RICHMOND, Va., May 9 /PRNewswire/ -- Revelations of accounting scandals
plagued corporate America in 2002 leading to the demise of such companies as
Enron and WorldCom. These incidents of seemingly fraudulent financial
reporting raised serious questions about the governance arrangements of
American corporations. John A. Weinberg, vice president and economist,
discusses issues related to corporate responsibility and financial accounting
in the Richmond Fed's 2002 Annual Report essay, "Accounting for Corporate
Behavior."
The fundamental challenge to corporate governing, Weinberg suggests, is
the ability of large public corporations to align the incentives of
professional managers with those of widely dispersed shareholders. Weinberg
says the two groups have different levels of knowledge about a company's
opportunities and performance -- with management being better informed -- and
different incentives driving their actions. The essay offers perspectives and
remedies, including governmental reform as in Congress' passing of the
Sarbanes-Oxley Act in 2002, and the strengthening of market forces that impact
the alignment.
In addition to the essay, the annual report also includes information on
the Fifth District economy and on the Reserve Bank's operational and financial
activities. For copies free of charge, contact the Bank's Public Affairs
Department at (804) 697-8111. An electronic copy is also available on the
Federal Reserve Bank of Richmond Web site at
http://www.rich.frb.org/pubs/ar/2002 (The electronic format does not include
listings and photographs of executives included in the print format.)
SOURCE Federal Reserve Bank of Richmond
 back to top
Related links:
http://www.rich.frb.org
http://www.rich.frb.org/pubs/ar/2002
CONTACT:
Lisa Oliva, Public Affairs, +1-804-697-8192;
or John Weinberg, Research, +1-804-697-8205, both of the Federal
Reserve Bank of Richmond
|
