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A Prescription to Retire the Rhetoric of \u22Principles-Based Systems\u22 in Corporate Law, Securities Regulation and Accounting

By Lawrence A. Cunningham

Abstract

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

Topics: rules, principles, standards, rhetoric, politics, ethics, Delaware, GAAP, IFRS, regulatory competition, Accounting, Commercial Law, Corporations, Securities Law, Accounting, Business Organizations Law, Commercial Law, Securities Law
Publisher: Digital Commons @ Boston College Law School
Year: 2007
OAI identifier: oai:lawdigitalcommons.bc.edu:lsfp-1196
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