A Dubious Legacy–a review fromDirectors & BoardsVol. 38 No.2-First Quarter 2013

FromDisorganized Crimesby Bernard E. Munk. Copyright 2013 by the author. Published by Palgrave Macmillan (www.palgrave.com).

Corporate governance is deeply embedded and dependent upon our system of political governance. We must realize that no governance system can prevent all crime. There will always be individuals and groups who test the limits of any system. We should not assume that the prevention of all crimes, economic or otherwise, is without cost or even a desirable metric for success. There is a continuing need to balance between the costs of preventing crimes and the actual cost of crime. Disorganized crimes arising from corporate governance failures are crimes nonetheless but the same cost/benefit principle applies. It is always a comparison of risk versus return.

Our legislative and policy responses have tried to regulate behavior that is extremely difficult to control and tointervene when the authorities deem it too dangerous not to intervene. That is an arbitrary and difficult policy path to implement. Intervention has been done in an unpredictable manner. We have become reliant on unclear authority and moved away from understandable and relatively fixed rules. That makes it difficult for market participants to respond in a predictable manner and surely it will be a source of future instability and further corporate misgovernance. In many ways, we have ignored holes in our corporate governance system that could be repaired and instead have come to depend on an ad hoc set of government interventions to fix a crisis. That has left an uncertain legacy for policy making in the future.

Bernard Munkfounded and operated several companies in the agricultural and energy industries and headed a financial advisory firm. He is a senior fellow at the Foreign Policy Research Institute. The book’s website iswww.disorganizedcrimes.net.