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

Chapter 1

Virtue Lost

Introduction

The dramatic rise¹ in corporate malfeasance and accounting-related problems since the enactment of the Sarbanes-Oxley Act of 2002 argues for the urgent need for substantive improvements in U.S. corporate governance policy. The demonstrated inefficacy² of the extant regulatory approach indicates the need not simply for revised policy, but for a revamped regulatory framework,³ whose core assumptions about human behavior are more closely rooted in actual experience. However, progress in this critical policy arena has been severely hampered by multiple factors, beginning with a relatively hollow debate punctuated by a lack of effective policy dialogue⁴—one that appears to be at an all-time low. As a consequence, a rational basis—one quite difficult to achieve—for modern U.S. corporate governance regulation has eluded policymakers.⁵

A further obstacle has been the complex nature of corporate governance regulation: As rooted in a deeply embedded, philosophical history of ideas,⁶ regulatory efforts cannot be adequately understood outside of the context of the distinctive moral and evaluative position that they represent.⁷ Because modern policy analysis overly relies upon quantitative analyses, the “inescapably historical, socially context-bound character”⁸ of regulation has been essentially overlooked. Thus, policy research has, to date, been able to contribute relatively little to the ongoing debate.

Furthermore, fundamental disagreements—for example, ...