Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came from

Like the mythical teenager who flew too close to the sun, corporations are incorrigibly prone to catastrophic risk-taking, argues this engaging study. Corporate law professor and NPR commentator Skeel, author of Debt's Dominion: A History of Bankruptcy Law in America, examines a number of celebrated corporate disasters, from the collapse of 19th-century railroad baron Jay Cooke's empire to the ""junk-bond"" mania and savings and loan debacles of the 1980s and the recent Enron and Worldcom fiascoes. These ""Icarus Effect failures"" conform to a pattern of ambitious over-expansion financed by unsustainable debt, followed by mounting losses that are concealed by ever more desperate accounting manipulations. But Skeel's account is less a taxonomy of business skullduggery than a history of the growing size and complexity of corporations and the corresponding political and legal efforts to control them. He delves into a wide range of issues, including anti-trust law, the New Deal regulatory regime, the advent of malleable financial instruments and corporate structures (Enron executives concocted a labyrinth of thousands of paper subsidiaries to hide its debts and losses), the collusion of auditors and securities analysts in misrepresenting corporate finances, and the rise of ""charismatic"" CEOs. Although the financial details occasionally bog down the book, Skeel sets a colorful narrative of fraud and bankruptcy against an accessible background of academic theory, arguing for firmer regulations to cope with the gigantic scale, byzantine complexity and ""winner-take-all"" managerial culture of the modern corporation. The result is an illuminating and highly readable treatment of an important economic issue.