Chapter 9. More Failed Monitors : Credit Rating Agencies and Lawyers
While the media has mostly concentrated on the failures of the executives, accountants , and analysts, we would be remiss if we didn't mention the failure of two other potential monitors: credit rating agencies and corporate lawyers. Both the credit agencies and attorneys should be considered as monitors in the corporate system. While corporate lawyers are hired and paid by the company executives, their fiduciary duty is to the corporation. It seems that most corporate attorneys have been more devoted to the executives than to the shareholders. One difference between credit agencies and other monitors is that they focus on protecting a company's bondholders and other creditors. This chapter details the role of credit agencies and lawyers in the corporate system and examines how credit agencies might have played a role in the business scandals.