Corporate Governance and Accountability

This book chapter on Corporate Governance and Accountability is a contribution to the book CORPORATE GOVERNANCE - SYNTHESIS OF THEORY, RESEARCH, AND PRACTICE (Wiley, forthcoming 2010), edited by Ronald Anderson and H. Kent Baker. This chapter describes the sources of corporate governance standards for American corporations and analyzes the accountability mechanisms designed to ensure that corporate officials act faithfully in their management of corporate affairs. The chapter focuses on the financial reporting system under the U.S. securities laws which forms the foundation of the accountability system, and discusses structures and rules designed to ensure the integrity of financial reporting. The role of the SEC, accounting and auditing regulators and the board of directors is examined. Special emphasis is given to the Sarbanes-Oxley Act of 2002, which aimed to correct many of the perceived failures of the system. The chapter concludes that while our corporate governance systems is sound in design, problems in enforcement prevent the regime from effectively constraining abuses and excesses of corporate leaders