Corporate Governance Regulation How Poor Management Is Destroying the Global Economy Wiley Finance Series, Vol. 839

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&rsquo,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&rsquo,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 &lsquo,&lsquo,Unobservables&rsquo,&rsquo, 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

NICHOLAS V. VAKKUR is the founder of Vakkur.org, a non-partisan think tank that helps corporations manage risk while positively influencing corporate governance policy. Widely published in leading U.S. and international scholarly journals, Mr. Vakkur has been cited before the U.S. Supreme Court, the U.S. Senate, the U.S. Department of Justice, and various foreign entities; has been covered frequently in the news media; and has been invited to speak to Wall Street CEOs. He is an assistant professor of accounting at Trident University and has served as the CFO of a global nonprofit organization. Mr. Vakkur graduated summa cum laude from the University of Notre Dame and has a master's degree in public policy.

ZULMA J. HERRERA, while with Goldman Sachs, participated at a senior level in various mergers of global corporations. Ms. Herrera has worked in-house with the executive teams of two global corporations and has served in a variety of senior roles within the technology industry. A noted corporate governance scholar, Ms. Herrera serves as the CEO of Vakkur.org, which enables corporate clients to manage risk effectively. Ms. Herrera graduated with honors from the University of Notre Dame and is acquiring an MBA.