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Praise for Corporate Governance Regulation
"Nicholas Vakkur has written an excellent critique of Sarbanes-Oxley and has made a very useful contribution, correctly pointing out that Sarb-Ox requirements would not have prevented some of the staggering corporate stock market losses that preceded the adoption of those requirements, or those that have come since—in part, because they were caused by intentional management activities, not unintended and undetected failures in control. As Vakkur points out, Sarb-Ox is ...
Praise for Corporate Governance Regulation
"Nicholas Vakkur has written an excellent critique of Sarbanes-Oxley and has made a very useful contribution, correctly pointing out that Sarb-Ox requirements would not have prevented some of the staggering corporate stock market losses that preceded the adoption of those requirements, or those that have come since—in part, because they were caused by intentional management activities, not unintended and undetected failures in control. As Vakkur points out, Sarb-Ox is 'impotent in the face of managerial override.'"
—Robert Grady, Chairman, New Jersey State Investment Council; Managing Partner, Cheyenne Capital Fund; former chairman, National Venture Capital Association; Lecturer in Public Management, Stanford Graduate School of Business; and member of the Management Committee, The Carlyle Group
"Professor Vakkur makes a timely and vital contribution, showing how transparency can be achieved through developing an ethical climate rather than through a focus on regulation. This makes it essential reading for policymakers, students, and those in the corporate world."
—Des Laffey, Senior Lecturer, Kent Business School, UK; Co-Editor in Chief, Journal of Strategic Management Education
"For those who seek to be informed about the need to change accounting . . . this is a promising and potentially valuable study addressing issues that are timely and relevant."
—Gary John Previts, E. Mandell de Windt Professor, Case Western Reserve University
"This book is unique, as it seeks a restoration of the prior focus on ethical development (e.g., common within the U.S. prior to the 1950s), that trumps complex legal machinations as an efficacious means of achieving 'transparent' financial markets."
—Teresa T. Kaldor, PhD, former task manager of public sector reforms, USAID project (Manila, Philippines)
"In this era of heightened regulation, we must critically analyze previous regulations to understand whether the objectives have been achieved, to improve or eliminate existing regulations, and to serve as a guide as more regulations are promulgated. Professor Vakkur's analysis provides an innovative and fresh look at whether Sarbanes-Oxley achieved its objectives of corporate transparency and accountability."
—Michael H. Messaglia, Partner, Krieg DeVault LLP
"Vakkur's extensive research, valuable insights, and evaluation tools will help companies and their stakeholders."
—Timothy H. Carmon, CPA financial reporting/risk manager for a leading Fortune 500 firm
"The impact of comprehensive financial regulations, properly envisaged at the global level, is not confined to the home country, write Nicholas Vakkur and Zulma Herrera. . . . A useful read for financial researchers."
—D. Murali, Deputy Editor, The Hindu Business Line
CHAPTER 1 Virtue Lost 1
Methodological Limitations 4
The Modern Corporation and Virtue 5
The Policy Framework 26
CHAPTER 2 An Introduction to WorldCom: A Policy Primer 47
The Source of Conflict 50
Rules versus Laws 51
The Case for Intentionality 53
Regulatory Contribution 55
WorldCom as a Basis for the Sarbanes-Oxley Act 56
CHAPTER 3 The Enactment Process 59
The Enactment Process 62
The Law’s Effects 69
Current Arguments in Favor of the Sarbanes-Oxley Act 75
Institutional Precedents 78
CHAPTER 4 CEO Perception 81
Summary of Relevant Literature 82
Appendix to Chapter 4 89
CHAPTER 5 Sarbanes-Oxley’s Effect on Investor Risk 97
Extending CAPM 99
Evaluation of Risk 102
Estimation and Results 105
CHAPTER 6 An Audit of Sarbanes-Oxley 125
A Conceptual Foundation 126
Internal Controls 128
The Audit Framework 130
Effect on Unintentional Sources of Error 134
Effect on Corporate Malfeasance 138
CHAPTER 7 The Underlying Vision 149
Econometrics in Policy Analysis 149
A Model Predicated on ‘‘Unobservables’’ 151
CHAPTER 8 The Argument for Accountability 169
Professional Liability 170
Policy Misuse 172
The Case for Culpability 174
The Improbability of Accountability 177
CHAPTER 9 Why Sarbanes-Oxley? 183
The Port Huron Statement 190
Why Sarbanes-Oxley? 202
About the Authors 263