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Conflicts of interest in corporate governance.

The financial scandals of the last three years have shaken the confidence of the investment community. This paper first reviews the perceived extent of the breach in trust, as evidenced by several surveys. The paper then examines some of the key failures in corporate governance that led or contributed to the scandals. It is shown that conflicts of interest with regard to the relationship between corporate boards and CEOs, including the setting of executive compensation, created the structural weakness that precipitated the eventual breakdown of corporate governance. This breakdown, in turn, became the impetus for corporate governance reform. The paper concludes with an ...

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