The meltdown of the corporate governance mavens

One would think these would be heady days for the stalwart corporate reformers who were sure they had the answers about how firms ought to be run. But just as the retreating tide reveals mollusks like Madoff, it also exposes the bones of those good government advocates. Consider the following:

• The SEIU, which only a few months ago wanted to “take back the economy from the buyout firms” is now revealed as having been one of disgraced governor Blago’s biggest political friends.
• Calpers, perhaps the leading good governance maven, while trying to impose a code of conduct on its portfolio companies, was setting itself up for billions of losses, making disastrous land deals, and threatening the welfare of the California employees who depend on it.
• The NYT reports that "Eliot Spitzer, who as New York attorney general was known as the 'Sheriff of Wall Street' for his crusade against investment fraud, has acknowledged that his family was swindled by the man accused of running what could be the largest Ponzi scheme in history."
• And of course Spitzer had plenty of company in the Madoff camp – e.g., at the SEC, while that agency was spending a lot of its time working on such projects as executive pay.
• I noted that one of the more disastrous meltdowns had bragged that "Lehman Brothers continues to be committed to industry best practices with respect to corporate governance."

The lesson isn’t that firms were well governed after all. Obviously they weren’t. It is that the “good governance” crowd had no idea where to look for the problems and the solutions. Just as we should be more skeptical about get rich schemes, so we should learn to reject platitudes in favor of evidence as to what does and doesn't work. And, as I've been saying for awhile, maybe we should look away from "corporate" governance altogether. 

Comments

[Bruce_NYC]

But aren't you grateful that Sarbanes-Oxley was here to protect us just when we needed it most?