In the wake of a series of corporate governance disasters in the US and Europe which have gained almost mythic status - Enron, WorldCom, Tyco, Adelphia, HealthSouth, Parmalat - one question has not yet been addressed. A number of 'gatekeeping' professions - auditors, attorneys, securities analysts, credit-rating agencies - exist to guard against these governance failures. Yet clearly these watchdogs did not bark while corporations were looted and destroyed. But why not? To answer these questions, a more detailed investigation is necessary that moves beyond journalism and easy scapegoating, and examines the evolution, responsibilities, and standards of these professions. John Coffee, world-renowned Professor of Corporate Law, examines how these gatekeeping professions developed, to what degree they failed, and what reforms are feasible. Above all, this book examines the institutional changes and pressures that caused gatekeepers to underperform or neglect their responsibilities, and focuses on those feasible changes that can restore gatekeepers as the loyal agents of investors. This informed and readable view of the players on the contemporary business stage will be essential reading for investors, professionals, executives and business academics concerned with issues of good governance.
1 Introduction 1
2 The failure of the gatekeepers 15
3 Explaining gatekeeper failure 55
4 A comparative perspective 78
5 The rise, fall, and redefinition of the auditor : from bookkeeper to professional to information consultant 108
6 Corporate attorneys as gatekeepers : the short history of a developing concept 192
7 Securities analysts 245
8 The ratings agencies 283
9 What went wrong? 317
10 What should work? : (and how to get there) 333
11 Conclusions : the future of gatekeeping 362