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ISBN-10 0133039722ISBN-13 9780133039726
ISBN-10 0133039706ISBN-13 9780133039702
Author(s): Jonathan R. Macey
Publisher: FT Press
Copyright year: © 2013 Pages: 304

For over a century, law firms, investment banks, accounting firms, credit rating agencies and companies seeking regular access to U.S. capital markets made large investments in their reputations. They treated customers well, and even occasionally endured losses to maintain their reputations as faithful brokers, dealers' issuers, and “gatekeepers.” This has changed. The business model among today's leading participants in the capital markets no longer treats customers as valued counterparties whose trust must be earned and nurtured, but as distant “counter-parties” to whom no duties are required. Simply put, the rough and tumble norms of the marketplace have replaced the long-standing fiduciary model in U.S. finance, and the result has been unrelenting financial scandal.

In The Death of Corporate Reputation, pioneering corporate law and governance expert and Yale professor Jonathan Macey describes the disastrous transformation from the old reputational model to the existing laissez faire model in finance. Macey convincingly argues that the change came as a result of two factors: (1) the growth of reliance on regulation rather than reputation as the primary mechanism for protecting customers and (2) growing regulatory complexity, which made technical expertise rather than reputation the #1 criterion customers use in choosing new business partners. After identifying the heart of the problem, he offers a path forward -- and a true “silver lining” in the age of Madoff.