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

Preface ixIntroduction xiiiCHAPTER 1 Virtue Lost 1Introduction 1Methodology 4Methodological Limitations 4The Modern Corporation and Virtue 5The Policy Framework 26Conclusions 41CHAPTER 2 An Introduction to WorldCom: A Policy Primer 47Introduction 47WorldCom 48The Source of Conflict 50Rules versus Laws 51The Case for Intentionality 53Regulatory Contribution 55WorldCom as a Basis for the Sarbanes-Oxley Act 56CHAPTER 3 The Enactment Process 59Introduction 59The Enactment Process 62The Law's Effects 69Current Arguments in Favor of the Sarbanes-Oxley Act 75Institutional Precedents 78CHAPTER 4 CEO Perception 81Summary 81Introduction 81Summary of Relevant Literature 82Survey 83Results 84Discussion 88Appendix to Chapter 4 89CHAPTER 5 Sarbanes-Oxley's Effect on Investor Risk 97Summary 97Introduction 98Extending CAPM 99Hypotheses 100Evaluation of Risk 102Estimation and Results 105Discussion 114CHAPTER 6 An Audit of Sarbanes-Oxley 125Introduction 125A Conceptual Foundation 126Internal Controls 128The Audit Framework 130Effect on Unintentional Sources of Error 134Effect on Corporate Malfeasance 138Conclusions 146CHAPTER 7 The Underlying Vision 149Econometrics in Policy Analysis 149A Model Predicated on ''Unobservables'' 151Conclusions 165CHAPTER 8 The Argument for Accountability 169Introduction 169Professional Liability 170Policy Misuse 172The Case for Culpability 174The Improbability of Accountability 177Conclusions 180CHAPTER 9 Why Sarbanes-Oxley? 183Introduction 183Methodology 186The Port Huron Statement 190Why Sarbanes-Oxley? 202Notes 205About the Authors 263Index 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.