of the Sarbanes-Oxley Act 75

Institutional Precedents 78

CHAPTER 4 CEO Perception 81

Summary 81

Introduction 81

Summary of Relevant Literature 82

Survey 83

Results 84

Discussion 88

Appendix to Chapter 4 89

CHAPTER 5 Sarbanes-Oxley’s Effect on Investor Risk 97

Summary 97

Introduction 98

Extending CAPM 99

Hypotheses 100

Evaluation of Risk 102

Estimation and Results 105

Discussion 114

CHAPTER 6 An Audit of Sarbanes-Oxley 125

Introduction 125

A Conceptual Foundation 126

Internal Controls 128

The Audit Framework 130

Effect on Unintentional Sources of Error 134

Effect on Corporate Malfeasance 138

Conclusions 146

CHAPTER 7 The Underlying Vision 149

Econometrics in Policy Analysis 149

A Model Predicated on ‘‘Unobservables’’ 151

Conclusions 165

CHAPTER 8 The Argument for Accountability 169

Introduction 169

Professional Liability 170

Policy Misuse 172

The Case for Culpability 174

The Improbability of Accountability 177

Conclusions 180

CHAPTER 9 Why Sarbanes-Oxley? 183

Introduction 183

Methodology 186

The Port Huron Statement 190

Why Sarbanes-Oxley? 202

Notes 205

About the Authors 263

Index 265