Infectious Greed: Restoring Confidence in America's Companies

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FT Press, 2003 - Business & Economics - 277 pages
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Financial and corporate scandals have led to a fundamental crisis in the American corporate system: one in which investors believe they have been thoroughly betrayed by the managers, boards, accountants, and investment advisors they once trusted. The fundamental challenge is to restore confidence, but how? Tougher laws, while essential, aren't enough: they've already been passed, and investors are as disillusioned as ever. In Infectious Greed, John Nofsinger and Kenneth A. Kim begin with an insightful assessment of what really happened: how executive compensation systems have led to unethical and greedy behavior; and how monitoring systems and regulators failed. Next, they offer systematic solutions that align incentives to promote desirable actions and discourage unethical behavior. Their solutions build on what's best about capitalism, and can truly restore the investor confidence that is essential to the system's long-term success.
 

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Contents

CHAPTER 1 The Importance of Investor Confidence
1
CHAPTER 2 The Structure of Corporations
17
PART 1 The Failure of Executives
33
CHAPTER 3 Executive Compensation and Incentives
35
CHAPTER 4 Executive Behavior
51
PART 2 The Failure of Monitoring Systems
69
CHAPTER 5 Accountants and Auditors
71
CHAPTER 6 The Board of Directors
89
PART 3 Shortcomings in Enforcement and Investor Activism
167
CHAPTER 10 The Securities and Exchange Commission
169
CHAPTER 11 Investor Activism
187
PART 4 Restoring Confidence
205
CHAPTER 12 New Rules Regulations and Policies
207
CHAPTER 13 Create Good Incentives for LongTerm Solutions
227
CHAPTER 14 Regaining Investor Confidence
247
INDEX
265

CHAPTER 7 Investment Banks
109
CHAPTER 8 Analysts
131
Credit Rating Agencies and Lawyers
151
Inside Back Cover
279
Back Cover
280
Copyright

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About the author (2003)

JOHN NOFSINGER, finance professor at Washington State University, is author of Investment Madness, The Psychology of Investing, and Investment Blunders (Financial Times Prentice Hall). Widely acknowledged as one of the world's leading experts in investor psychology and behavioral finance, he has been quoted in financial media including The Wall Street Journal, Fortune, BusinessWeek, SmartMoney, Bloomberg, and CNBC, and other media from The Washington Post to Wired.com. Nofsinger's 1997 paper "Herding and Feedback Trading by Institutional Investors" (written with Richard W. Sias) was awarded "Best of the Best" and "Best Paper in Investments" by the Financial Management Association. He has also done advanced research for the New York Stock Exchange and the Association for Investment Management and Research.

KENNETH KIM is a finance professor at the State University of New York at Buffalo. His work has been published in the Journal of Finance, the Journal of Corporate Finance, the Journal of Banking and Finance, and other leading journals. Kim is co-author of the textbook Global Corporate Finance, and he has served as a financial economist at the U.S. Securities and Exchange Commission, where he worked on diverse issues including M&A regulation.

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