ABSTRACT
This chapter asks why some of the standard means of monitoring the activities of senior decision-makers in large corporations seem prone to periodic failure. Key factors in monitoring managerial performance include the composition and independence of the board of directors, issues of transparency, outside reporting, accounting standards, and auditing quality. It is suggested that an over-reliance of legal and economic theory on the standard rational model as applied to reputational intermediaries may lead to overconfidence with regard to the feasibility of independence of the two groups of gatekeepers under investigation. As a result, rules based on the presumed rationality and independence of these agents may be less reliable than is frequently assumed.
