In the aftermath of the worst economic and financial crisis in the United States in decades, policymakers, journalists, investor advocates, and others have been hard at work trying to identify those responsible. Commissions have met and studies have been undertaken, and people are beginning to reach their conclusions. But at the very core of this crisis was not a single set of actors. The problems stem significantly and systematically from the failure of governance, oversight, and risk management at the corporate, legislative, and regulatory levels.
Those in position to imagine, identify, and reduce the possibilities of failure simply did not do their jobs. As Richard Steinberg makes clear in these pages, the price of inattention or inaction by managers, regulators, and board members could be measured not in the hundreds of millions of dollars, but in the hundreds of billions of dollars. He explains how reputations and corporations were shattered in a matter of weeks and months, because individuals and institutions had no means of checking and correcting their market assumptions and their culture of risk-taking. In short, not enough people were asking: “What could go wrong?”
This failure in governance pains me deeply, primarily because as a regulator throughout the 1990s I was able to see many of these same failures play out once before in corporate America and our regulatory infrastructure. Many of the biggest changes in corporate governance were launched just after ...