The collapses of Enron and other major U.S. companies in recent years are highlighting the need to amend corporate governance rules that overemphasize management protection so that an effective market for corporate control can be restored, said William Niskanen, head of the Cato Institute, a U.S. think tank.
Speaking at a seminar in Tokyo organized by the Keizai Koho Center at Keidanren Hall on Nov. 11, Niskanen, acting chairman of the Council of Economic Advisers to former President Ronald Reagan in 1985, said the Enron scandal gave corporate America a number of new lessons to learn.
One is that the public shouldn't put too much emphasis on the accounting when assessing a company's condition. Another is that corporate auditing can't be trusted much either. But the most important lesson, Niskanen said "is that the rules of corporate governance do not now adequately protect the general shareholder against the discretionary behavior of corporate managers."