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

Chapter 3

The Enactment Process

To help define the context for the entire book, this chapter provides an overview of the debate over Sarbanes-Oxley–era regulation, beginning with a brief introduction and then a discussion of the four-stage process by which Sarbanes-Oxley was formally enacted into law. It then turns to a brief review of the empirical evidence, focusing on the most notable of the various documented effects, followed by an analysis of the various motivations that characterize continued support for the law to the present day.

The chapter concludes by pointing out several institutional precedents: similar, thematic developments, as witnessed in other leading American institutions that effectively influenced—whether directly or indirectly—the actions of the 107th Congress. Although the focus of this chapter is relatively topical, the information presented is critical in terms of setting the context for the detailed, comprehensive analyses presented throughout the remainder of the book.

In keeping with the main, educational objective, and so as to effectively facilitate a rational dialogue among ideological opponents, the reader is encouraged to focus less on potential sources of disagreement, and more on efforts to grasp the rational basis underscoring each major argument. In such a context, mere disagreement is of less importance than is the rational basis motivating such differences.

Introduction

The late George J. Stigler, a Nobel Laureate in economics, once observed, ...