chapter  13
31 Pages

Corporate Responsibility—What Went Wrong? Lessons from the Dark Side

Chapter Outline Long History of Fraud in Financial Markets Earnings Management Practices Failure to Disclose Material Information, Fraud in Financial Statements

and Fraud on the Market Confl icts of Interest

The Role of Greed? The Meltdown of Financial Markets and Institutions of 2008

Regulatory Focus and the Recognition of Systemic Risk High-Return, High-Risk Products: CMOs/MBSs, CDOs and CDSs Micro-Origins and Unintended Negative Consequences

Financial Meltdown 2008 Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Volcker Rule: Section 619 of Dodd-Frank Wall Street Reform and Consumer Protection Act

Resolution Plans (“Living Wills”) End of Chapter Case: Origins of the Financial Crisis of 2008

Chapter Introduction In the 1990s there were many initiatives to develop corporate social responsibility. The 1991 Sentencing Guidelines were passed in the US, and corporations were encouraged to develop codes of ethics. Business for Social Responsibility was founded in 1992. Why, therefore, did the 1990s close with such a spate of corporate debacles and scandals? Confl icts of interest, the failure to disclose material information to business stakeholders and fraud in fi nancial statements resulting in fraud on the market are troubling aspects of the spate of corporate debacles of the 1990s and early twenty-fi rst century. What lessons can be learned from corporate wrongdoing? How can a company with ethical lapses be rehabilitated?