Corporate Governance After the Financial Crisis

The years from 2000 to 2010 were bookended by two major economic crises. The bursting of the dotcom bubble and the extended bear market of 2000 to 2002 prompted Congress to pass the Sarbanes-Oxley Act, which was directed at core aspects of corporate governance. At the end of the decade came the bursting of the housing bubble, followed by a severe credit crunch, and the worst economic downturn in decades. In response, Congress passed the Dodd-Frank Act, which changed vast swathes of financial regulation. Among these changes were a number of significant corporate governance reforms. Corporate Governance after the Financial Crisis asks two questions about these changes. First, are they a good idea that will improve corporate governance? Second, what do they tell us about the relative merits of the federal government and the states as sources of corporate governance regulation? Traditionally, corporate law was the province of the states. Today, however, the federal government is increasingly engaged in corporate governance regulation. The changes examined in this work provide a series of case studies in which to explore the question of whether federalization will lead to better outcomes. The author analyzes these changes in the context of corporate governance, executive compensation, corporate fraud and disclosure, shareholder activism, corporate democracy, and declining US capital market competitiveness.
"Stephen Bainbridge is not only an expert on corporate governance and an academic whose ideas and writing have changed the way we think about corporations. Professor Bainbridge is also one of the most perceptive academic commentators on the federal government's regulation of corporate governance. In Corporate Governance after the Financial Crisis, Professor Bainbridge has written an important book for those seeking to understand the theoretical and practical implications of Dodd-Frank, Sarbanes-Oxley and the federal government's foray into corporate regulation. It is a book that for years to come will influence the controversial debate over the federal regulation of corporate governance."
--Professor Steven Davidoff
N.Y. Times "Deal Professor"

"In this important work, Stephen Bainbridge exposes the flaws in the modern notion that corporations should be treated as little democracies, and shows how this erroneous idea influenced the framing of both the Sarbanes-Oxley Act and the Dodd-Frank Act. If there is ever to be a repeal or significant modification of the corporate governance provisions in these destructive laws, it will be driven by the scholarly work in this book."
--Peter J. Wallison
Arthur F. Burns Fellow in Financial Policy Studies
American Enterprise Institute

"Stephen Bainbridge's outstanding book, Corporate Governance after the Financial Crisis, is a 'must read' not only for corporate scholars, but also (and perhaps more importantly) for federal policy makers. Professor Bainbridge incisively peels away the layers of the onion that encapsulate the complex issues lying at the heart of corporate governance and principles of federalism. This superb work cogently reveals the policy reasons why corporate governance must continue to be purely a matter of internal affairs of the states of incorporation. He argues convincingly why crisis-driven paroxysms of federalization of corporate governance (epitomized by SarbanesACKNOWLEDGEMENTS; ABOUT THE AUTHOR; INTRODUCTION; CHAPTER 1. WHO MAKES THE RULES?; CHAPTER 2. THE BOARD'S ROLE; CHAPTER 3. DIRECTOR INDEPENDENCE; CHAPTER 4. EXECUTIVE COMPENSATION; CHAPTER 5. INTERNAL CONTROLS; CHAPTER 6. THE GATEKEEPERS; CHAPTER 7. SHAREHOLDER EMPOWERMENT; CONCLUSION; INDEX