Reforming Regulation of Corporate Governance

Since the revelation of accounting scandals at Enron, Worldcom, and several other high profile companies ("Enron et al") five years ago, there has been unprecedented public focus on U.S. corporate governance. A common view, articulated by many journalists, politicians and public pundits, is that these scandals were indicative of a crisis that eroded investor confidence in U.S. corporations. This paper makes the argument that the increase in resources allocated to securities enforcement and the substantial penalties meted out to executives convicted of accounting fraud have dramatically reduced the incentive to engage in Enron-like behavior.