As for better corporate governance, the NYSE's new rules are a step in the right direction. Much will depend on how committed the exchange is to ensuring that the rules are honoured in the spirit as well as by the letter. Greater independence of non-executive board directors is certainly desirable. Too many American bosses fill their boardrooms with yes-men who have neither the character nor the financial incentive to challenge the boss's grandiloquence. Ultimately, however, governance is unlikely to improve much until the institutions that own large chunks of corporate America start acting as real owners, by keeping a sharper eye on their boards and their management.
Joseph Grundfest, a former SEC commissioner, argues that Wall Street firms may be less to blame for the corporate messes currently unfolding than corporate managers and boards, or their auditors. "Wall Street firms," he says, "clearly have the deepest pockets" at a time when angry investors are looking for any recompense for the sins of the past — which means that they are probably in for a torrid few years, a time in which they will find out how much it costs to lose the trust of investors. It is easy to see why Merrill Lynch's Mr O'Neal is worried about the destructive possibilities of today's air of cynicism.
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