Private Equity, Corporate Governance And The Dynamics Of Capital Market Regulation

Global capital markets are in a state of flux. Castigated in the past as OC Barbarians at the GateOCO, private equity providers are once again proclaiming the end of the public corporation. This important book addresses the implications of private equity for the governance of corporations, the capital markets in which they operate and the professionals who provide corporate advisory services. The book evaluates and ranks the precise nature of the risk posed by private equity by situating it within an overarching analysis of the dynamics of financial capitalism. Key issues addressed include: the management of conflicts of interest, fiduciary duties, the role of enforcement, the efficacy of adopting a rules- or principles-based system of regulation, the form and function of compliance, and a detailed examination of how to embed accountability into an integrity system for the financial markets. The book therefore has enormous benefit for industry, regulatory and academic communities alike. Sample Chapter(s). Introduction: The Dynamics of Capital Market Governance (157 KB). Chapter 1: The Conceptual Underpinnings of Australian Securities Regulation (116 KB). Contents: Introduction: The Dynamics of Capital Market Governance (J O''Brien); The Conceptual Underpinnings of Australian Securities Regulation (M Rodgers); Evolving OCyRules of the GameOCO in Corporate Governance Reform (J Hill); Overlapping Fields and Constructed Legalities: The Endogeneity of Law (L B Edelman); The Significance of Relative Autonomy in How Regulation of the Financial Services Sector Evolves (G Gilligan); ASIC v Citigroup: Investment Banks, Conflicts of Interest, and Chinese Walls (P F Hanrahan); Enforcement of Capital Markets Regulation: The United Kingdom and Its International Markets (I MacNeil); Why Auditors Don''t Find Fraud (N M Hodson); Compliance, Ethics and Responsibility: Emergent Governance Strategies in the US and UK (D McBarnet); Professional Norms (D Cocking); Sarbanes-Oxley and the Search for Accountable Corporate Governance (M J Dubnick); Charting an Icarian Flightpath: The Implications of the Qantas Deal Collapse (J O''Brien); Institutions, Integrity Systems and Market Actors (S Miller). Readership: Postgraduate law and business students; also suitable for general informed market (e.g. investment bankers, compliance professionals, providers of corporate advisory services including lawyers, tax advisors and auditors). Contents......Page 10 Preface......Page 8 Contributors......Page 12 Introduction: The Dynamics of Capital Market Governance Justin O’Brien.......Page 14 I THE AUSTRALIAN REGULATORY ARCHITECTURE......Page 19 II THE CONFLICTING ROLE OF THE PROFESSIONS......Page 24 III SETTING REGULATORY PRIORITIES......Page 27 I A CLEAR CONCEPTUAL FRAMEWORK......Page 32 II INFLUENCES ON ASIC’S THINKING......Page 35 (A) Accounting for Regulatory Performance......Page 37 (B) Costs and Benefits of Regulation......Page 38 IV PARTNERSHIPS BETWEEN REGULATOR AND THE ACADEMY......Page 39 2. Evolving ‘Rules of the Game’ in Corporate Governance Reform Jennifer Hill......Page 42 I COMPARATIVE CORPORATE GOVERNANCE......Page 44 II THE POST-SCANDAL REGULATORY RESPONSES: LAWS, PRINCIPLES AND POLITICS......Page 47 III SHAREHOLDER INTERESTS VERSUS PARTICIPATORY RIGHTS — WHAT THE POST-SCANDAL REFORMS DID AND DID NOT ADDRESS......Page 56 IV CURRENT POLICY DEBATES AND REGULATORY BACKLASH......Page 60 CONCLUSION......Page 66 3. Overlapping Fields and Constructed Legalities: The Endogeneity of Law Lauren B Edelman......Page 68 I LEGAL AND ORGANISATIONAL FIELDS......Page 74 II THE MANAGERIALISATION OF LAW IN ORGANISATIONAL FIELDS......Page 81 (A) Professional Construction of the Legal Environment......Page 82 (B) The Construction and Diffusion of Symbolic Forms of Compliance......Page 84 (C) The Construction of Law within Organisations......Page 86 III LEGAL FIELDS AND THE RATIONALISATION OF MANAGERIALISED LAW......Page 91 (A) Employees’ Legal Consciousness and the Mobilisation of Law......Page 92 (B) Professional Framing of Rights Violations......Page 93 (C) Judicial Deference to Organisational Constructions of Law......Page 94 CONCLUSION: OVERLAPPING FIELDS AND ENDOGENOUS PROCESSES......Page 101 4. The Significance of Relative Autonomy in How Regulation of the Financial Services Sector Evolves George Gilligan.......Page 104 I THE EMERGENCE OF FINANCIAL REGULATION IN ENGLAND......Page 105 II REGULATION AS A COMPETITIVE COMMODITY?......Page 121 III THE LEVERAGED CHARACTER OF FINANCIAL SERVICES......Page 126 CONCLUSION......Page 128 5. ASIC v Citigroup: Investment Banks, Conflicts of Interest, and Chinese Walls Pamela F Hanrahan......Page 130 (A) The Patrick Takeover......Page 132 (B) The Allegations......Page 134 II THE CONFLICTS CLAIMS......Page 135 III ISSUE 1: THE FIDUCIARY POINT......Page 137 (A) The Fiduciary Character of Advisory Relationships......Page 138 (B) The Effect of the Contractual Stipulation......Page 141 IV ISSUE 2: THE CONFLICTS POINT......Page 142 (A) The Daly Positive Duty of Disclosure......Page 143 (B) The Fourth and Fifth Allegations......Page 144 V ISSUE 3: INFORMED CONSENT......Page 145 VI ISSUE 4: CONFLICTS MANAGEMENT AND CHINESE WALLS......Page 147 (A) Chinese Walls......Page 148 VII IMPLICATIONS FOR ADVISERS......Page 150 VIII THE NATURE OF FIDUCIARY DUTIES......Page 151 IX IMPLICATIONS FOR REGULATION......Page 153 6. Enforcement of Capital Markets Regulation: The United Kingdom and Its International Markets Iain MacNeil......Page 156 I RISK-BASED REGULATION AND ENFORCEMENT......Page 159 (A) The Move towards More-Principles-Based Regulation......Page 161 (B) The Enforcement Implications of Principles-Based Regulation......Page 165 III THE ROLE OF SELF-REGULATION AND MARKET DISCIPLINE......Page 168 IV CORPORATE, COLLECTIVE OR INDIVIDUAL RESPONSIBILITY?......Page 174 (A) Public Enforcement......Page 180 (B) Private Enforcement......Page 182 (A) Sanctions: The Statutory Options......Page 184 (B) Settlements: Process and Incentives......Page 186 (C) Procedural Complications......Page 187 CONCLUSION......Page 188 7. Why Auditors Don’t Find Fraud Nicholas M Hodson......Page 192 II THE ESSENTIALS......Page 193 III DECEPTION......Page 196 IV THE DECEIVERS......Page 197 (A) Thoughts on Collusion......Page 198 V THE DECEIVED......Page 199 VI AUDITOR–CLIENT RELATIONSHIPS......Page 200 VIII A REAL EXAMPLE......Page 201 IX A HYPOTHETICAL ILLUSTRATION......Page 205 X THE EVIDENCE OF FRAUD......Page 216 XI CHANGING AUDITING STANDARDS......Page 218 (A) Acknowledging a Problem......Page 220 (B) Spreading the Load......Page 221 (E) Plausible Deniability......Page 223 CONCLUSION......Page 224 8. Compliance, Ethics and Responsibility: Emergent Governance Strategies in the US and UK Doreen McBarnet......Page 226 (A) US Regulation and the Enron Effect......Page 227 (B) US Regulatory Initiatives......Page 230 (C) Enforcement Policy......Page 233 (D) Regulatory Initiatives: The UK......Page 236 (E) Enforcement Policy: UK......Page 240 (A) Potential Limitations in the Regulatory Bid for Ethical Compliance......Page 243 (B) Corporate Social Responsibility......Page 245 (C) Legal Compliance on the CSR Agenda......Page 248 (D) CSR as an Enforcement Mechanism......Page 250 CONCLUSION......Page 252 9. Professional Norms Dean Cocking......Page 254 I TWO MODELS OF ETHICO-PROFESSIONAL NORMS......Page 256 II THE NECESSITY AND IMPORTANCE OF PROFESSIONAL AUTONOMY......Page 263 III CORRELATIVE DUTIES OF CARE TO CLIENTS......Page 268 CONCLUSION......Page 275 10. Sarbanes-Oxley and the Search for Accountable Corporate Governance Melvin J Dubnick.......Page 278 I ‘PURPOSE’ AND THE ASSESSMENT OF CORPORATE GOVERNANCE REFORM......Page 280 II UNCOVERING THE HISTORICAL PURPOSE OF CORPORATE GOVERNANCE......Page 284 (A) The Modern Corporate Form as Hybrid......Page 285 (B) Inventing the Corporate Form......Page 288 III CLARIFYING THE STANDARD......Page 292 (A) The Stakeholder Model......Page 293 (B) The Fiduciary Model......Page 294 (C) The Accountability Model......Page 295 IV ASSESSING ACCOUNTABLE GOVERNANCE: A FRAMEWORK......Page 297 V ASSESSING SARBANES-OXLEY......Page 301 (A) The Performative Provisions......Page 303 (B) The Regulatory Provisions......Page 304 (C) Managerial Provisions and the Absence of Fourth Order Provisions......Page 305 CONCLUSION......Page 306 11. Charting an Icarian Flightpath: The Implications of the Qantas Deal Collapse Justin O’Brien.......Page 308 I A CHRONICLE OF A DEATH FORETOLD......Page 315 (A) Inside the Alchemist Workshop......Page 316 (B) Back to the Future: The Return of the LBO......Page 319 (C) The Creative Destruction of Private Equity......Page 325 II CHARTING AN ICARIAN FLIGHTPATH......Page 329 (A) The Fall to Earth......Page 330 (B) The Deal Structure......Page 334 III ALIGNING AND CONFLICTING INTERESTS......Page 339 (A) The Limits of Directorial Discretion......Page 340 (B) Investing in Conflict......Page 342 IV THE DYNAMICS OF REGULATORY REFORM......Page 344 CONCLUSION......Page 348 12. Institutions, Integrity Systems and Market Actors Seumas Miller......Page 352 I SOCIAL INSTITUTIONS......Page 357 II INTEGRITY SYSTEMS......Page 367 III CORPORATIONS, FINANCIAL MARKETS AND MARKET ACTORS......Page 375 1 BOOKS/ARTICLES/REPORTS......Page 384 2 CASES......Page 409 3 LEGISLATION AND TREATIES......Page 410 4 OTHER MATERIALS......Page 411 This Important Book Addresses The Implications Of Private Equity For The Governance Of Corporations, The Capital Markets In Which They Operate And The Professionals Who Provide Corporate Advisory Services. The Book Evaluates And Ranks The Precise Nature Of The Risk Posed By Private Equity By Situating It Within An Overarching Analysis Of The Dynamics Of Financial Capitalism. Key Issues Addressed Include: The Management Of Conflicts Of Interest, Fiduciary Duties, The Role Of Enforcement, The Efficacy Of Adopting A Rules - Or Principles - Based System Of Regulation, The Form And Function Of Compliance, And A Detailed Examination Of How To Embed Accountability Into An Integrity System For The Financial Markets. The Book Therefore Has Enormous Benefit For Industry, Regulatory And Academic Communities Alike.--jacket. Introduction: The Dynamics Of Capital Market Governance -- The Conceptual Underpinnings Of Australian Securities Regulation -- Evolving 'rules Of The Game' In Corporate Governance Reform -- Overlapping Fields And Constructed Legalities: The Endogeneity Of Law -- The Significance Of Relative Autonomy In How Regulation Of The Financial Services Sector Evolves -- Asic V Citigroup: Investment Banks, Conflicts Of Interest, And Chinese Walls -- Enforcement Of Capital Markets Regulation: The United Kingdom And Its International Markets -- Why Auditors Don't Find Fraud -- Compliance, Ethics And Responsibility: Emergent Governance Strategies In The Us And Uk -- Professional Norms -- Sarbanes-oxley And The Search For Accountable Corporate Governance -- Charting An Icarian Flightpath: The Implications Of The Qantas Deal Collapse -- Institutions, Integrity Systems And Market Actors. Editor, Justin O'brien. Includes Bibliographical References. Global capital markets are in a state of flux. Castigated in the past as "Barbarians at the Gate", private equity providers are once again proclaiming the end of the public corporation. This important book addresses the implications of private equity for the governance of corporations, the capital markets in which they operate and the professionals who provide corporate advisory services. The book evaluates and ranks the precise nature of the risk posed by private equity by situating it within an overarching analysis of the dynamics of financial capitalism. The key issues addressed include: the management of conflicts of interest, fiduciary duties, the role of enforcement, the efficacy of adopting a rules- or principles-based system of regulation, the form and function of compliance, and a detailed examination of how to embed accountability into an integrity system for the financial markets. The book therefore has enormous benefit for industry, regulatory and academic communities alike