F. Scott Kieff
Troy A. Paredes
George Washington University Law School and Stanford University Hoover Institution Washington
University in St. Louis, School of Law
Perspectives on Corporate Governance
The chapters in this book were presented at a conference on “The ‘New’ Corporate Governance” held at the Washington University School of Law in St. Louis. The conference was sponsored and hosted by the Center for Interdisciplinary Studies, along with support from the Whitney R. Harris Institute for Global Legal Studies, both of which are housed at the Washington University School of Law. The conference was held in honor of Joel Seligman – to whom this book is dedicated – and the contributions he has made to the study of securities regulation and corporate governance during his distinguished career. Before becoming the President of the University of Rochester in 2005, Joel Seligman served as the Dean and Ethan A. H. Shepley University Professor at the Washington University School of Law. This book is part of broader work through the Project on Commercializing Innovation at Stanford University’s Hoover Institution, which studies the law, economics, and politics of the range of legal and business relationships that can be used to bring ideas to market. We thank James E. Daily, who is a Postdoctoral Fellow and Administrative Director of the Project, for his excellent help editing the manuscript. More about the Project is available on the Web at www.innovation.hoover.org.
Although a number of factors contributed to the stock market decline that started in 2000 – including the bursting of the “dot-com” bubble, a softer economy than many expected, September 11 and the ongoing terrorist threat, and the wars in Afghanistan and Iraq – one factor that weighed on stocks stands out for present purposes: corporate scandal. Beginning with Enron in the fall of 2001, a wave of corporate scandal crashed on the U.S. economy. In addition to Enron, the scandals involved companies such as WorldCom, Tyco, HealthSouth, Adelphia, and Global Crossing. They also ensnared mutual funds and leading financial institutions up and down Wall Street, along with major accounting firms, such as the collapsed Arthur Andersen. As if the bona fide scandals that made the headlines were not enough to drag the markets down, a record number of earnings restatements – increasing steadily from 116 restatements in 1997, to 158 in 1998, 234 in 1999, 258 in 2000, and 305 in 2001 when the scandals began to break – fueled doubt about companies’ governance, finances, and business plans. These doubts became particularly sharp as the overall market tumbled through 2008.