About the Book

disorganized-crimes-coverDisorganized Crimes begins with the financial scandals of the Enron Era, isolating the central governance issues that arose in this period from the fundamental agency’ problem: the separation of ownership and control. Publicly-held corporations are run by managers who have their own distinct set of interests that often conflict with the interests of the owners (shareholders). The book discusses the incentives of managers and the incentives of the monitors of public companies: boards, auditors, credit rating agencies, investment analysts, investment and commercial banks. It also devotes attention to government regulators who are supposedly interested in protecting shareholders from managerial opportunism, but who are often captured by the very companies that they are supposed to regulate.

A major finding is that the lessons of the Enron Era were not well learned and the financial fiascos of the Banking Crisis of 2007-8 exhibited most of the same issues once again. The problems became more virulent when corporate misgovernance crossed from the industrial to the financial sector. Fixing these issues involves reforming Board of Directors and assigning some liability for failures of directors as well as other monitors when they too fail. Creating two-sided incentives for all monitors is required, but the fulcrum for proper monitoring is a responsive, well trained set of directors who can gain or lose depending upon their performance in properly informing the shareholders.

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