Robert Charles Clark

Corporate Governance Changes in the Wake of the Sarbanes-Oxley Act: A Morality Tale for Policymakers Too

This paper seeks to draw a lesson for designing major reforms of corporate governance in the future. It recalls the key events leading to the recent seismic shift in corporate governance policies applicable to American public corporations, and identifies the four sources of policy changes - the Sarbanes-Oxley Act, new listing requirements, governance rating agencies, and tougher judicial opinions (notably in Delaware) about perennial corporate governance issues. It presents a synthetic overview of the numerous reforms, which at the most general level aim to fix the audit process, increase board independence, and improve disclosure and transparency. It pauses to identify the vast territory of unchanged corporate governance rules that are still left to state law, and then examines some of the empirical studies that bear on whether the governance reforms can be confidently predicted to have strong positive results for investors. The exercise suggests an irony: Studies about the impacts of the most costly reforms, those concerning audit practices and board independence, are fairly inconclusive or negative, while studies about proposals for shareholder empowerment and reduction of managerial entrenchment indicate that changes in these areas - which in general are only atmospherically supported by the SOX-related changes - could have significant positive impacts. Admittedly, the general evidence for mandatory disclosure does suggest that the new round of enhanced disclosures, which are only moderately costly, will have good effects. The concluding section presents and explains a new approach for the next crisis-generated reform movement. It is based on the notion that bandwagons are unavoidable, but their motivating impact can be leveraged and their bad effects alleviated by good statutory design. In particular, legal reforms in the area of corporate governance should have bite but should also be explicitly structured to authorize and mandate (1) serious empirical study of the effects of particular regulatory changes (or existing rules), (2) periodic reassessment of regulations in light of such evidence (while also considering experience and analytical arguments, of course), and (3) explicit decisions to reaffirm or alter regulations in light of these reassessments.

The Duties of the Corporate Debtor to Its Creditors

T HE initial thesis of this article is that the law of fraudulent conveyances 1 contains a few simple but potent moral principles governing the conduct of debtors toward their creditors. Moreover, when these normative ideals are properly distilled and examined, a number of less venerable doctrines concerning corporate debtors can be shown to be functional substitutes for or technically necessary complements to the law of fraudulent conveyances. In particular, the doctrines of equitable subordination and piercing the corporate veil may be seen as applications of the same notions of securing the moral obligations of debtors to creditors which are at work in fraudulent conveyance law. The near absence of sustained discussion in cases or in the writings of commentators of the relationships among these branches of the law is odd, in view of the importance that these doctrines have to attorneys.2 My explanation is that the lack of

The Regulation of Financial Holding Companies

Discusses laws that regulate financial intermediaries and financial holding companies in the U.S. Information on laws that regulate the acquisition activities of intermediaries and holding companies; Consequences of financial holding companies; Criteria of definitional decisions.