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year, the SEC and several Wall Street firms agreed on a broader settle

ment which the SEC called “a pact that could change the face of Wall

Street.” In it 10 of the nation’s largest securities firms agreed to pay a re

cord $1.4 billion to settle government charges involving abuse of inves

tors during the stock market boom of the 1990s.

The agreement sets new rules regarding the handling of research.

Some security analysts at investment banks had presented positive re

ports about certain companies to the public while privately thinking

otherwise. The purpose of issuing routine overly optimistic, if not de

ceptive, stock research to investors was to win investment bank busi

ness. The settlement now requires securities firms to have separate

reporting and supervisory structure for their research and banking op

erations. Analysts’ compensation is to be tied to the quality and accu

racy of their research. Furthermore, analysts will no longer be allowed

to accompany investment bankers during their “road-show” sales

pitches to clients.

Stock Exchanges. Attention focused on the New York Stock Ex-

change (NYSE) which handles the daily purchases and sales of major

companies’ securities. It is essentially a private club of members who hold

a seat on the exchange, but the SEC also allows it to regulate the behavior

of its floor traders and member firms, such as the specialists who manage

the trading of the exchange’s listed stocks. Its board failed in the latter

duty, as the scandal of the exorbitant pay ($140 million) of its chairman

Richard A. Grasso and cozy relations with directors revealed.

The NYSE was insufficiently transparent and failed to act on phony

research. Its insensitivity to its public responsibility was evidenced

when it invited discredited Sanford I. “Sandy” Weill, chairman and CEO

of Citigroup, to represent the public on its board.

Its chairman, John S.

Reed, also a former Citigroup chairman, is undertaking a drastic over-

haul of the governing structure, but critics, including the SEC, say more

is needed.

His plan doesn’t separate the Exchange’s regulatory and

commercial functions, and it doesn’t include a public pension fund (ma

jor users of the Exchange) representative on the board, nor does it con

sider replacing the specialist system in favor of an electronic trading

model embraced by most other exchanges.

Specialists are accused of

routinely placing their own trades ahead of those of customers.

member of CALpers, the country’s largest pension fund, says that the

Reed proposal merely reorganizes rather than truly reforms, the Big

Board.

Securities & Exchange Commission. The nation’s rule maker and

enforcer of securities and exchange regulations failed in its oversight

function. Even as corporate scandals unfolded, former SEC chairman

Harvey Pitt seemed more interested in protecting the interests of his

former law clients in the accounting field than regulating them. For

392 I CHAPTER 14

example, he held a private meeting with KPMG, his former law client,

which was under SEC investigation.

His insensitivity to the require

ments of the SEC was further revealed when he proposed William Web

ster, former FBI director, to head the new Public Company Accounting

Oversight Board. Pitt failed to reveal that Webster had served on the

audit committee of a firm, U.S. Technologies, facing fraud charges.

Take on the Street, written by Arthur Levitt, Jr., former SEC chairman,

and Paula Dwyer describe how the accounting profession’s power in

Congress stymied his efforts at enforcement and reform.

Robert

Kuttner, who writes a column for BusinessWeek, observed that in the

past two decades, “free-market ideologues and self-interested Wall

Street insiders” had dismantled securities regulations. “The nub of the

problem,” he says, “is that Wall Street and its regulators remain far too

clubby.”

Fortunately, new SEC chairman, William H. Donaldson, al

though a former Wall Streeter, has been getting high marks for re

forming the SEC.

The Sarbanes-Oxley Act Seeks to Repair the Information

Infrastructure

The main effort to rid the financial system of unethical practices and re-

pair the badly battered financial information infrastructure is the

wide-sweeping corporate oversight bill, the Sarbanes-Oxley Act, offi-

cially called the Public Company Accounting Reform Investor Protection

Act of 2002. Recognizing that an economic system cannot survive when

people no longer trust basic information, Congress passed this reform

legislation on July 25, 2002, by an overwhelming majority (423–3 in

the House and 99–0 in the Senate). Although initially opposed by most

Republicans, fear of voter backlash in the coming November election left

no alternative. There was a rising tide of opinion that free markets and

property rights require the rule of law to function.

The act gets to the heart of the accuracy of financial reporting by es

tablishing new accounting regulations. A newly established independ

ent five-member Public Company Accounting Oversight Board under

the jurisdiction of the SEC has the power to set auditing standards and to

investigate and discipline auditors. The act also addresses the conflict of

interest by an auditing firm that often makes more money providing

consulting than auditing services. CEOs and CFOs are given the respon

sibility of certifying the authenticity of financial statements. Adding to

safeguards, lawyers are required to report serious violations of securi

ties laws. Box 14.1 outlines these and other provisions of the act.

Certified public accountants and their professional association, the

AICPA, both of whom had steadfastly opposed reform, lost heavily with

passage of the Sarbanes-Oxley Act. By favoring consulting and other

services, the AICPA failed to defend the integrity of audits and financial

statements, the very underpinning of the profession.

CONSTRUCTING A COMPETITIVE POLITICAL MARKETPLACE I 393

394

Box 14.1 Main Provisions of the Sarbanes-Oxley Act

1. Establishes new accounting regulations. For example, it establishes

an independent five-member oversight board under the jurisdiction of

the SEC with investigative and disciplinary powers. The board has the

power to set auditing standards and to investigate and fine auditors.

2. Places limitations on the types of consulting an auditing firm can

do for a specific client so as to remove a major conflict of interest. Au

ditors will not be inhibited from honest reporting out of fear that the

client will severe more lucrative consulting services. The law prohibits

accounting firms from offering nine types of consulting services to

corporate clients, including building financial-information systems. It

also requires accounting firms to rotate lead or reviewing partners

from client assignments every 5 years and requires auditors to be

hired by and report to the audit committee of the board (not by the

company managers).

3. Stiffens criminal penalties. For example, it raises the maximum

penalty for securities fraud to 25 years and increases CEO and CFO

penalties for false statements to the SEC or failing to certify financial

reports; and establishes penalties of up to 10 years in jail for fraud and

obstruction of justice involving shredding of documents.

4. Increases corporate responsibility by requiring corporate CEOs and

CFOs to certify the authenticity of financial statements—or face crimi-

nal sanctions (prison terms of up to 20 years for “willingly and know-

ingly” permitting seriously misleading material into reports); corporate

chieftains must forfeit profits and bonuses when earnings are restated

due to securities fraud; prohibits executives from selling company

stock during blackout periods and requires insiders to report all com-

pany stock trades within 2 days; prevents executives from receiving

company loans unavailable to outsiders; requires companies to imme

diately disclose “in plain English” material changes in their financial

conditions.

5. Creates new protections. For example, in a first-ever protection that

applies to employees of all public companies, it broadens ability of

whistle-blowers to sue and prohibits investment firms from retaliating

against analysts who criticize clients of the firm.

6. Extends the amount of time investors have to file suits to 2 years

from 1 after they have discovered an alleged fraud, and to 5 years

from 3 after it occurs.

7. Sets up a restitution fund for wronged shareholders, financed by

fines from any ill-gotten gains that securities regulators squeeze from

wayward executives.

8. Requires lawyers for publicly traded companies to report material

violations of securities laws up the chain of command, all the way to

THE CULTURE OF WALL STREET CHANGES SLOWLY

“What Wall Street really needs is a change in culture, starting at the very

top,” says BusinessWeek.

Real change may depend on taking action

against senior managers, including CEOs. As stated by New York State’s

Attorney General Eliot Spitzer, who has spearheaded the investigation

of Wall Street, “If the responsibility for these improprieties is not directly

laid at the feet of senior management, then we will have failed to send a

message to the right people.” Corporate leaders as well as Wall Street

players must be held accountable for corrupting the accuracy and avail-

ability of vital financial information and blocking reform efforts.

Corporate Leaders

The response of corporate leaders to the recent corporate scandals has

mostly been silence and, sometimes, opposition. “Sadly, business lagged

for years in its understanding of the political effects of corporate gover-

nance despite the pleas of savvy CEOs and public affairs professionals

for corporate transparency and ethical orthodoxy,” wrote Wes Pedersen,

editor of Public Affairs Review.

One exception was billionaire Warren

Buffett, who advised corporate chieftains to reform. In his opening ad

dress to 120 executives attending The Forum for Corporate Conscience

in March 2003, he said that the need to restore corporate integrity was

“vital to this country.” He specifically criticized the high pay CEOs are

collecting, regardless of company performance, which, he said, was un

dermining corporate America’s image. “What really gets to the public is

when CEOs get rich, really rich, and they get poorer,” he said. “I think

the acid test is going to be CEO compensation.”

Some business leaders who voiced opinions were either opposed to re

forms or offered weaker remedies. For example, even before the NYSE

released its far-reaching proposals to upgrade corporate governance

standards, letters of protest started to pour in from at least a dozen

members of the Business Roundtable, including General Mills Chairman

Stephen W. Sanger.

When the Business Roundtable as a body took a

stand, it issued a narrowly focused statement in a full-page ad that es

sentially said it supported: (a) “totally open” corporate financial state

CONSTRUCTING A COMPETITIVE POLITICAL MARKETPLACE I 395

the board if necessary. A threat of financial harm or material violation

of SEC rules requires lawyers to report such matters to the SEC. Only

35% of lawyers in a survey support changing such client confidentiality

rules.

9. Requires auditing firms to rotate partners who manage audits for a

company every 5 years.

10. Boosts SEC budget.

ments—“What you see is what you get”; (b) independent corporate

boards of directors, especially in audit, compensation, or governance

committees; and (c) “fairness”; for example, shareholders must approve

all stock option plans.

It didn’t talk about greater responsibility of the

accounting profession or a government role in achieving greater trans

parency of financial information. In short, it really didn’t support the

Sarbanes-Oxley reform bill. The Business Roundtable seems to believe

that corrections made by the free market would make regulation

unnecessary.

More candor by business executives would be a good place to start re

gaining public confidence and lessen the need for more legislative solu

tions. “For their own sake, it’s time to break radio silence and declare

their positions on what practices are proper and how the improper ones

should be fixed,” says Jerry Useem, a scholar of corporate governance.

He quotes Jeffrey Garten, dean of the Yale School of Management and

author of The Politics of Fortune: A New Agenda for Business Leaders, “It

would take only a dozen major CEOs to give the business community a

good chance of rebuilding its reputation..”

Seymour Trachimovsky,

general counsel and corporate secretary of DuPont Canada, extends this

argument in support of free market capitalism. Speaking of the CEOs

role, he said, “It will take the leadership and sound judgment of senior

corporate managements willing to accept accountability and willing to

confront their own narcissism and hubris. This is not a job for the legis-

lature but for business leaders with maturity and intestinal fortitude.”

When executives violate the law, “they have to be held individually

accountable for specific crimes,” argues a Wall Street Journal editorial.

The deterrent effect on executive behavior of seeing their counterparts

punished is likely to be more powerful than prescriptions coming from

Congress or the SEC. However, few top-echelon executives have landed

in jail. It took 2 years before the prosecutors of Enron’s CFO Andrew

Fastow collected enough evidence to persuade him to plead guilty. He

faces a 10-year prison term and forfeiture of more than $29 million,

which is unusual for a white-collar crime. Enron’s former treasurer Ben

Glisan was also imprisoned after pleading guilty to criminal activity in

doctoring Enron’s financial statements to make the company look far

healthier than it was.

Although U.S. prosecutors filed an indictment

against Enron’s former president and CEO Jeffrey Skilling, who arrived

at a Houston courthouse in handcuffs, he pleaded “not guilty to all

counts.”

His lawyers are expected to argue that the charges are really

“a general indictment of corporate business” and an attempt to “demon

ize some normal procedures of corporate activity.”

It took over two-and-a-half years before Kenneth Lay, Enron’s for

mer chairman and CEO was indicted for massive conspiracy to deceive

and defraud investors. When he was led handcuffed into a Houston

courthouse in July 2004, he pleaded not guilty.

His defense was that

his CFO, Andrew Fastow, was to blame. After having previously said “I

and the board are also sure that Andy has operated in the most ethical

396 I CHAPTER 14

and appropriate manner possible,” he changed his mind and said that

Fastow had “betrayed” his trust. He added that “to the extent that I did

not know what he was doing … then indeed, I cannot take responsibil

ity.”

As John Budd, a veteran public relations counselor, noted, “If an

executive hailed as a brilliant leader, with a PhD in economics can be so

easily duped what does it portend for mere mortal CEOs?”

The “plausi

ble deniability” defense has become routine among CEOs. Also calling

this legal tactic the “30,000 foot” defense, “the notion is that a chief ex

ecutive can’t possibly be held responsible for all the goings on so far be

low him.”

In other big scandal cases, indictments and imprisonments are moving

slowly. In March 2004, the federal government indited Bernard J. Ebbers,

WorldCom’s CEO, after Scott Sullivan, the company’s former CFO,

pleaded guilty; Tyco’s former CFO Mark Swartz and CEO Dennis

Kozlowski were on trial in a New York state court on charges of looting

the company of $600 million in unauthorized compensation and illicit

stock sales; and two HealthSouth executives agreed to plead guilty and

former CEO Richard Scrushy went on trial in August 2004.

In March

2004, a jury found Martha Stewart guilty on all counts facing her, but

after appealing the verdict, she decided to report to prison as soon as pos-

sible to reclaim her life.

Remorse by corporate leaders appears to be ab-

sent or rare, which doesn’t bode well for a change in corporate culture.

Wall Street

Lawmakers examining the settlement by the SEC and several Wall Street

firms alleged that the high-profile agreement with the SEC doesn’t go

far enough to punish wrongdoers. They said the pact hasn’t done any-

thing to change the culture of Wall Street and prevent future abuses.

“Without holding executives and CEOs personally accountable for the

wrongdoing that occurred under their watch, I do not believe that Wall

Street will change its ways or that investors’ confidence will be re

stored,” said Richard Shelby (R-Ala.), chairman of the Senate Banking

Committee. Doubt was also expressed about the adequacy of the present

self-regulatory system to police the industry and enforce the new rules

of the settlement. The SEC’s regulatory commitment was weak, as was

Donaldson’s statement that his agency was committed to “vigilance” in

enforcing the terms of the settlement and issuing new rules to prevent a

recurrence of the problems.

The SEC, however, has been reluctant to regulate Wall Street. It was

only after an investigation by Spitzer that the SEC (along with the New

York Stock Exchange and the NASD) took action. As former SEC chair

man Arthur Levitt reported in his memoir, Take the Street, the SEC was

often stymied by Wall Street’s allies in Congress. Robert Kuttner, who

writes a column for Business Week, observed that in the past two de

cades, “free-market ideologues and self-interested Wall Street insiders”

CONSTRUCTING A COMPETITIVE POLITICAL MARKETPLACE I 397

had dismantled securities regulations. “The nub of the problem,” he

says, “is that Wall Street and its regulators remain far too clubby.”

Showing how difficult it is to change organizational cultures, the les

sons of the settlement were initially ignored by some Wall Street firms.

Chairman Philip Purcell of Morgan Stanley, one of the 10 companies in

the $1.4 billion settlement, told a group of institutional investors that

he didn’t see anything in the settlement that would concern the retail in

vestor about Morgan Stanley. In response, Donaldson, in a strongly

worded letter, said, “Your reported comments evidence a troubling lack

of contrition and lead me to wonder about Morgan Stanley’s commit

ment to compliance with the letter and spirit of the law.” He also cau

tioned Purcell not to deny the SEC’s allegations. Purcell subsequently

replied, “I deeply regret any public impression that the commission’s

complaint was not a matter of concern to retail investors”—a statement

that falls far short of an apology.

Another firm, Bear Stearns, reverted to the practice of using an ana-

lyst to promote a new stock offering when one of the firm’s analysts,

James Kissane, appeared in one of its promotional webcasts. SEC en-

forcement chief Stephen Cutler said, “It’s just astonishing to me that a

firm could allow an analyst to participate in a roadshow—and the fact

that the prohibition on such conduct isn’t literally in effect yet doesn’t

make me any less disappointed.”

Wall Street epitomizes the core ideology of capitalism, which is to

maximize profits for the benefit of shareholders. However, it is also

obliged to follow the rules of the marketplace as established by stock

exchanges and the SEC. Wall Street is also expected to act ethically and

be aware that violations of public trust inevitably lead to undesirable

consequences: greater government regulation and, especially impor-

tant in the financial world, a loss of public confidence in financial insti-

tutions and business in general. In his speech on the outlook of the

economy in the late 1990s, Federal Reserve Chairman Alan Greenspan

recognized the seriousness of the crisis of confidence, saying that an

“infectious greed” had gripped business. He warned that breakdowns

in corporate governance could undermine the trust necessary for effi

cient markets.

CONCLUSIONS

Corporations must voluntarily curb their short-term drive for domi

nance in society and be willing to accept competition in the political

marketplace. In the long run the survival of marketplace economics and

the free enterprise system is at stake. Pushing back the extent of corpo

rate influence is a never-ending effort, says the Economist in its 160-year

anniversary article “A Survey of Capitalism and Democracy.” This pub

lication, which since its founding in 1843 by a Scottish businessman

named James Wilson, has stood for liberty—especially economic lib

398 I CHAPTER 14

erty—states one antidote to corporate dominance: “In democracies,

governments have to be the arbitrators, the counterweights to powerful

private groups. But if they allow, or even encourage, companies and

wealthy individuals to manipulate them, they risk stretching public

faith in democracy to the breaking point.”

Business is urged to support a competitive political marketplace in

which political parties and interest groups, by competing with one an

other, seek to promote their individual interests in a way that does not

jeopardize the public interest. This model of competition, borrowed

from economics, requires a free flow of “full and timely” information so

that everyone can make efficient decisions. In addition to the news me

dia, the entire financial information infrastructure must help produce

and distribute needed information. The failures exposed by the

Enron-era scandals can be corrected by improving on the rules of the

game, changing organizational structures and cultures, and

recognizing the needed function of government in enforcing the rules.

To mitigate public fears that corporations have too much power, cor-

porations must show that they are willing to change their organiza-

tional cultures and comply with the rules of the financial marketplace.

However, as the experience of the almost-forgotten savings-and-loan

scandal in the early 1980s demonstrated, business sometimes seems in-

capable of reforming itself unless prodded by the government. This ex-

perience should convince businesspeople as well as the public that

laissez faire has its limitations. The self-correcting mechanisms of the

marketplace need prodding; market excesses don’t necessarily correct

themselves. Government has the responsibility to assure the public that

companies do not take advantage of their market power.

ENDNOTES

1. Some theorists envision an organizational chart with two senior vice presi

dents: one in charge of operations (representing the economic marketplace),

and the other in charge of public policy. See chart in W. Howard Chase, Issue

Management: Origins of the Future (Stamford, Conn.: Issue Action Publica

tions, Inc., 1984), pp. 36–37.

2. Robert D. McTeer, Jr., “The Dismal Science? Hardly!” Wall Street Journal, June

4, 2003, p. A16.

3. The Sherman Act is designed to preserve competition by declaring illegal “any

contract, combination in the form of trust or otherwise, or conspiracy, in re

straint of trade or commerce among the several states, or with foreign na

tions.” Without this safeguard, profit maximization would inevitably lead to

cutthroat competition, defined by one economist as a “ruthless, savage war

to the death, waged without rules of fairness or reasonableness, and legiti

mate as long as it promotes the interest of the person practicing it.” When a

competitor is too successful in the economic marketplace and comes close to

achieving a monopoly, the government intervenes, sometimes by imposing

draconian solutions, as illustrated by the breakup of Standard Oil of New Jer

sey in 1911.

CONSTRUCTING A COMPETITIVE POLITICAL MARKETPLACE I 399

4. The Clayton Act reinforces the Sherman Act by curbing the use of unfair meth

ods of competition: “Competition must be made an orderly, regulated process,

conducted according to rules of fair play, for otherwise it will not perform its

social purpose of providing more and better goods at lower prices.”

5. Alfred Marshall, the well-known classical economist, gives this definition of a

market: “the whole of any region in which buyers and sellers are in such free

intercourse with one another that the price of the same goods tend to equal

ity easily and quickly.” See his Principles of Economics, 8th edition (London:

Macmillan, 1947), p. 324.

6. Unless one takes the cynical view that lawmakers extract a “price” for choos

ing and processing a public policy demanded by some voters and their inter

est groups, in which case those who propose a law would have to decide how

much they are willing to bid to obtain legislative action. The rise in soft

money contributions supports this view.

7. The intensity of public opinion can be seen as the equivalent of the elasticity of

demand; for example, people who feel strongly about an issue would be more

fervent supporters of a public policy.

8. Barry M. Mitnick, editor, Corporate Political Agency: The Construction of Compe-

tition in Public Affairs (Newbury Park, Calif.: Sage, 1993), p. 24.

9. Ibid., p. 25.

10. Ibid., p. 32. Quoted by Mitnick as appearing in Andrew Hacker, “Introduc-

tion: Corporate America,” in Andrew Hacker, editor, The Corporation

Take-Over (New York: Harper & Row, 1964), pp. 7–8.

11. Mitnick calls such a system one of “contestable competition”—whereby all

participants have the resources that enable them to compete effectively in

the political process; op. cit., pp. 12, 24.

12. Stephanie Simon, “Nader Suits up to Strike Back Against ‘Slapps,’” Wall

Street Journal, July 9, 1991, p. B1.

13. Aaron Bernstein, “All’s Not Fair in Labor War,” BusinessWeek, July 19, 1999,

p. 43.

14. Harley Shaiken, “Labor’s Decline Has Meant Wages’ Decline,” Los Angles

Times, March 8, 1998, p. M5.

15. Aaron Bernstein, “A Shot in the Foot?,” BusinessWeek, May 4, 1998, p. 52.

16. An argument made by Orrin Baird, “Labor’s Right to Speak Under Attack,”

Legal Times, May 18, 1998, p. S34.

17. Vernon A. Mund, Government and Business (New York: Harper, 1950), p. 7.

18. Stated on Lehrer Newshour, November 19, 2003.

19. Rebecca Smith, “Blackout Could Have Been Avoided,” Wall Street Journal,

April 6, 2004, p. A6.

20. Arthur Schlesinger, Jr., “Government Isn’t the Root of All Evil,” Wall Street

Journal, January 30, 1998, p. A14.

21. Paul Starobin, “Rethinking Capitalism,” National Journal, Vol. 29, January

18, 1997, p. 106.

22. Jay M. Shafritz, The Dorsey Dictionary of American Government and Politics

(Chicago: The Dorsey Press, 1988), p. 417.

23. Herrnson includes the further objectives of improving the accountability of

the electoral process, enhancing representation in Congress, and endeavor

ing to increase the legitimacy of the election system in the eyes of citizens;

op. cit., p. 234.

24. Paula Dwyer, Robert D. Hof, Jim Kerstetter, and Ronald Grover, “The New Fat

Cats,” BusinessWeek, April 12, 2004, p. 32.

25. Ibid., p. 34.

400 I CHAPTER 14

26. Paul S. Herrnson, Congressional Elections: Campaigning at Home and in Wash

ington, 2nd edition (Washington, D.C.: Congressional Quarterly Press,

1998), pp. 190–195.

27. “Goodbye, Soft Money,” Economist, April 7, 2001, p. 22.

28. “Campaign Finance Reform,” Federal News Service, November 14, 2002.

29. Ellen Miller and Nick Penniman, “The Road to Nowhere; Thirty Years of

Campaign-Finance Reform Yield Precious Little,” The American Prospect, Au

gust 12, 2002, p. 14.

30. Eliza Newlin Carney, “The Soft-Money Battle Turns Bitter,” National Jour

nal, Vol. 34, July 6, 2002, pp. 2028–2029.

31. Dan Ackman, “Whistleblower?” Wall Street Journal, December 24, 2002, p.

A10.

32. Wendy Zellner, “An Insider’s Tale of Enron’s Toxic Culture,” BusinessWeek,

March 31, 2003, p. 16.

33. David Wessel, “Capital: When Standards Are Unacceptable,” Wall Street Jour

nal, February 7, 2002, p. A1.

34. David Henry and Mike McNamee, “Bloodied and Bowed,” BusinessWeek, Jan

uary 20, 2003, pp. 56–57.

35. David Henry, “Commentary: An End Run Around Accounting Reform,”

BusinessWeek, April 28, 2003, p. 85.

36. Wall Street Journal, April 2, 2003, p. A5.

37. See ad, “A mandate or a smart business practice,” in Wall Street Journal, Feb-

ruary 24, 2003, p. A15.

38. “Enron: The Case Against Skilling,” BusinessWeek, March 1, 2004, p. 35.

39. Kurt Eichenwald, “Andersen Guilty in Effort to Block Inquiry on Enron,” New

York Times, June 16, 2002, p. YNE-1; Michael Schroeder and Tom Ham-

burger, “Congressional Panel Investigates Andersen’s,” Wall Street Journal,

January 14, 2002, p. 3.

40. John Gibeaut, “Fear and Loathing in Corporation America,” ABA Journal,

January 2003.

41. Kurt Eichenwald, “In String of Corporate Troubles, Critics Focus on Boards’

Failings,” New York Times, September 21, 2003, p. 1.

42. John A. Byrne, “Fall from Grace,” BusinessWeek, August 12, 2002, pp. 50–56.

43. Charles Gasparino, “Analyst Pack Is Held up by Words,” Wall Street Journal,

January 16, 2003, p. C1.

44. Charles Gasparino, Susan Pulliam and Randall Smith, “Citigroup Proposes

Pact Splitting Research and Investment Banking,” Wall Street Journal, Sep

tember 27, 2002, p. A1.

45. Jathon Sapsford and Paul Beckett, “Citigroup Deals Helped Enron Disguise

Its Debts as Trades,” Wall Street Journal, July 22, 2002, p. A1.

46. Randall Smith, Susanne Craig, and Deborah Solomon, “Wall Street Firms to

Pay $1.4 Billion to End Inquiry,” Wall Street Journal, April 29, 2003, p. A1.

47. “Wall Street: Merrill Settles,” Economist, May 25, 2002, p. 72.

48. Smith, Craig, and Solomon, op. cit., p. A6.

49. See Gary Weiss, “The $140,000,000 Man,” BusinessWeek, September 15, 2003,

p. 84.

50. Paula Dwyer, “Commentary: Why the Market Can’t Police Itself,”

BusinessWeek, June 2, 2003, p. 84.

51. Gary Weiss, “NYSE: How Deep Will Reform Run? BusinessWeek, November

10, 2003, p. 48. Also see Deborah Solomon and Susanne Craig, “Market Dis

cipline: SEC Blasts Big Board Oversight of ‘Specialist’ Trading Firms,” Wall

Street Journal, November 3, 2003, p. A1.

CONSTRUCTING A COMPETITIVE POLITICAL MARKETPLACE I 401