After the Scandals: Changing Relationships in Corporate Governance

The spate of recent corporate scandals has produced a legislative and regulatory reaction aimed at restoring marketplace integrity. This response – consisting notably of the Sarbanes-Oxley Act of 2002, implementing regulations and stock market listing standards – has, in turn, affected relationships between the chief executive and the board, as well as between the corporation and gatekeepers. To take stock of these changes, the Mossavar-Rahmani Center for Business and Government's Regulatory Policy Program convened a roundtable dialogue in May 2006 that brought together government officials, business leaders, and academic researchers. Roundtable participants considered changes that have and have not occurred in corporate relationships, as well as their effect on current governance practices. One area participants also discussed that has not changed much – executive compensation – appears to be causing even greater concern now than several years ago. This report synthesizes the roundtable discussion, and includes a keynote address by SEC Commissioner Roel C. Campos. The report also highlights key public policy challenges that lie ahead, and calls for an appropriate balance in future policymaking between a long- and short-term focus, between national and state solutions, and, ultimately, between governmental and market action.