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Groups

in Secrets, Sex, and Spectacle: The Rules of Scandal in Japan and the United States

This chapter focuses on one type of scandal: scandal involving groups. Japan has a long history of encouraging self-governance by groups. That trait generally fosters secrets and leads to a reliance ... More

This chapter focuses on one type of scandal: scandal involving groups. Japan has a long history of encouraging self-governance by groups. That trait generally fosters secrets and leads to a reliance on private rules over contradictory public ones. The eventual public revelation of these secret breaches of law or norms results in scandal. The chapter divides “groups” in four ways: corporate scandals, major scandals involving educational institutions, minority- and race-related scandals, and religious scandals. The Japanese legal system promotes private ordering, shifting wide decision-making and governing power from the government to private, self-regulating groups. Three modern instances illuminate the character of state-sponsored private ordering in Japan: large-scale retail stores, the legislative process, and religion. The chapter looks generally at Japanese state encouragement of self-governance to get at the underpinnings of a Japanese proverbial approach to scandal: “if it stinks, put a lid on it.”Less

How Are Markets Constructed?

Paul Edwards and Judy Wajcman

in The Politics of Working Life

The market is perhaps the core institution of capitalism. It is the means through which goods and services are exchanged and prices are determined. The language of supply and demand is universal, and ... More

The market is perhaps the core institution of capitalism. It is the means through which goods and services are exchanged and prices are determined. The language of supply and demand is universal, and the proposition that markets ensure the efficient allocation of resources has become almost an axiom. The argument is that markets are constructed as opposed to existing naturally and that a drive towards efficiency cannot be assumed. The high-profile collapse of the energy company Enron in 2001 sparked a major debate about corporate malpractice. This chapter explores the idea that markets are structures of power, in which interest group concerns can and do override any tendency towards efficiency. It also discusses corporate governance and shareholder value, option pricing, financial instruments, corporate scandals, effects of market restructuring in the United States, varieties of capitalism, and alternative models of capitalism.Less

The Trading Scandals

Matthew P. Fink

in The Rise of Mutual Funds: An Insider's View

The record bull market of 1982-2000 ended with a bubble in high technology and telecom stocks, followed by a severe bear market and revelation of a number of major corporate and accounting scandals, ... More

The record bull market of 1982-2000 ended with a bubble in high technology and telecom stocks, followed by a severe bear market and revelation of a number of major corporate and accounting scandals, resulting in enactment of the Sarbanes-Oxley Act. In 2003-2004 there were revelations of illegal market timing and late trading in mutual fund shares at some twenty fund groups, the worst scandal ever in the history of the mutual fund industry. The scandal resulted in over one hundred proposals for reform, and led the SEC to adopt a record number of new regulations.Less

The 2000s: The Decade from Hell

Brian R. Cheffins

in The Public Company Transformed

This chapter analyzes the 2000s, which for public companies and the executives who ran them was akin to “the decade from hell.” The stock market performed poorly, the number of public companies ... More

This chapter analyzes the 2000s, which for public companies and the executives who ran them was akin to “the decade from hell.” The stock market performed poorly, the number of public companies declined substantially, and scandals in the early 2000s and the financial crisis of 2008 greatly eroded confidence in big business. A deregulatory trend that began in the late 1970s was reversed, epitomized by the enactment of the Sarbanes Oxley Act of 2002. A casualty of the bad news for public companies was the imperial-style CEO who featured prominently as the 1990s drew to a close. Those running banks nevertheless enjoyed a corporate governance “free pass” in the mid-2000s that arguably contributed to the onset of the financial crisis.Less

The Enron Scandal: Legal Reform and Investor Protection in the United States

in Law and Capitalism: What Corporate Crises Reveal about Legal Systems and Economic Development around the World

This chapter discusses the collapse of Enron and its aftermath. Enron's breathtakingly rapid unravelling in 2001 threw a good deal of cold water on the perception that the United States had reached ... More

This chapter discusses the collapse of Enron and its aftermath. Enron's breathtakingly rapid unravelling in 2001 threw a good deal of cold water on the perception that the United States had reached the zenith of legal and corporate governance. This perception had been building throughout the 1990s, propelled in part by the law and finance literature. The chapter opts for a simple rendition of the crisis, because the precise mechanics of Enron's accounting fraud are less important for its purposes than situating the event in the contemporary U.S. market and legal structures. The Enron saga vividly underscores that all market-oriented economies, however highly developed, require constant regulatory recalibration; the legal infrastructure for a capitalist economy is always under construction. The chapter also shows how a decentralized and highly protective legal system helps give rise to and responds to a corporate crisis. The legal response to the Enron debacle and other corporate scandals in the United States in the name of investor protection has proved to be almost as controversial as the underlying events.Less

Setting the Scene

Laura F. Spira and Judy Slinn

in The Cadbury Committee: A History

This chapter explores the emergence of the concept of “governance” in the second half of the twentieth century, in the context of the evolution of the limited liability joint stock company through ... More

This chapter explores the emergence of the concept of “governance” in the second half of the twentieth century, in the context of the evolution of the limited liability joint stock company through the preceding century. It examines the background of corporate development in the two decades before the Committee was established, encompassing the legal and financial reporting issues which emerged in the 1970s and the 1980s, through recession, deregulation and restructuring as well as the secondary banks crisis and the failure of Rolls Royce. The recession of the 1980s and privatization as well as the corporate scandals of that decade led to concerns about accountability, which was interpreted in several ways as well as a new focus on the development of financial reporting standards.Less

The General Counsel in the Crosshairs: Exposure to Sanctions, Prosecution, and Liability

E. Norman Veasey and Christine T. Di Guglielmo

in Indispensable Counsel: The Chief Legal Officer in the New Reality

This chapter discusses how general counsels have become more frequently subjected to sanctions, prosecutions, and shareholder claims due to recent corporate scandals. According to a report made by ... More

This chapter discusses how general counsels have become more frequently subjected to sanctions, prosecutions, and shareholder claims due to recent corporate scandals. According to a report made by the Association for Corporate Counsel entitled In-House Counsel in the Liability Crosshairs, there has been an increase in the number of formal complaints and convictions filed against in-house lawyers in light of the 2001-2002 corporate scandals. The Securities and Exchange Commission (SEC) is one of the prosecutor agencies responsible for the recurrent imposition of sanctions against general counsels. Nevertheless, the general counsel's driving force must always be the willingness to do right thing, and not just to elude the consequences of being held accountable by law. Furthermore, it also includes the different types of legal charges confronted by the in-house counsel such as SEC enforcement, prosecution, and fiduciary liability.Less

Introduction

in Law and Capitalism: What Corporate Crises Reveal about Legal Systems and Economic Development around the World

This book offers a perspective on the relation between law and capitalism that generates answers quite different from the ones taken for granted in the economics literature and the policy world. Its ... More

This book offers a perspective on the relation between law and capitalism that generates answers quite different from the ones taken for granted in the economics literature and the policy world. Its empirical core comprises six analytical narratives of recent corporate scandals or controversies: the Enron debacle in the United States, the Mannesmann executive compensation scandal and criminal trial in Germany, the institutional response to the rise of hostile takeovers in Japan, the role of law in a foreign institutional investor's challenge to one a chaebol (conglomerate) in Korea, an insider trading and false disclosure scandal at a state-owned firm listed in Singapore and the challenges to legal governance in China, and the use of law in the hands of Russian President Vladimir Putin to “renationalize” Yukos. The book focuses on corporate governance as a vehicle for better understanding the relation between legal and economic institutions.Less