A Prescription to Retire the Rhetoric of 'Principles-Based Systems' in Corporate Law, Securities Regulation and Accounting
Lawrence A. Cunningham
George Washington University
Boston College Law School Research Paper No. 127
Vanderbilt Law Review, Vol. 60, October-November 2007
This Article corrects widespread misconception about whether complex regulatory systems can be fairly described as either "rules-based" or "principles-based" (also called "standards-based"). Promiscuous use of these labels has proliferated in the years since the implosion of Enron Corp. While the concepts of rules and principles (or standards) are useful to classify individual provisions, they are not scalable to the level of complex regulatory systems. The Article uses examples from corporate law, securities regulation and accounting to illustrate this problematic phenomenon before turning to a series of possible explanations for the widespread use of these misleading labels. The piece contributes to the substantive fields it uses to animate the inquiry and to more general jurisprudential literature on the rules-standards question.
Number of Pages in PDF File: 65
Keywords: rules, principles, standards, rhetoric, politics, ethics, Delaware, GAAP, IFRS, regulatory competition
JEL Classification: M41, M44, M49, L22, G18Accepted Paper Series
Date posted: March 13, 2007
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