The Corporate Crisis: Implications for Government

June 2, 2004
Jeanie M. Barnett

Government has an important role to play in responding to the recent rash of devastating corporate scandals. That’s the conclusion reached by participants in a recent conference sponsored by the Kennedy School’s Center for Business and Government (CBG) on "The Role of Government in Corporate Governance." The conference focused on the public policy challenges raised by corporate abuse and their implications for a global economy.
"The Enrons and Worldcoms are not just problems for corporate America; they are also problems for American government," said Cary Coglianese, chair of the Center's Regulatory Policy Program. He added that the scandals raised important questions about the adequacy of existing regulatory structures. “If fraud is not adequately policed, it has huge implications for our markets, for publicly traded companies, for society’s savings,” he said.
The recently appointed head of the New York Stock Exchange (NYSE), John Thain, emphasized the strategies that the NYSE is implementing. As the conference's keynote speaker, Thain said the NYSE is working to restore the integrity of the US securities market in a competitive global environment. A two-prong reform is already underway at the NYSE that focuses on keeping its regulatory function independent as well as reforming listing standards and changing other requirements for publicly traded businesses.
"Thain is uniquely positioned because the Exchange is both a regulator of publicly traded companies and itself an entity regulated by the Securities and Exchange Commission," said John Ruggie, CBG director.
Correcting systemic abuses becomes even more critical in the context of a global economy, commented Richard Breeden, the corporate monitor of Worldcom, a former chairman of the Securities and Exchange Commission, and the conference's closing speaker.
The health of US markets now almost instantaneously impacts other securities markets, such as Tokyo and London. If the US fails to maintain integrity in its securities industry, it risks losing its position as the leading capital market for the world.
"The underlying problems of dishonesty and greed have always been with us, but the level of attention by the public, the media, and now the government is clearly higher than it has been for many years," said Thomas Healey, a senior fellow at CBG.
The May conference was part of the Regulatory Policy Program's Corporate Governance Initiative. Through this Initiative, CBG actively engages faculty, fellows, students, and decision makers on issues of corporate governance and financial regulation.

Photos by Kathy Hebert

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Event attendees discussing John Thain's remarks.

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New York Stock Exchange (NYSE) head , John Thain, emphasizing the strategies that the NYSE is implementing.


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