THE RECENT REGULATORY RESPONSE TO CORPORATE ECONOMIC CRIME IN THE UNITED STATES: OBSERVATIONS AND COMMENTS

James A. Millar and Fred C. Yeager

Economic Affairs, 2007, vol. 27, issue 1, 39-43

Abstract: Corporate economic crime, including accounting and auditing fraud and inappropriate behaviour by directors on the boards of US corporations, has resulted in stockholder financial losses and the loss of confidence in investing in the US stock market. We observe the modern corporation with its absentee ownership and professional management team and discuss its inherent incentives to commit management crime. In spite of financial reporting, audits and the use of boards of directors to represent stockholders, management misbehaviour persists. We conclude that the failure of these potential remedies is due to a lack of independence from management in their execution. We comment on some of the provisions of the Sarbanes–Oxley Act, enacted in 2002, and their potential to mitigate some of these conflict of interest conditions.

Date: 2007
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