The Death of Corporate Reputation: How Integrity Has Been Destroyed on Wall Street (Applied Corporate Finance)
“...a brilliant, provocative, and persuasive exploration of a root cause of the failure of modern financial market regulation, engendered by lawmakers, regulators and prosecutors, and their legal and accounting acolytes.... A must-read for anyone concerned about the health and well-being of our capital and financial markets.”--Harvey Pitt, CEO of global business consultancy Kalorama Partners, formerly 26th Chairman of the U.S. Securities and Exchange Commission (2001-2003)The real reasons why we can no longer trust Wall Street and what to do about itHow the SEC got captured--and why it’s perfectly happy about thatEssential reading for every policymaker, financial executive, investor, and citizen concerned with well-functioning capital marketsTrust and reputation are central to the operation of capital markets. But in our generation, reputational mechanisms are failing, and when these fail, markets and societies will fail as well.The conventional response is more aggressive regulation. But this only worsens the problem. InThe Death of Corporate Reputation, one of the world’s leading experts in financial market regulation explains why. Yale Law School’s Jonathan R. Macey demonstrates how and why poorly considered regulation has undermined traditional trust mechanisms throughout financial institutions, accounting and law firms, credit ratings agencies, and stock exchanges alike.Macey retells Wall Street’s recent history in a new and more productive light, revealing what has really happened--and offering a different and better path back to trust and integrity.For more than a century, law firms, investment banks, accounting firms, credit rating agencies, and companies seeking regular access to U.S. capital markets made large investments in their reputations. They generally treated their customers well and occasionally even endured losses to maintain their reputations as faithful brokers, dealers’ issuers, and “gatekeepers.” This has changed. Today’s leading capital market participants no longer treat customers as valued counterparties whose trust must be earned and nurtured but as distant “counter-parties” to whom no duties are required. The rough and tumble norms of the marketplace have replaced the long-standing fiduciary model in U.S. finance. The result has been unrelenting financial scandal.InThe Death of Corporate Reputation, pioneering corporate law and governance expert and Yale professor Jonathan Macey describes the disastrous transformation from the old reputational model to the existing buyer beware model in finance. Macey convincingly argues that the change can be attributed to several factors, including (1) the growth of reliance on regulation rather than reputation to protect customers and (2) growing regulatory complexity, which has made technical expertise more important to customers than reputation. After identifying the heart of the problem, he offers a better path forward--and a true “silver lining” in the age of Madoff.Why traditional methods of fraud deterrence have failed in financeThe unintended consequences of aggressive overregulation--and how to fix themIt’s not just the banks: touring post-reputation Wall StreetFailure of reputation in accounting and law firms, rating agencies, and exchangesMilken and beyond: why “nobody goes down with the ship” anymoreWhy the employees of scandal-tarnished firms keep right on thrivingThe perverse incentives that make the SEC so ineffectiveResponding to the wrong metrics, driven by the wrong politics