Among their many provisions, the new law and the stock market rules together require that the board of a publicly traded company be composed of a majority of independent directors and that the board’s audit committee consist entirely of independent directors and have at least one member with financial expertise. They also impose restrictions on the types of services that outside auditors can provide to their audit clients. These wide-ranging legislative and regulatory changes were adopted in response to the widespread outcry that followed these But Bengt Holmstrom and Steven Kaplan argue that while parts of the . corporate governance system failed in the 1990s, the overall system.
