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Capital Markets, Corporate Governance, And The Future Of The U.S. Economy

February 2006

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 What's Inside

  • What Are Capital Markets, and Why Are They So Important?
  • The Connection Between Good Regulation and Growth
  • U.S. Markets Are the Most Highly Regulated on Earth
  • What Went Wrong at Enron and WorldCom?
  • Good Corporate Governance Is Good Business
  • The Role of Accounting—Is It an Art or a Science?
  • Does More Regulation Mean Better Governance?
  • The Risk of Confusing the Demands of Interest Groups With Corporate Governance
  • Lawsuits and Settlements: What Do They Really Mean?
  • Conclusion: The System Is at Risk
  • Action Plan
  • Final Thoughts
  • Notes

 

Introduction

Dear Reader:

Recent business scandals and the frenzied response by lawmakers, regulators, litigators, prosecutors, the media, and interest groups have raised fundamental questions about the future of an economic system that depends on innovative, risk-taking companies and vibrant capital markets to survive and prosper.

More than three years after the enactment of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley), companies and markets are being bombarded with changing rules, shifting advice, new layers of cost, and duplicative compliance and bureaucracy. Politically ambitious prosecutors have weighed in to grab headlines with little regard for fairness or due process. As a result of the charges, threats, and innuendos flying through the media, it is little wonder that many Americans believe that business is on the whole a corrupt institution, that our markets lack long-term stability, and that the only solution is additional rounds of regulation and prosecution.

With all this sound and fury, there has been relatively little light and clarity brought to this critical discussion. The purpose of this document is to clear away some of the fog so that business, government, and the public can make decisions based on facts and reason.

Inside you will find the facts to dispel some of the most common myths that have taken hold since the first of the major business scandals was exposed over four years ago. You will also find a description of the Chamber's many initiatives in this area, as indicated by the following examples:

  • The Commission on the Regulation of U.S. Capital Markets in the 21st Century
  • Recommendations to Improve Section 404 Implementation
  • Auditing: A Profession at Risk
  • Report on the Current Enforcement Program of the Securities and Exchange Commission
  • Enhancing America's Long-Term Competitiveness: Ending the Quarterly Earnings Guidance Game

Our capital markets are the means by which we funnel investment toward innovation and growth. They are the lifeblood of our economy and our global competitive advantage. Unfortunately, we are on the verge of destroying the system that feeds our businesses and creates our wealth. This report provides clear and complete information about serious risks to our capital markets system—and what we intend to do about it.

Thomas J. Donohue

President and CEO

U.S. Chamber of Commerce

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