Academic journal article Economic Perspectives

Corporate Governance: Implications for Financial Services Firms

Academic journal article Economic Perspectives

Corporate Governance: Implications for Financial Services Firms

Article excerpt

The 2003 conference will address issues related to corporate governance. In recent months, there have been a number of highly publicized incidents in which appropriate corporate governance was lacking. Deficiencies include inadequate oversight by boards of directors, misleading or fraudulent accounting practices, questionable audit arrangements, and various efforts to obfuscate the true financial condition of the firm. As a result, there has been a general rise in investor skepticism, leading to significant uncertainty in equity and credit markets and adverse effects on the overall economy.

These events have significantly affected the financial services sector. A number of banks and other financial intermediaries were directly affected because they had large credit exposures to firms that followed questionable accounting practices and subsequently failed. Of particular concern are the structured finance arrangements provided to special purpose entities associated with the failed firms. The revelation of these problems has brought into question the efficacy of current mechanisms used to monitor and control firm behavior. The appropriate role and effectiveness of boards of directors, shareholders, creditors (including banks), financial regulators, self-regulation, market regulation, accounting standards, and disclosure rules are all being challenged. The Sarbanes-Oxley Act was a first step in addressing these issues. Modifications are now being recommended and additional reforms are being evaluated. These corporate governance concerns raise a number of important public policy questions that will b e discussed at the 2003 conference.

As in past years, much of the program will be devoted to the conference theme, but there will also be a number of sessions on current industry issues. Some of the highlights of the conference include:

* The keynote address by Federal Reserve Board Chairman Alan Greenspan. …

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