The Death of Corporate Reputation How Integrity Has Been Destroyed on Wall Street

Why did the financial scandals really happen? Why are they continuing to happen? In The Death of Corporate Reputation, Yale's Jonathan Macey reveals the real, non-intuitive reason, and offers a new path forward. For over a century, law firms, investment banks, accounting firms, credit rating agencies and companies seeking regular access to U.S. capital markets made large investments in their reputations. They treated customers well, and even occasionally endured losses to maintain their reputations as faithful brokers, dealers'issuers, and "gatekeepers." This has changed. The business model among today's leading participants in the capital markets no longer treats customers as valued counterparties whose trust must be earned and nurtured, but as distant "counter-parties" to whom no duties are required. Simply put, the rough and tumble norms of the marketplace have replaced the long-standing fiduciary model in U.S. finance, and the result has been unrelenting financial scandal. Now, Macey illuminates this disastrous transformation, and convincingly argues that the change came as a result of two factors: (1) the growth of reliance on regulation rather than reputation as the primary mechanism for protecting customers; and (2) growing regulatory complexity, which made technical expertise rather than reputation the #1 criterion customers use in choosing new business partners. After identifying the heart of the problem, he offers a path forward -- and a true "silver lining" in the age of Madoff. This compelling book will drive the debate about the financial crisis and financial regulation for years to come -- both inside and outside the industry.

JONATHAN R. MACEY (New Haven, CT) is Sam Harris Professor of Corporate Law, Corporate Finance and Securities Law at Yale University, and Professor in the Yale School of Management. He is a member of the Board of Directors of the Yale Law School Center for the Study of Corporate Governance, a member of the Faculty Advisory Group of Yale’s Millstein Center for Corporate Governance and Performance, and Chairman of Yale's Advisory Committee on Investor Responsibility. He has served as an independent director of two public companies, and is a member of FINRA's Economic Advisory Council. His many books include Corporate Governance: Promises Kept, Promises Broken and Macey on Corporation Law.

Introduction     1
Chapter 1: The Way Things Used to Work: Reputational Theory and Its Demise     7
Chapter 2: Thriving the New Way: With Little or No Reputation--The Goldman Sachs Story     29
Chapter 3: The Way Things Used to Be: When Reputation Was Critical to Survival     55
Chapter 4: Individual Reputation Unhinged from the Firm: Hardly Anybody Goes Down with the Ship     83
Chapter 5: Proof in the Pudding: Michael Milken, Junk Bonds, and the Decline of Drexel and Nobody Else     103
Chapter 6: The New, Post-Reputation Wall Street: Accounting Firms     123
Chapter 7: The New, Post-Reputation Wall Street: Law Firms     149
Chapter 8: The New, Post-Reputation Wall Street: Credit Rating Agencies     165
Chapter 9: The New, Post-Reputation Wall Street: Stock Exchanges     191
Chapter 10: The SEC and Reputation     215
Chapter 11: The SEC: Captured and Quite Happy About It     231
Chapter 12: Where We Are and Where We Are Headed: A Conclusion of Sorts     253
Index     277