*** Proof of Product ***
Exploring the Essential Features of “Infectious Greed – John Nofsinger & Kenneth Kim”
Topics include: The Failure of Executives, The Failure of Monitoring Systems, Shortcomings in Enforcement and Investor Activism, and Restoring Confidence.
Book description
In Infectious Greed, two leading financial experts offer a powerful new explanation of why the corporate scandals happened—and propose market-driven reforms that don’t just “patch” the system but fix it for generations to come. Discover how the system came to provide massive incentives for malfeasance by CEOs, boards, auditors, analysts, and investment houses—and learn how those “bad” incentives can be replaced by even more powerful incentives for integrity.
Table of contents
Copyright
Praise for Infectious Greed
FINANCIAL TIMES Prentice Hall
Financial Times Prentice Hall Books
Preface
Acknowledgments
1. The Importance of Investor Confidence
Asleep at the Wheel
Investor Attitude
Investor Confidence and the Stock Market
Long-Term Economic Effects
Our Approach
Endnotes
2. The Structure of Corporations
Business Forms
People in Business
Separation of Ownership and Control
Can Investors Influence Managers?
Are Investors Helpless?
A System of Problems
International Monitoring
Summary
Endnotes
1. The Failure of Executives
3. Executive Compensation and Incentives
Types of Executive Compensation
Base Salary and Bonus
Stock Options
Options and Accounting
Stock Options and (Mis)Alignment
Who Gets Options?
CEO Pay Around the World
Hidden Compensation
Summary
Endnotes
4. Executive Behavior
Options and Fraud
Timing of Sales
Company Loans—A Potential Abuse
Grand Theft
Adelphia
Enron
Tyco
Why Do Some Executives Misbehave?
Summary
Endnotes
2. The Failure of Monitoring Systems
5. Accountants and Auditors
Accounting Functions
Auditing
The Changing Role of Accounting
From Management to Fraud
Fraud, Plain and Simple
Consultants
When the Auditor is also a Consultant
Fear of All Sums
An International Perspective
Summary
Endnotes
6. The Board of Directors
Current Board Regulations
More Attention on Directors
Who Are Directors?
The Board’s Functions
Problems with Boards
Is Enron’s Board Partially to Blame?
Summary
Endnotes
7. Investment Banks
Some Historical Perspective
Investment Banking Activities
IPO Problems
IPOs and Fraud
Structured Deals
Summary
Endnotes
8. Analysts
The Traditional Role of the Analyst
Can Analysts Predict?
Analyst Compensation
Potential Conflicts of Interest
Analysts at Investment Banks
Just Who Is the Client?
Changing Roles
Summary
Endnotes
9. More Failed Monitors: Credit Rating Agencies and Lawyers
Credit Rating Agencies
A Brief Historical Perspective
The Ratings
Criticism
Enron
Summary of Credit Agency Problems
Attorneys
Protecting Lawyers
Summary of Attorney Problems
Endnotes
3. Shortcomings in Enforcement and Investor Activism
10. The Securities and Exchange Commission
The Securities Acts
Organizational Structure of the SEC
Assessment of the Acts and the SEC
SEC Problem Areas
Arthur Levitt’s I Told You So
The Man in the Middle: Harvey Pitt
Summary
Endnotes
11. Investor Activism
What Is Shareholder Activism?
Does Institutional Shareholder Activism Pay Off?
Potential Roadblocks to Effective Shareholder Activism
The Future Role of Shareholder Activists
Summary
Endnotes
4. Restoring Confidence
12. New Rules, Regulations, and Policies
A Review of the Corporate Problems
Sarbanes-Oxley Act of 2002
Public Company Accounting Oversight Board
Auditor Independence
Corporate Responsibility
Enhanced Financial Disclosures
Analysts’ Conflicts of Interest
SEC Resources and Authority
Corporate and Criminal Fraud Accountability and Penalties
Summary of the Act
Other Proposals for Change
New York Stock Exchange
Expensing Stock Options
More Change
Endnotes
13. Create Good Incentives for Long-Term Solutions
The Power of Incentives
Our Recommendations
Stock and Stock Option Incentives
Insider Equity Sales
Changing Option Structure
Auditing Firm Incentives
Boards of Directors
Investment Banks and Analyst Incentives
Credit Rating Agencies
Shareholders
Summary
Endnotes
14. Regaining Investor Confidence
Protecting Investors (Not)
Investor Confidence
Failing to Regain Confidence
Regaining the Confidence
Summary
Endnotes
Product information
Title: Infectious Greed: Restoring Confidence in America’s Companies
Author(s): John Nofsinger, Kenneth Kim
Release date: January 2003
Editorial Reviews
From the Back Cover
Financial scandals have led to a fundamental crisis in the American corporate system: 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 finger-pointing and tougher laws simply won’t be enough.
John Nofsinger and Kenneth Kim begin with an insightful assessment of what really happened: how executive compensation systems have led unethical and greedy behavior, and why monitoring systems and regulators failed so completely. Next, they identify powerful reforms that realign incentives to actively promote integrity and discourage malfeasance. In so doing, they offer the first real prescription for restoring investor confidence in both the short- and long-term—and for getting the U.S. economic system back on track.
Investor trust: the U.S. economy’s “secret ingredient” Why restoring investor confidence is crucial to restoring economic vigor Why the corporate scandals really happened Greed doesn’t explain everything Who did what, and how they did it CEOs, boards, auditors, analysts, investment firms: a realistic performance assessment Not just laws: a market-driven approach to reform Incentive-based reforms that will really work
Restoring investor confidence: a tough, realistic, incentive-driven plan.
“Nofsinger and Kim have written a book that is both timely and important. Encompassing issues from boards of directors to accountants to analysts, it is a clear exposition and analysis of topics that have filled the front pages of daily newspapers for the last year.”
— Erik Sirri, Babson College and former Chief Economist of the U.S. Securities and Exchange Commission
Enron. Andersen. WorldCom. Tyco. Adelphia. Corporate scandals have shaken investor confidence more than any event since the Great Depression. Without investor trust, American capitalism can never regain the vigor that has made the United States the world’s most dynamic economy. In Infectious Greed, two financial experts offer a powerful new explanation of why the scandals happened—and realistic solutions that leverage the immense power of markets and self-interest.
John Nofsinger and Kenneth Kim show how the system came to provide massive incentives to greedy CEOs, ignorant boards, willfully blind auditors, and dishonest investment houses. They also show how those “bad” incentives can be replaced by even more powerful incentives for honest stewardship and counsel—and how the right incentives will do more to restore investor trust than politicians ever could.
About the Author
Dr. Nofsinger is one of the world’s leading experts in behavioral finance. He has authored/coauthored fourteen finance trade books, textbooks, and scholarly books that have been translated into eleven languages. He also a prolific scholar who has published over 70 articles in prestigious scholarly journals and practitioner journals. Dr. Nofsinger is also a frequent speaker on behavioral and financial topics.
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. 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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